If you’re a first-time homebuyer in Chicago, Illinois, chances are you’ll come across some real estate terms you’re not familiar with. And that can be overwhelming, especially while going through one of the biggest purchases of your life.
The good news is you don’t need to be an expert on real estate terminology. That’s your agent’s job. But getting to know these basic terms will help you feel a lot more confident throughout the process.
Terms Every Homebuyer Should Know
Once you’re familiar with these real estate terms, you’ll have a better understanding of important details – from contracts to negotiations. So, when those big conversations happen, you’ll feel informed, in control, and able to make the best decision for your unique situation. As Redfin puts it:
“Having a basic understanding of important real estate concepts before you start the homebuying process will give you peace of mind now and could save you a fortune in the future.”
Here’s a breakdown of a few key real estate terms and definitions you should know, according to the Federal Trade Commission (FTC) and First American.
Appraisal: A report providing the estimated value of the home. Lenders rely on appraisals to determine a home’s value, so they’re not lending more than it’s worth.
Contingencies: Contract conditions that must be met, typically within a certain timeframe or by a specified date. For example, a home inspection is a common contingency. While you can waive these to try and make your offer more competitive, it’s generally not recommended.
Closing Costs: A collection of fees and payments made to the various parties involved in your home purchase. Ask your lender for a list of closing cost items, including attorney’s fees, taxes, title insurance, and more.
Down Payment: This varies by buyer, but is typically 3.5-20% of the purchase price of the home. There are even some 0% down programs available. Ask your lender for more information. Chances are, unless specified by your loan type of lender, you don’t need to put 20% down.
Escalation Clause: This is typically used in highly competitive markets. It’s an optional add on in a real estate contract that says a potential buyer is willing to raise their offer on a home if the seller receives a higher competing offer. The clause also includes how much a buyer is willing to pay over the highest offer.
Mortgage Rate: The interest rate you pay when you borrow money to buy a home. Consult a lender so you know how it can impact your monthly mortgage payment.
Pre-Approval Letter: A letter from a lender that shows what they’re willing to lend you for your home loan. This, plus an understanding of your savings, can help you decide on your target price range. Getting this from a lender should be one of your first steps in the homebuying process, before you even start browsing homes online.
What Experts Say About Real Estate Terms
You don’t need to memorize every term, but knowing a few essential real estate terms can help you make more confident decisions and avoid surprises in your homebuying journey.
What unfamiliar real estate term or phrase have you come across that wasn’t on this list?
Let’s connect and discuss it so you feel fully informed. Contact a trusted real estate agency in Chicago, Illinois, today and take your next step with confidence.
