12 Key Housing and Mortgage Terms to Know Before Buying a Home

Buying your first home is exciting, but understanding key home buying terms can make the process feel far less overwhelming. From financing and inspections to contracts and closing costs, home buying terminology often feels like a language of its own.

This guide breaks down essential housing terms, explains how common mortgage concepts work, and highlights important terms to know when buying a house so you can move forward with confidence. Whether you are preparing for your first purchase or brushing up on the basics, this home buying glossary will help you feel informed at every step.

1. Adjustable-Rate Mortgage (ARM) 
An adjustable-rate mortgage starts with a set interest rate for an initial period. After that, the rate adjusts at regular intervals based on market conditions. Payments may increase or decrease over time, which can be appealing for buyers who plan to own the home for a shorter period or expect future income growth. The trade-off is less payment predictability compared to a fixed-rate mortgage.

2. Appraisal 
An appraisal is an independent estimate of a home’s value. Lenders require one to confirm the home is worth the amount you want to borrow. Appraisals protect buyers and lenders by ensuring the price aligns with the current market. If the appraisal comes in lower than expected, buyers may need to renegotiate or adjust their financing.

3. Buyer’s Agent 
A buyer’s agent represents you during a home purchase. They help you understand the market, find properties, write offers, negotiate terms and navigate the steps from contract to closing. Their loyalty is to the buyer, not the seller, which makes their guidance especially helpful for first-time homebuyers.

If you are still early in the process, Perry Homes’ Homebuying 101 resource walks through each stage of buying a home, from preparing financially to moving in.

4. Closing Costs 
Closing costs include the fees required to finalize a home purchase. They may cover lender charges, title insurance, appraisal fees, document filing, surveys and more. These costs typically range from two to five percent of the purchase price, depending on factors like location and loan type. Reviewing your Loan Estimate can help you plan for these expenses.

Understanding how closing costs are calculated can help you budget more accurately before purchase. This detailed guide on how closing costs are determined for homebuyers explains what fees to expect and how they may vary.

5. Contingencies 
Contingencies are contract conditions that must be met before the sale can move forward. Common examples include a satisfactory home inspection, a completed appraisal or final loan approval. If a contingency is not met, buyers may be able to cancel the contract without losing their earnest money deposit. Contingencies are designed to protect the buyer as they evaluate the home.

6. Down Payment 
A down payment is the portion of the purchase price you pay upfront. Many first-time buyers put down five to ten percent, although some loans offer even lower minimums. A larger down payment can reduce your monthly mortgage amount, your interest costs over time and the need for mortgage insurance.

7. Earnest Money 
Earnest money is a deposit that shows the seller you are committed to purchasing the home. It is usually held by a title company or escrow agent until closing. As long as the sale goes through, the deposit is applied to your down payment or closing costs. If a contract falls through due to a valid contingency, buyers can often recover their earnest money.

8. Escrow 
Escrow refers to a neutral third party that holds and manages funds during a real estate transaction. Earnest money is usually placed in escrow until closing. Once you own the home, lenders may also set up an escrow account to collect your property taxes and homeowners insurance along with your monthly mortgage payment. The lender then pays those bills on your behalf each year.

9. Fixed-Rate Mortgage 
A fixed-rate mortgage keeps the same interest rate for the entire loan term. This means your principal and interest payments remain stable from month to month. Fixed-rate loans are popular with buyers who prefer consistent budgeting and long-term payment security.

10. Home Inspection 
A home inspection is an in-depth review of the property’s condition. A licensed inspector examines major components such as the roof, foundation, electrical systems, plumbing and HVAC. The inspection gives buyers a clear understanding of potential repairs or maintenance needs. It also allows time to request repairs or reconsider the purchase based on the findings.

11. Private Mortgage Insurance (PMI) 
PMI protects the lender if a borrower defaults on the loan. Buyers who put down less than twenty percent are often required to pay PMI. Once you build enough equity in the home, you may be able to remove it. PMI increases monthly costs temporarily but allows many buyers to enter the market sooner.

12. Seller’s Agent 
A seller’s agent represents the homeowner who is selling the property. They market the home, manage showings and negotiate for the seller’s best interest. Understanding this role is important because the seller’s agent does not represent the buyer. Your buyer’s agent is the one who advocates for you.

Moving Forward with Confidence 
Learning the language of home buying takes the mystery out of the process. With these terms in your toolkit, you are better prepared to evaluate options, ask helpful questions and work closely with the experts guiding your purchase. When you are ready to explore new homes across Texas and Florida, Perry Homes offers thoughtfully designed communities and a variety of floor plans created for the way you live. Browse move-in ready homes, or contact Perry Homes to speak with a sales professional who can help guide your journey.