Real Estate Terms to Know

Pre-Qualification and Pre-Approval

Home Buyers become stronger buyers in the eyes of the seller when they get Pre-Qualified or Pre-Approved from a lender or mortgage company. Getting Pre-Qualified is a lender’s quick way of estimating the buyer’s borrowing power based on general, over the phone financial information and credit check. Getting Pre-Qualified also gives the buyer the opportunity to learn about borrowing programs that fit their needs. Pre-Approval is one step better than being Pre-Qualified. It involves applying for a mortgage, credit checks, and employment verification. Once the mortgage application process is complete, mortgage underwriters review the application, and if approved, issue a commitment letter to fund the purchase.

Underwriting

A lender will assess a home loan applicant’s income, credit, and any risk involved before offering the applicant a mortgage.

Debt-to-income ratio (DTI)

A ratio comparing the buyer’s expenses to gross income.

Closing costs

Fees associated with the purchase of a home that are due at the time of property transfer. Fees may include broker commissions, bank appraisal, title search and deed preparation.

Comparative market analysis

Also referred to as a CMA, is a collection of market information and analysis done by the real estate agent. A CMA gives the seller and agent a basis for projecting a market value of a home based on similar, recently sold homes.

Title insurance

Insurance that protects the buyer and lender should an individual make a claim that they have ownership rights to the property.

Contingencies

Conditions written into a home purchase contract that protect the buyer. Two typical examples are financing and home inspection.

Comps

The comparison of sold homes and purchase prices in a town or neighborhood, usually within the past six months.