Are you purchasing a home in Northern Virginia, Maryland, or the Washington, DC area? If it’s your first time buying a property, these terms and definitions will come in handy throughout the home buying process! And even if you’ve done it all before, we’re sure you can learn a thing or two about the buying process in Buyers Lingo 101.
Terms You Need to Know When Buying a House
Abstract of Title—This is an important stack of paper that lists the history of the property: including property transfers, inheritances, liens, encumbrances, and conveyances. You should read and understand the Abstract of Title before purchasing a property.
Adjustable Rate Mortgage—This type of mortgage comes at a lower cost than other types. However, it is considered less stable than a fixed-rate mortgage and the interest rate will vary depending on the market.
Amortization Schedule—This table displays your mortgage payment schedule, including principal and interest.
Appraisal—This procedure determines the value of the house.
Assessed Value—This is the value of your home as determined by the county for tax purposes; it has little to do with the sale price or actual worth of the home.
Balloon Mortgage—In this type of mortgage, the final balance is due in one big payment at the end of the loan term.
Bridge Loan—This type of loan covers the period of time between buying and selling a property.
Caveat Emptor—“Let the Buyer Beware” in Latin; this phrase reminds you that you, as the buyer, are assuming any risk involved in the transaction.
Chain of Title—List of previous owners of the property.
Closing Costs—Miscellaneous charges that you will need to pay upon closing.
Closing Statement—Legally required document that itemizes credits and debits to the buyer and the seller.
Comps—List of comparable properties that have recently sold in the area, used to help determine a home’s value.
Contingency—A provision in your contract that cancels the sale should certain events occur.
Conventional Mortgage—Any mortgage not guaranteed by the federal government.
Conveyance—The transfer of the property from one person to another.
Earnest Money Deposit—Used when a buyer needs more time to secure financing; held in a joint escrow account by the buyer and seller.
Equity—The market value of a property minus any liens.
Escrow—The period of time when an impartial third party holds the deeds or funds.
FHA loan—Federally qualified loan that allows for a lower down payment.
Good Faith Estimate (GFE)—Provided by your lender, an estimate that breaks down loan fees and terms.
Loan-to-Value Ratio—Shows the value of the loan compared to the value of the property.
Negative Amortization—If you make payments that don’t cover the loans interest, the principal balance will increase.
Organization—Another term for the lending process.
Refinancing—Replacing an old mortgage with a new one in hopes to get a better interest rate; can be done a few years after the initial mortgage.
Seller Contribution—When the seller of the property directly contributes to your costs or down payment rather than providing a discount.
Title Insurance—Provides protection to property owners and lenders; required any time you have a mortgage on a home.
Underwriting— Process a lender uses to assess risk and make sure you meet their minimum requirements for a home loan.