Real Estate Terms, Part 1: Buying a Home
FHA. ARM. Highest and best. You’ve likely seen these real estate terms or heard others talk about them. But until you’re in the market for selling or buying a home, you may not realize just what they mean.
That’s where Berkshire Hathaway HomeServices Home Team Realty comes in. As your source for all things related to real estate in Ocala, Marion County and The Villages, we are happy to help you learn more about real estate terms and jargon.
Because the world of real estate can seem so vast and complex, we’re splitting this blog into several parts. This one is focused on things related to buying a home. Look for future blog articles about terms and phrases related to closing on a home and selling a home.
With our help and this blog post, you’ll be up to speed in no time.
Real Estate Terms To Know
Amortization — This is the repayment schedule on a home mortgage. As you begin paying on a loan, most payments are applied towards the interest that is due, rather than the principal. Near the end of the loan term, this changes. Since interest has been paid in advance, most of the loan payment now goes toward paying off the principal.
ARM — This is the acronym for adjustable-rate mortgage. For this type of mortgage, the interest rate is adjusted based on the prevailing rates in the economy. Many ARMs will lock in a fixed rate for a limited period of time, such as 5, 7 or 10 years. Many also come with a cap guarantee, which means the rate increase will be capped at a certain maximum, like 2 percent.
Contingency — When a home buyer submits an offer to purchase a property, they often will make the offer contingent upon certain stipulations, like a home inspection, certain repairs and home financing. This means the offer is dependent upon the favorable outcome of those stipulations. The offer can be withdrawn if those conditions aren’t met.
Fixed-Rate — Unlike the ARM, listed above, a fixed or fixed-rate mortgage offers the same interest rate for the duration of the loan, no matter what’s going on in the overall economy. For example, a 30-year fixed loan keeps the same interest rate for 30 years. When you take advantage of a low-interest rate, a fixed rate can be very attractive for today’s home buyers.
FHA — This stands for Federal Housing Administration, a U.S. government agency. This agency encourages home ownership by insuring FHA loans. Many first-time homebuyers opt for these FHA loans because they require a smaller down payment, sometimes as low as 3.5 percent. If you are a first-time homebuyer, check to see if you qualify.
Highest and Best — In real estate terms, “highest and best” refers to the best offer that a prospective homebuyer can make to the seller. It is also called the “Best and Final” offer. If a seller receives multiple offers on their home, they may ask all the bidders to submit their “best and final” or “highest and best” offer by a certain date. The home seller can then select among these top offers.
Inspection — Prior to buying a house, you’ll want to have a home inspection done by a professional inspector who is certified by the American Society of Home Inspectors. This inspector typically spends several hours performing a thorough inspection of the home you are interested in. Inspectors focus on structural issues, mechanicals like electric and plumbing, and other aspects of the home. You’ll want to ask for a written report, which will help you make decisions about the house.
Short Sale — This is a home that is listed for sale at a price lower than what is owed on the mortgage. To avoid penalties that go with going into foreclosure, homeowners hope to sell their home as a short sale. But selling a short sale home can be difficult because there are usually multiple owners of the home’s mortgage, and all have to agree to take a loss on the loan.
Walkthrough — This is the final inspection of a home by the potential buyers to make sure any requests for repairs or appliances have been done before the closing. If there are still problems with the home, the buyers should request they be fixed before the sale is final. Read more about this in a recent blog article: Final Walkthrough A Must When Buying an Ocala Home.
What do you think about these real estate terms? Are there others you’d like to know more about? Comment here or reach out to us on any of our social networks. Here at Berkshire Hathaway HomeServices Home Team Realty, we’re happy to help you with all of your real estate needs. If you’re looking to buy or sell a home in Ocala or The Villages, we’d love to help you.