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Richardson Property
735 Tank Farm Road
Suite 130
San Luis Obispo, CA 93401

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A First-Time Buyer’s Guide to Real Estate Terms

Couple with keys to new home

Entering the world of real estate can seem like a trip to a foreign country where they speak a language you don’t understand. The industry is awash in lingo that can leave a novice’s head spinning.

“Understanding the language of buying and selling homes can save you literally thousands of dollars,” Chris Richardson, president of Richardson Properties in California. Here are some important terms with which every home buyer should be familiar:

Mortgage – The loan used to purchase your home, usually from a bank or mortgage lender.
Fixed-Rate Mortgage – The most common form of mortgage. Its time frame is fixed(typically 15 or 30 years) and its interest rate does not fluctuate over the life of the loan.

Adjustable-rate Mortgage (ARM) – A mortgage with a rate that is pegged to an index and can change over time. These loans usually start at a lower cost than fixed rate mortgages because the borrower is sharing the risk of rising rates with the lender.

Buyer’s Agent – A real estate agent who works for the buyers and represents their interests. If you don’t hire a buyer’s agent, it is important to understand that the other real estate agent works for the seller.

Realtor® – A member of the National Association of Realtors. To become a member, agents must demonstrate expertise and uphold high ethical standards. Not all real estate agents are Realtors®.

Pre-qualification – The process that determines whether a buyer will qualify for a mortgage and how much they may qualify to borrow. Because pre-qualified borrowers have already completed much of the mortgage process and face fewer barriers to securing a mortgage, they are often preferred buyers.

Down Payment – Portion of the purchase price that is paid up front. Many lenders require a minimum five percent down payment in order to offer a mortgage. For a $200,000 house, for example, that’s $10,000.

Appraisal – A determination of the value of the home, usually by a professional appraiser. The appraisal is based on values of similar homes sold in the same or surrounding neighborhoods and may differ from the price negotiated on the house.

Points – An optional one-time charge used to lower the mortgage interest rate. One point equals one percent of the amount of the loan, so that on a $200,000 mortgage, one point equals $2,000. Points lower interest payments over the life of the loan depending on how long you own the home.

Closing – The moment when your final documents are signed and the purchase is complete.

Closing Costs – All the additional expenses incurred in finalizing the purchase of a home. This typically includes attorney’s fees, state and local taxes, a loan origination fee, credit report, home inspection and more. This generally adds three-to-four percent to your upfront costs, beyond your down payment, according to the National Association of Realtors.

PITI (Principal, Interest, Taxes and Insurance) – Monthly mortgage payments often include these four items. Principal is the portion of the payment that pays down the loan. Interest is the cost of borrowing that money. Insurance protects your investment and includes private mortgage insurance (PMI) if your down payment is less than 20 percent of the value of the home.

PMI – This protects the lender against buyer default on the loan. Once you have paid off 20 percent of the value of the loan, PMI is generally discontinued.

Richardson Properties provides superior customer service, thorough understanding of the San Luis Obispo real estate market and innovative marketing tools to help you with buying and selling property. Affiliated with the renowned luxury agency Christie’s International Real Estate, Richardson Properties has been a market leader on California’s Central Coast for over 30 years.

Visit RichardsonProperties.com or call 805.781.6040 to get started today.

Corporate Office 735 Tank Farm Road
Suite 130
San Luis Obispo, CA 93401
CalBRE# 01465507
Phone: 805.781.6040
Fax: 805.781.2504

Richardson Properties | Christie's International Real Estate deems information reliable but not guaranteed. Richardson Properties | Christie's International Real Estate fully supports the principles of the Fair Housing Act (Title VIII of the Civil Rights Act of 1968), which generally prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status, and handicap (disability).

All information subject to change. All imagery is representational and does not depict specific building, views or future architectural, community or amenity details.
All services, pricing, square footage and bed/bath counts subject to change. Not an offer or solicitation to sell real property.