You know the words “real estate,” but do you know exactly what they mean? I’m here to better explain this term and more today.
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There’s a lot of lingo out there when it comes to real estate, so I just wanted to give you a quick cheat sheet of some of the most common terms and what they mean. Here are the ones you need to know:
1. Real estate. The term includes both the land and the property built upon it. Though each has its own value, land is a limited resource, meaning it will increase in value over time along with the cost of building on that land. This is what causes real estate to appreciate in value.
2. Purchase agreement. This is the contract you enter into in order to buy the home.
3. Closing date. Once you enter into a purchase agreement, you’ll need to negotiate a closing date. On this day, your down payment is due and you officially become a homeowner.
4. Mortgage. Some people have enough cash to buy a home outright (must be nice), but most people will need a loan from a bank, also known as a mortgage.
“Most people aren’t aware of the additional costs that are separate from your down payment.”
5. Down payment. Banks have built-in safety nets to protect their interest when giving out loans. One of these safety nets is the down payment. It causes fewer people to go into foreclosure. Not all mortgages require down payments, though. Most range from 3% to 20%, but vets can take advantage of 0% down programs.
6. Equity. Once you know what you’re looking for in a home, you can calculate your instant equity. Let’s say you buy a house for $100,000 and it requires a 3% down payment. Now, you owe the bank $97,000 before you own the home free and clear, and you have $3,000 in equity from your down payment. As your home and the land it’s on gains value, you’ll also be paying down your mortgage and increasing your equity.
7. Closing costs. Most people aren’t aware that there are additional costs after your down payment is made. These include things like lender fees, title fees, and state taxes. Sometimes you can get these paid for by the seller, but it’s all based on how your agent negotiates.
If you have any questions for me in the meantime or any real estate needs that I can assist you with, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.