Before you go house hunting for your dream home, learn some of the key home buying terms and definitions you will most likely encounter when purchasing a house.

So you’re planning to buy a new home? If you’ve bought a property before, you know how overwhelming and convoluted the buying process could be, especially if you don’t understand real estate jargon. If you’re a first-time home buyer, you might get confused with a lot of terms.

To help you, we have listed some of the home buying terms (and their definitions) that you will most likely encounter when you purchase a house. You might be familiar with some of these terms, but it wouldn’t hurt to brush up on your real estate vocabulary.

Amortization

Amortization is the process of paying off your mortgage by paying your principal and interest in regular installments over time. Each payment installment will partly go to the principal and partly to the interest. Your amortization schedule will show a table of your scheduled monthly payments (listed individually by month), principal repayment, and interest dues. 

Appraisal

Appraisal means the written estimate of the market value of a property (such as houses and condos) as of a given date based on a professional opinion.

Closing

In real estate, closing (also called “settlement”) refers to the delivery of financial adjustments, deed, signing of a note, and disbursement of the funds needed to close the sale or loan transaction.

Collateral

Collateral is any property or asset that you own, which the lender will accept as a security for your loan. If you’re buying a home on a loan, the house that you buy with the borrowed money usually becomes the collateral.

Contract of sale

This is the contract between the seller and buyer of a property (e.g., house) to convey title after successfully completing the sale transaction.

Deed

The deed is the document that shows an owner of a property has title to that property. The deed becomes a public record after it is filed and recorded by your local government.

Downpayment

This is a portion of the sales price that buyers pay to the seller to close a sale. The buyer and seller will then agree as to when and how the balance will be paid.

Foreclosure

A foreclosure is the legal action of taking back property that was bought with borrowed money, but the money was not paid back based on the written agreement. The creditor is allowed to sell the property to pay off the buyer’s unpaid mortgage.

FSBO (For sale by owner)

This is used when a home or property is being sold by the owner, without having any assistance from a real estate agent or broker.

Home-Equity Loan 

This is a close-ended, secured loan where your home is used as collateral. This is also known as a second mortgage.

Property tax

This is the tax you pay to your local and state government for owning property within their jurisdiction.

Real property

Most commonly known as “real estate,” this type of property includes land and the objects permanently attached to it (e.g., buildings, houses, fences).

Refinance

This is the process of revising and replacing the terms of an existing loan agreement, while still using the same property as collateral.

Real estate agent or broker

A real estate agent or broker is a licensed real estate professional who usually represents buyers and sellers in real estate transactions.

Mortgage

If you’re not planning to buy a house with cash, chances are you’re considering getting a mortgage. 

A mortgage is a loan from a bank or any financial institution that is used to buy or finance a home, land, and other types of real estate properties. You can even mortgage a car. As the borrower, you agree to pay the lender in a series of regular payments over a specific period of time. The payment is divided into two: principal and interest.

Principal 

The principal is the amount that you borrowed from a lender in order to buy a property. For example, if you borrowed $200,000 to finance a home, the principal you owe is $200,000.

Interest

The interest is the percentage that the lender charges you to borrow the principal, also known as the interest rate. Simply, it is the fee that you pay for borrowing money. Your monthly interest payment is calculated by multiplying your remaining loan balance by your monthly interest rate.

Mortgage term

Your mortgage term is the length of time (usually in years) that your mortgage agreement is legally in effect. To fully own your home, you need to abide by the mortgage conditions and pay your mortgage (both principal and interest) within the agreed mortgage term. Mortgage terms can be as short as 5 years or as long as 40 years. The most common types of mortgages are fixed-rate mortgages with 30- or 15-year terms.

The cost of your mortgage will depend on the type of loan you apply for, the mortgage term, and the interest rate.

When you apply for a mortgage, the lender will ask for collateral.

Are you ready to find your dream home or move to your next condo? Check out Ziba Property.

About Ziba Property

Ziba Property is a global property management app that connects property buyers and tenants to real estate agents, property owners, and property managers in one easy-to-use platform.  Aside from searching homes and units near you, the app also gives you easy access to nearby shops, establishments, and other lifestyle amenities in your community.

Download the Ziba Property app from Play Store and App Store now and start searching for your dream home.