Common Terms When Buying a House

| October 23, 2012

Assessed value – The dollar value of a property as determined by a public tax assessor. Your tax bill will depend on the assessed value of your home.

Closing costs – Expenses incurred by the purchase and sale of a property. These may include taxes, the costs of title insurance, transfer fees and other costs.

Earnest money – Money given to a seller by a buyer as a deposit toward the purchase price. Also called a “good faith deposit.”

Equity – The value an owner has in a piece of property above the amount owed.

Listing price – The amount a seller is asking for the property. More often than not, this is negotiable.

Mortgage – This is the contract, which says the buyer will repay the home loan to the entity furnishing it.

Mortgage insurance – If your down payment is less than 20 percent, you need to purchase mortgage insurance, which protects the lender if you don’t make your payments.

Sale price – The amount a buyer actually pays for the home after the negotiations are complete.

Short sale – This occurs when a homeowner cannot fully pay a mortgage loan but comes to an agreement with the lender that the lender will allow the property to be sold for less than is owed on it. This is less trouble for both the borrower and lender than going through foreclosure (repossession) and may mean a lower price for the buyer.

Tips and Warnings

  • Short sales, despite the name, tend to take a long time to be completed. The bank that owns the property may sit on your offer for several months before responding.
  • In addition to equity, there is also “sweat equity,” which is equity a buyer builds by putting their own work into the home.
  • Discuss the terms of your mortgage with a real estate attorney. Is the interest rate fixed or adjustable? Will there be a penalty if you pay off the mortgage early?
  • Be sure to factor four things into your estimated mortgage payment – principal, interest, taxes and insurance. This will help keep you from committing to a higher monthly payment than you can afford.

To find a local real estate agent who can help you make the right purchase, check out DexKnows.

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Category: Real Estate