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Having a basic understanding of important real estate concepts before you start the homebuying process will give you peace of mind now and could save you a fortune in the future. Here are ten real estate terms and definitions you should know before you start looking for a home.

1. Buyer’s Agent vs. Listing Agent

There are usually two agents involved when you buy a home; the “buyer’s agent,” who represents you, and the “listing agent,” who represents the home seller. Dual agency is when there is only one agent representing both sides of the transaction, and is illegal in several states.

2. Fixed Rate vs. Adjustable Rate Mortgages

Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan, the most common are for 15 and 30 years. An adjustable rate mortgage has a variable interest rate, and the most common are for 5, 7, or 10 years.

Adjustable rate mortgages can make financial sense if you’re planning to sell or refinance your home before the introductory period ends, but if you’re planning to own your home longer than five years it’s less risky to choose a fixed rate loan. Make sure to shop around so you can get the best mortgage possible, which will save you a lot of money in the long run. Ask your friends, family, and real estate agent for lender recommendations. You should also use a mortgage calculator with pmi and taxes to find out your potential monthly mortgage payment when determining which mortgage rate is best.

3. Pre-approval Letter

Before you apply for a mortgage or even start looking for a home, you should get a pre-approval letter from the bank, which is an estimate of how much they’ll lend you. This letter will help you determine what you can afford, and ensures home sellers that you will be able to get a loan when needed.

When you go in for a mortgage pre-approval letter, you should be clear on what the bank is offering. Ask them about closing costs, what fees are involved, what you’re getting for that fee, and if they’ll lock in your loan at a specific interest rate. Note that if you end up competing for a home against other offers, it can help to have a local lender. Local lenders want continued referrals and really care about their reputation; listing agents prefer to deal with them for this reason.

4. Listings

One of the first real estate terms you’re likely to encounter is what real estate agents frequently refer to homes for sale as “listings.” A “listing” on a website shows information about the home, such as the price and number of bedrooms.

For the most up-to-date listings, use sites from real estate brokers like 7M Sports, rather than real estate portals. Brokers have access to the multiple listing service, which real estate agents are required to update, so the information is more accurate than sites who aren’t affiliated with a brokerage. In a competitive real estate market, you can miss out on a good deal if you use sites that don’t show all the homes for sale.

5. Home Inspection

After you’ve made an offer on a home, you’ll most likely need to schedule a home inspection, which costs around $200 – $500, depending on the market and size of the home. The inspector will go through every nook and cranny, and review things like the plumbing, electrical, foundation, walls, heating, and appliances.

Get advice from your realtor on a good inspector. If they find something wrong, you can negotiate for home sellers to fix it or possibly reduce the purchase price of the home.

6. Appraisal

When you apply for a mortgage, your lender will require an appraisal of the home you want to buy. A licensed appraiser will estimate the home’s value based on comparable homes that have sold in the area and an investigation of the property.

If the appraised value is less than the offer you are making on the home, you might not be approved for a loan. The bank doesn’t want to invest in a home that’s overpriced (and neither do you). Before making an offer, ask your agent to do a comparative market analysis, which will tell you what comparable homes have sold for nearby. If you’re a seller, get an estimate on how much your home is worth as well as how to increase your home appraisal value.

7. Contingencies

When you put in an offer on a home, you can specify certain conditions that must be met before the deal will go through – these real estate terms are called contingencies. You have to make sure you can actually get the loan (a financing contingency), that the inspection doesn’t show anything of concern (inspection contingency), and that the appraised value is close to what you’re offering to pay (appraisal contingency). Those are just a few common examples; there are several other types of contingencies, which you should discuss with your agent.

If you’re in a bidding war on a home, sometimes it can help to shorten contingency periods or waive them altogether.

8. Offers and Contracts

Once you find the right home, you’ll make an offer on the property with the help of an agent or attorney. If the seller counters your original offer, it’s usually because they want more money or a faster timeline for closing the deal, at which point you’ll have to negotiate. When submitting an offer, it’s a good idea to add a personal touch by including a cover letter that explains why you want to buy the home.

Choosing an experienced realtor is key to winning in negotiations. Do your research to find one who has done recent deals in your area, and be sure to read online reviews. 7M Sports publishes all reviews of its agents, the good and the bad, so you can determine if you’d like to work with them.

9. Closing Costs

Be prepared to pay a lot of fees when you purchase a home. Typically, closing costs will amount to 2-5% of the purchase price of the home, and that doesn’t include the down payment. Common fees include excise tax, loan-processing costs and title insurance. It is important to do your research on how much are closing costs and which closing costs are negotiable before you are ready to close on a home.

Ask your lender about every fee involved in the Good Faith Estimate, and see if you can shop around for a better price for those services or negotiate them down. Examples include homeowner’s insurance, wire transfers, underwriting, and settlement fees.

10. Title Insurance

After all the negotiations are done and the seller has accepted your offer, you should receive a home title report within a week. Most mortgage lenders require you to pay title insurance as part of the closing costs. Title insurers search the public records to make sure the home seller actually had rights to the title and that there are no liens on the home (like an unpaid contractor or unpaid taxes).

If you have title insurance and you lose your home due to a title dispute, an owner's policy could compensate you for that loss and help cover legal fees related to the dispute.

For more real estate terms you’ll encounter throughout the process, check out the 7M Sports Real Estate Glossary.