Real Estate Basics: What You Need To Know When Buying A Home

It is a good idea to buy your own home. There is no monthly rent and you get to keep it. Of course, homeownership is an expensive commitment and most people can’t afford a house with a single payment. There is more than one way to buy a piece of property and several lesser-known uses for it when one is obtained. Outlined here are some critical terms of the real estate world.

What is real estate?

Real estate is basically land and whatever is on it, including buildings.

What is a real estate agent?

Real estate agents assist people who wish to buy or sell a house. They determine how much a home is worth based on its condition and the nature and quality of the neighborhood. In the event of a sale, a real estate agent gets to keep a small portion of the money for their work. These individuals are often required to work evenings and weekends so that they are at the disposal of clients.

What is a Realtor?

A Realtor is a real estate agent, but a real estate agent isn’t necessarily a Realtor. Only an agent who agrees to follow the National Association of Realtors Code of Ethics promoting truthful advertising can legally be called a Realtor.

What is a real estate broker?

A real estate broker is a real estate agent’s superior. These professionals generally focus on selling property. Usually, there is only one broker but many agents for each estate.

What is a mortgage loan?

Since houses generally cost a large sum of money, individuals need to pay for them in smaller installments. In order to do so, they secure a mortgage, which is a loan they legally agree to pay back gradually with a certain amount at a certain frequency.

What is a fixed rate mortgage?

The most common types of mortgages are those at a fixed-rate, which means the amount of money that is repaid remains the same throughout the entire payback process. Fixed-rate mortgages protect against inflation and they are very low risk. However, the interest rate is higher.

What is an adjustable rate mortgage?

Unlike a fixed rate mortgage, adjustable rate mortgages have dynamic interest rates that fluctuate with the market. They can ultimately save the borrower money, but when rates increase, some borrowers discover their salaries and wages cannot keep up. Adjustable rate mortgages are responsible for a decent portion of the foreclosures that are leaving many U.S. families in crisis. However, with the right agent and enough planning, they can prove beneficial.

What is a mortgage broker?

In order to obtain a mortgage loan, a person must consult a mortgage broker. Brokers are the middleman between the borrower and the bank that lends the money.

What is home equity?

Home equity is the amount of money a home is worth, minus the amount of money owed on the mortgage that pays for it. Also, if the value of a home increases, the equity does as well.

What is a home equity loan?

An equity loan is based on collateral. Therefore, a home equity loan is based on the amount of mortgage money that has already been paid back. It is a form of second mortgage that is sometimes utilized by borrowers who incur an unexpected necessity for money to buy a car or pay for medical care. They are beneficial because they are an easy source of money, even for people with poor credit. However, if the borrower fails to make payments in a timely fashion, the can lose their home.

What is a home equity line of credit?

Similar to a home equity loan, a home equity line of credit uses a house as collateral. The difference is that instead of a loan, the money borrowed is in the form of credit. Like the loan, the limit of this credit line is variable and depends upon how much of a mortgage has been paid off. They offer more flexibility than a home equity loan, but the money is not received as a single lump sum.

What is escrow?

Escrow is a process and arrangement between a buyer and seller of property. With it, there is a written contract and succession of deeds. There are escrow legal services which take care of the details for both parties and see to it that no funds are disbursed unless both keep their end of the deal. The money for taxes, insurance and other home-related fees goes into an escrow account each time it is due.

What is real estate investment?

Sometimes people buy property without the intent to live on it. The property may increase in value and be sold, or the owner can rent it out. There are a lot of risks with real estate investment such as a decrease in property value or competition affecting rental costs. However, it can also be a significant source of income. Some people earn enough doing real estate investment to make a living.