Important Terms for Clients to Know When Buying a Home

StnHenge98Real estate terminology may be difficult to understand for some buyers. Here are some common real estate terms to share with your clients’ as their PA realtor to help them get through the home buying process with ease.

• Amortization– The repayment schedule on a mortgage. In the beginning of a loan term, most payments are applied toward the interest. Toward the end of the loan term, the interest has been paid in advance, so most payments apply toward the principal pay down.

• Appraisal- The estimated property value.

• APR– Stands for the “annual percentage rate”. It is the most accurate indicator of the cost of a mortgage loan. The APR reflects all closing costs and can total up to 5% of the loan. APR is most effectively used to price-compare between various mortgages.

• ARM– Stands for “adjustable rate mortgage”. It is a type of mortgage where the interest weight fluctuates based on the customary rates in the overall economy. According to, “Many ARMs will lock in a fixed interest rate for a limited time, such as five years, seven years, or 10 years. Many will also guarantee that a rate increase will be “capped” at a certain maximum, such as 2%.”

• Assessment– The city or county’s opinion of the property’s value. Assessments impact your property tax rate, whereas appraisals do not.

• Balloon Payment– The practice of paying off an entire mortgage in full. Some loans are short-term mortgages that require a balloon payment at the end.

• BPO– Stands for “broker price opinion.” It is a licensed real estate broker providing a written opinion as to the fair-market value of a property.

• Capital gain– The increased value of a seller’s home is capital gain. Owner-occupants who reside in their primary residence for two or more years do not need to pay capital gain tax on the sale of their property.

• Cash-out refinance– The practice of taking a loan out over a fixed term, and borrowed against the equity of a home.

• Contingency– Once a buyer submits an offer to purchase a property, they commonly make the offer with a clause that upon favorable condition, and they get extra such as financing or an extra addition to a home. If it plays out badly then the offer can be withdrawn at any time.

• Depreciation– The roof, carpet, paint, HVAC, etc. start to wear down and experience aging throughout the years; this causes the home to depreciate or decrease in value.

• FHA– This stands for the U.S. Federal Housing Administration. FHA loan require a smaller down payment on a home.

• Fixed rate– A fixed rate mortgage retains the same interest rate over the duration of the loan, regardless of what is happening in the overall economy.

• GC- Stands for “general contractor”. This is a licensed designation that indicates someone who organizes a major renovation and coordinates all the specialty subcontractors.

• LTV– This stand for “loan to value”. This refers to the loan amount relative to the overall property.

Whether your client is a first time homebuyer or is experienced in the market of buying homes, the jargon used in real estate may get overwhelming. You can help make the process of buying a new home easier by ensuring your clients understand this important terminology. For more information on Keystone Custom Homes and it’s communities, visit