If you're buying your first home, you'll probably encounter some terms that might be new to you. This can feel a bit daunting, especially during such a significant purchase.

You don’t have to be a real estate whiz—your agent will handle that for you. However, getting familiar with some basic terms can really boost your confidence as you navigate the process.

Terms Every Homebuyer Should Know

Once you get to know this terminology, you'll grasp important details like contracts and negotiations much better. That way, when those crucial discussions come up, you'll feel informed, confident, and ready to make the best choices for your situation. As Redfin says:

““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.”
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— Redfin

Here’s a rundown of some important real estate terms and their meanings that you should be familiar with, as noted by the Federal Trade Commission (FTC) and First American.

Appraisal: It’s a report that estimates what the home is worth. Lenders use it to make sure they’re not giving out more money than the home’s actually valued at.

Contingencies: These are conditions in the contract that need to be met—usually by a certain date. A home inspection is a common one. You can waive them to make your offer more appealing, but it's usually not a great idea.

Closing Costs: Are the fees you’ll need to cover when buying a home, and they go to different people involved in the process. It’s a good idea to ask your lender for a breakdown of these costs, which can include things like attorney’s fees, taxes, title insurance, and several others.

Down Payment: This is the upfront amount you pay toward the home, usually between 3.5% and 20% of the price—but it can be even less. Some programs offer 0% down, so talk to your lender. Unless your loan requires it, you probably don’t need to put down the full 20%.

Escalation Clause: In a hot market, this can give you an edge. It’s an optional part of your offer that says you’re willing to beat any higher bids—up to a certain limit—if someone else makes a better offer on the home.

Mortgage Rate: This is the interest you’ll pay on your home loan. It affects your monthly payment, so it’s a good idea to talk to a lender and see how it all adds up.

Pre-Approval Letter: It’s a letter from a lender saying how much they’re willing to loan you. Combined with your savings, it helps you figure out your price range. It’s one of the first things you should get—ideally before you even start looking at homes online.

Bottom Line

You don’t need to memorize all these terms, but knowing the basics can really help. A little prep now means fewer surprises and more confidence when it’s time to buy.

What real estate term or phrase have you come across that you didn’t see on this list?

Let’s have a conversation about it so you can really grasp what it entails and how it might come into play during the homebuying process.