The Most Confusing Real Estate Terms Easily Explained
There are a lot of real estate terms you encounter when buying or selling your home. It can get a little confusing if you don't know what they mean. Along with choosing the right real estate agent to help guide you, it's also beneficial to do some research of your own and start becoming familiar with the lingo that accompanies a home sale or home purchase. Let Century 21 Action be your Topsail realty experts. We're here to help! Let's get started with these commonly used but oftentimes misunderstood real estate terms.
BUYER'S AGENT VS LISTING AGENT
There are usually two agents involved when you buy a home; the “buyer’s agent,” who represents you, and the “listing agent,” who represents the home seller. Dual agency is when there is only one agent representing both sides of the transaction, and it is something you want to avoid at all costs.
FIXED VS ADJUSTABLE RATE MORTGAGE
Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan; the most common are for 30 years. An adjustable rate mortgage has a variable interest rate; the most common are for 5, 7, or 10 years.
CONVENTIONAL MORTGAGE VS FHA MORTGAGE
A conventional mortgage is a loan not guaranteed or insured by the federal government. These borrowers usually make larger down payments (at least 20%), don’t require mortgage insurance, and are at a lower risk of defaulting on their home loan payment. Federal Housing Administration (FHA) loans have been around since 1934 and are meant to help first-time homebuyers. The FHA insures the loan making it easier for lenders to offer the homebuyer a better deal, including a lower down payment (as low as 3.5% of the purchase price), low closing costs, and easier credit qualifying.
CONSTRUCTION LOAN VS MORTGAGE
A construction loan (also known as a “self-build loan") is a short-term loan used to finance the building of a home or another real estate project. The builder or homebuyer takes out a construction loan to cover the costs of the project before obtaining long-term funding. Because they are considered fairly risky, construction loans usually have higher interest rates than traditional mortgage loans. After construction on the house is complete, the borrower can either refinance the construction loan into a permanent mortgage or get a new loan to pay off the construction loan (the “end loan”).
Pre-qualifying is just the first step. It gives you an idea of how much of a loan you'll likely qualify for. Pre-approval is the second step, a conditional commitment to actually grant you the mortgage. The pre-qualification process is based on consumer-submitted data and pre-approval is verified consumer data—for example, a credit check.
When a property is contingent, it means the owner has accepted an offer—but certain contractual expectations must be met or the offer will be void. If all contingencies are met, the property changes status to “pending.” While contingent offers are still considered active listings, pending offers are taken off the market and other offers will not be entertained.