Common Real Estate Terms

Real estate can seem intimidating to many people for a variety of reasons, but one of the most common is it’s unique terminology. Many words and phrases can seem very technical and cause potential homeowners to shy away from buying, but with the help of an experienced realtor this is very easy to overcome. Here are a few terms that we often explain to our clients to help them better understand the industry:

Adjustable Rate Mortgage (ARM): An ARM is a type of home loan that does not have one set interest rate but instead fluctuates. These loans often have a lower starting rate that is then adjusted over time. In today’s market with interest rates on the rise, ARMs are becoming a more and more popular option to help people buy a home. 

Closing Costs: Closing costs are fees that are associated with the purchase of a home. They are usually paid at the time of the closing, and they go towards paying the lender, title company, insurance companies, taxes, and other related elements of the transaction. It is often a good idea to get an estimate of your potential closing costs before deciding how much money you will be putting down to ensure that you have enough funds in reserve. 

Escrow Deposit: Your escrow deposit, also known as your earnest money deposit, is the money that you put down after you get a home under contract. This is not your whole downpayment, just a percentage of it that you deposit with an escrow or title company to show the seller that you are serious about your intent to purchase their home. The size of an escrow deposit can vary but is often around 1-3% of the purchase price. 

Home Equity: Home equity is the difference between what you owe on your home and what it is worth. It is essentially a measure of the stored value of the property, made up of how much you have paid off on the home coupled with any appreciation or depreciation. If you put down $10,000 as a downpayment on a $100,000 home and the property appreciates by 5%, then you will have $15,000 of equity in the home. 

Do you have any additional questions about real estate terminology? Our team of experienced real estate professionals would love to speak with you to help translate the language of real estate, just give us a call any time!

If you want to see a few other common real estate terms and their meanings, take a look at this article from theceshop.com.