There are a lot of unusual terms that people find unfamiliar when they start the home buying process. I’ve compiled a list of a few terms that are essential to know so that you focus on finding your dream home rather than flipping through the dictionary. If you have any questions about real estate, I’m always here to help!
Buyers Agent vs. Listing Agent
The most important step in home buying is finding a buyer’s agent that you trust. A buyer’s agent is a licensed professional who is legally bound to help the homebuyer. This person is dedicated to representing the best interests of the homebuyers, from negotiating offers to providing advice.
The seller’s agent (also known as a listing agent) represents the seller of the home. A seller’s agent will create a market analysis to determine the best price to list a home at and suggest any home improvements to increase the value. A seller’s agent’s main goal is to support the home seller.
The seller pays the commission for both the buyer’s and seller’s agents which is usually about six percent of the home’s selling price.
Mortgage Lender vs. Mortgage Broker
A mortgage lender is a bank or financial company that provides or underwrites home loans for buyers. A mortgage broker is a licensed individual who serves as an intermediary between the homebuyer and mortgage companies. The broker might work for an independent mortgage company so that they can offer home buyers options from multiple mortgage companies.
Pre-Approval Letter vs. Pre-Qualified
A pre-approval letter is a great way for home buyers to show the seller that you are serious and prepared to purchase. The documented letter from a mortgage lender is based on verified information and details exactly how much you are qualified to borrow at a specific interest rate.
Usually included in a pre-approval letter is the loan program, loan type, loan amount, purchase price, qualified interest rate, and how long the pre-approval offer will last (usually 60 to 90 days). It’s important to know that a preapproval letter doesn’t guarantee a home loan because changes can occur to your financial situation, the appraisal, mortgage rates, etc.
Pre-qualification is based on information that you provide to the lender to create an estimate of how much money you can spend to purchase a house. It’s not the same as a pre-approval letter, because it does not guarantee a loan.
Fixed-Rate vs. Adjustable Rate Mortgages
Fixed-rate loans have interest rates that do not change, while the rates of an adjustable-rate mortgage change at specific times during the loan term. A fixed-rate mortgage is a great option for a homebuyer who wants to lock in their rate for a typical 30-year loan. An adjustable-rate mortgage usually has a lower initial rate. While it can be a riskier option for homebuyers, it’s a good option for those who plan to sell the home within a shorter period of time.
I hope you find these terms useful! I’m here to answer any questions or explain any other confusing parts of real estate. If you ever have any questions about the ever-changing marketplace or know someone looking to buy or sell, please do not hesitate to reach out.
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