If you are a home-buyer, you've probably evaluated the market and decided now is the time to buy, and perhaps have educated yourself on the language and terminology involved in real estate. But, there is a good chance there are a few more terms that are worth knowing.
Though you may know what earnest money is–and the difference between getting pre-qualified and pre-approved for a mortgage–you are probably still navigating what at times is another language. Have no fear.
First, you can always ask your Realtor to explain what something is and how it affects or applies to you or your offer. Second, we have gathered a few of the less obvious terms you may encounter—with definitions–to help you understand exactly what everyone is talking about.
Real Estate Terms You May Not Know
Active Contingent: Active contingent is when a home seller has received an offer from a buyer, but the buyer needs to meet certain conditions before the sale can be finalized. These conditions may include a home inspection or getting approval on a mortgage loan. When the conditions are met, the home is no longer listed as active contingent.
Assessor Parcel Number (APN): is a number assigned to each plot of land by a county tax assessor. The local government uses APNs to identify and keep track of land ownership for property tax
Covenants, Conditions & Restrictions (CC&Rs): Limits and rules placed on a group of homes by a builder, developer, neighborhood association or Homeowners Association; when living in a building, a buyer gives up certain freedoms to be part of a shared community. For example, some condo associations have smoking restrictions, certain guidelines for parking, and even aesthetic guidelines for paint colors.
Debt-to-Income Ratio: The percentage of your gross monthly income (what you earn before taxes) that goes towards paying off debts. Debts can include car payments, credit card bills, child support payments, and student loans.
Loan-to-Value Ratio (LTV): This means the ratio of the amount of money borrowed above the appraised value of the home – what percentage that number represents. The difference between these two numbers is the amount of the home-buyer's down payment. For example, a borrower may purchase a home appraised at $200,000 with a down payment of $40,000. This means he has a loan-to-value ratio of 80%. In other words, he has 20% equity in the home.
Turn-Key: The term "turn-key" is used by Realtors to indicate that the home is move-in ready. This means that there are no obvious structural or electrical issues with the home, all appliances are in working condition. You turn the key and move in.
It is the wise home-buyer who takes the time to fully understand the terms being used in their real estate purchase. Ask questions, and make certain you understand the meaning of any terms being used. This ensures you make smart, informed decisions during your home buying experience.
The best way to understand real estate terms is to work with a trusted real estate advisor. They can be your advocate through the home buying journey.