Real Estate 101
Key Terms Every Buyer Should Know
A plain-language glossary of the financing, valuation, legal, and insurance terms that come up in every transaction.
Financing & Mortgages
- Adjustable-Rate Mortgage (ARM)
- A mortgage with an interest rate that may change periodically based on a financial index. Initial rates are typically lower than fixed-rate mortgages.
- Annual Percentage Rate (APR)
- The yearly cost of a loan including interest and fees, expressed as a percentage. APR gives a more complete picture than the interest rate alone.
- Fixed-Rate Mortgage
- A mortgage with the same interest rate for the entire loan term. Predictable payments are ideal for buyers who plan to stay long-term.
- Construction Loan
- A short-term loan used to finance the construction of a new home, typically converted to a permanent mortgage upon completion.
- Balloon Mortgage
- A mortgage with smaller monthly payments and a large lump-sum payment due at the end of the term.
- Pre-Approval
- A lender's commitment to lend up to a specified amount based on a thorough review of your finances. Sellers take pre-approved offers more seriously.
Property Valuation
- Appraisal
- A professional opinion of a property's market value, usually required by lenders before approving a mortgage.
- Assessment
- The taxable value of a property determined by the local government for property tax purposes.
- Comparable Sales (Comps)
- Recently sold properties similar in size, location, and features used to estimate the value of a home.
- Fair Market Value
- The price a willing buyer and willing seller would agree on with full knowledge of the property and no pressure to act.
Legal & Documents
- Deed
- The legal document that transfers ownership of real property from seller to buyer.
- Title
- The legal right to own and use a property. A clean title is one without liens or other encumbrances.
- Survey
- A professional measurement of a property's boundaries and structures, often required to verify lot lines.
- Lien
- A legal claim against a property, often by a lender or contractor, that must be paid off before the property can be sold.
- Easement
- A right granted to others to use part of your property for a specific purpose, such as utility access.
The Transaction
- Purchase Contract
- The binding agreement between buyer and seller specifying price, terms, and conditions of the sale.
- Contingency
- A condition in the contract that must be met for the sale to proceed — for example, financing, inspection, or appraisal contingencies.
- Earnest Money
- A good-faith deposit a buyer makes to show serious intent. It is typically applied toward the down payment at closing.
- Due Diligence
- In North Carolina, the period after contract signing during which the buyer can investigate the property and terminate without penalty (forfeiting only the due diligence fee).
- Closing
- The final step of the transaction when ownership officially transfers, documents are signed, and funds are disbursed.
- Escrow
- A neutral third-party account that holds funds or documents until contractual conditions are satisfied.
Insurance & Protections
- Hazard Insurance
- Homeowner's insurance covering damage from fire, storms, and similar perils. Required by lenders.
- Title Insurance
- A policy protecting buyers and lenders against losses from disputes over property ownership.
- Flood Insurance
- Separate coverage for flood damage, required for homes in designated flood zones.
- Mortgage Insurance (PMI)
- Insurance protecting the lender if a borrower defaults; typically required when the down payment is less than 20%.
- Home Warranty
- A service contract covering repairs or replacement of major home systems and appliances during the first year of ownership.
Other Terms
- HELOC (Home Equity Line of Credit)
- A revolving line of credit secured by the equity in your home, often used for renovations or major expenses.
- HOA Dues
- Fees paid to a homeowners association to fund community amenities, maintenance, and reserves.
- PITI
- The four components of a typical mortgage payment: Principal, Interest, Taxes, and Insurance.
Contact
Questions? We'd Love to Hear from You
Whether you're buying, selling, or just exploring your options, our team is here to help. Reach out and let us put our decades of experience to work for you.
Phone
(919) 847-7140 Office
10931 Strickland Rd, Ste 111
Raleigh, NC 27615