Real Estate Terms Every Buyer Should Know

Your Go-To Glossary for a Smarter Homebuying Experience

Buying a home can feel like learning a new language. From pre-approvals to appraisals, the real estate process is filled with terms that may be unfamiliar—especially if you're a first-time buyer.

To help you feel more confident and informed, here’s a quick guide to essential real estate terms every buyer should know:

1. Pre-Approval

A written statement from a lender saying you’re approved for a loan up to a certain amount, based on a credit check, income verification, and other financial info.

Why it matters: It shows sellers you're serious and ready to buy—and it gives you a clear budget.

2. Offer

A formal proposal to buy a home, including your proposed purchase price, deposit amount, and any conditions or contingencies.

Why it matters: Your offer starts the negotiation process—and can make or break the deal.

3. Contingency

A condition that must be met before the sale can go through. Common contingencies include:

• Financing contingency (you must secure a loan)

• Inspection contingency (you can back out if the inspection reveals major issues)

• Appraisal contingency (home must appraise at or above the offer price)

Why it matters: Contingencies protect you from risks during the buying process.

4. Appraisal

A professional assessment of a home’s value, usually required by lenders to ensure the loan amount is justified.

Why it matters: If the home appraises for less than your offer, your loan may be affected.

5. Escrow

A neutral third party that holds funds and documents until both buyer and seller meet all the conditions of the sale.

Why it matters: Escrow ensures everything is handled fairly and legally until closing.

6. Earnest Money

A deposit made to show the seller you're serious about buying. It’s typically applied toward your closing costs or down payment.

Why it matters: It shows good faith—but you could lose it if you back out for a reason not covered by a contingency.

7. Title

Legal proof of ownership of a property. A title search ensures there are no outstanding claims, liens, or legal disputes over the home.

Why it matters: A clear title is required to transfer ownership.

8. PMI (Private Mortgage Insurance)

An insurance policy lenders require if your down payment is less than 20%. It protects the lender in case you default.

Why it matters: It adds to your monthly mortgage payment until you reach 20% equity.

9. Closing Costs

Fees paid at the end of a transaction (by buyer, seller, or both). They typically include:

• Lender fees

• Title insurance

• Escrow fees

• Property taxes and insurance

• Attorney or notary fees

Why it matters: They usually range from 2–5% of the purchase price—so budget accordingly.

10. Closing

The final step in the homebuying process where all documents are signed, funds are transferred, and ownership officially changes hands.

Why it matters: Once you close, the home is yours!

Final Thoughts

Understanding these real estate terms helps you avoid confusion, make informed decisions, and feel more in control during the buying process.

Need help navigating your home search? I’m here to guide you every step of the way—let’s chat and make your homeownership journey a confident one.