Common Real Estate Terms Explained

If you're a first-time homebuyer, you’ve likely come across a few unfamiliar real estate terms. That’s completely normal. This is one of the most significant purchases of your life, and it can feel overwhelming at times.

The good news? You don’t need to become a real estate expert overnight. That’s what we’re here for. Still, having a foundational understanding of common terms will boost your confidence and help you navigate key decisions with clarity.

Terms Every Homebuyer Should Know

Once you get familiar with these concepts, you’ll better understand everything from offers to closings—so when big conversations happen, you’ll feel informed, in control, and empowered to make smart choices.

As Redfin puts it:

“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’s a quick breakdown of key real estate terms, based on guidance from the Federal Trade Commission (FTC) and First American:

Appraisal

A professional estimate of a home's market value. Lenders require this to ensure they’re not loaning more money than the property is worth.

Contingencies

These are conditions written into your contract that must be met—often within a specific timeframe. A common one? The home inspection. While some buyers waive contingencies to strengthen their offer, doing so can come with risks.

Closing Costs

These are the fees paid at the end of the transaction, covering things like attorney’s fees, taxes, and title insurance. Ask your lender for a breakdown specific to your situation.

Down Payment

Typically between 3.5% and 20% of the purchase price, though some programs offer 0% down. Many buyers think they need to put down 20%—but that’s not always required. Ask your lender about your options.

Escalation Clause

In competitive markets, this clause lets a buyer automatically increase their offer if the seller receives a higher one—up to a specified limit.

Mortgage Rate

This is the interest rate on your home loan. Even a small change can impact your monthly payment, so be sure to consult a lender and explore your rate options.

Pre-Approval Letter

This letter from a lender shows how much they're willing to lend you, helping you define your budget and signal to sellers that you're serious. It’s one of the first (and smartest) steps in the buying process.

Bottom Line

You don’t need to memorize every term—but understanding the basics helps you feel more in control and better prepared for what’s ahead.

Come across a term you’re unsure about?
We’re here to help break it down, so you can move forward with confidence.

Let’s connect and make sure you feel informed every step of the way.