Buying a home is an exciting milestone, but it also comes with many new terms and decisions. Most buyers spend a year or more preparing before they’re ready to make a move, whether it’s their first home or their fourth. Along the way, you’ll likely hear phrases and mortgage jargon that can feel overwhelming at first. This FAQ breaks down those terms in simple, straightforward language so you can move forward with confidence.
What is a mortgage pre-approval?
A mortgage pre-approval is a letter you receive from a lender or bank showing that they’ve reviewed your financial stability by looking at things like your bank statements, tax returns, income, and assets. The letter outlines the loan amount you qualify for, the type of loan, and other important details. Having a pre-approval ready before viewing homes is essential, as it helps you focus your search within the right budget and is usually required when preparing and submitting an offer.
How is pre-qualification different from pre-approval?
Pre-qualification is a quick estimate of how much you might be able to borrow based on basic information you share with a lender, often without providing documents. It’s helpful early on for getting a rough idea of your price range and affordability, but it’s not as strong or as trusted by sellers as a full pre-approval.
What is earnest money?
Earnest money is a deposit you include with your offer to show the seller that you’re serious about buying their home. If the sale goes through, this money is usually applied to your down payment or closing costs, but if you back out for reasons not covered in your contract, you might lose some or all of it.
What is PMI (Private Mortgage Insurance)?
Private Mortgage Insurance (PMI) is a monthly cost added to your mortgage when your down payment is less than 20% of the home’s price. It protects the lender if you stop making payments, but it also allows you to become a homeowner sooner instead of waiting to save a larger down payment. In many cases, you can request to remove PMI once you have enough equity in your home.
House-Hunting & Offer FAQ
What are contingencies?
Contingencies are conditions written into your offer that must be met for the sale to move forward. Common examples include a home inspection contingency, an appraisal contingency, and a financing contingency, which all give you a way to back out or renegotiate if something important doesn’t go as planned.
What is an appraisal and why do I need one?
An appraisal is a professional estimate of the home’s value, completed by a licensed appraiser. Your lender requires it to make sure the home is worth at least what you’re paying, which helps protect both you and the lender from overpaying for the property.
What does a home inspection cover?
A home inspection is a detailed check of the home’s condition, including the roof, structure, plumbing, electrical system, heating and cooling, and more. The inspector will provide a report that highlights any problems or safety issues, giving you a chance to ask for repairs or reconsider your offer if serious issues come up.
What is an “offer” in real estate?
An offer is a written proposal you submit to the seller that includes the price you’re willing to pay, your preferred closing date, and any contingencies or special terms. If the seller accepts and signs it, the offer becomes a binding contract that moves you closer to closing on the home.
Legal & Closing FAQ
What is a home’s title?
The title is the legal record of who owns the property and what claims or liens exist on it. Before you buy, a title company or attorney will do a title search to make sure the seller truly owns the home and that there are no unpaid debts or legal issues attached to it.
What is a deed?
The deed is the legal document that transfers ownership of the home from the seller to you. At closing, the deed is signed and then recorded with the local government so there is an official public record that you are now the owner.
What are closing costs?
Closing costs are the fees you pay at the end of the transaction when you finalize the purchase of your home. They can include lender fees, appraisal costs, title insurance, taxes, recording fees, and pre-paid items like homeowners insurance and property taxes, and they typically total about 2–5% of the purchase price.
What is a seller disclosure?
A seller disclosure is a form where the seller shares known issues or past problems with the property, such as roof leaks, water damage, structural concerns, or previous repairs. These disclosures help you understand the home’s history and condition so you can make an informed decision before you buy.
Market & Listing FAQ
What is the MLS?
The MLS (Multiple Listing Service) is a large online database where real estate agents list homes that are for sale. Most home search websites and apps pull their information from the MLS, which helps keep listings accurate, updated, and easy to find.
What are comps?
“Comps,” short for comparables, are recently sold homes that are similar to the one you want to buy in terms of size, location, age, and condition. Your agent and appraiser use comps to help determine a fair market value so you don’t overpay.
What does Days on Market (DOM) mean?
Days on Market (DOM) shows how many days a home has been listed for sale. A low DOM can mean the home is in high demand, while a high DOM may suggest that the price is too high or that buyers have concerns about the property.
What does “pending” mean?
When a listing is marked as “pending,” it means the seller has accepted an offer and the home is under contract. The sale is moving through steps like inspection, appraisal, and final loan approval, but it hasn’t officially closed yet.
Pro Tips for Buyers & Sellers
Ask your real estate agent to explain anything you’re unsure about. They’re there to guide you and help you feel confident at every step.
First-time buyer? Look into down payment assistance programs, grants, and special loan options that may help reduce your upfront costs.
Sellers: Be honest in your disclosures and price your home based on recent comps so you attract serious buyers and avoid any delays when selling.