8 Real Estate Terms Every First-Time Buyer Should Know

You probably recognize the common terms by now. Real estate jargon shows up in contracts, lender emails, and documents you’ll be asked to sign quickly. There’s a big difference between hearing a word and truly understanding what it means for your purchase. Terms like “contingency” and “appraisal” might sound routine, but if you don’t fully grasp how they work, they can lead to delays, unexpected costs, or even lost deposits. This is where a solid first time home buyer guide can make all the difference. Here are 10 real estate terms every first-time buyer needs to fully understand. Knowing how they actually affect your deal can help you avoid mistakes that many new buyers regret.

Contingency

A contingency gives you the legal right to back out of a deal under certain conditions, like failing to secure financing or uncovering major issues during an inspection. First-time buyers often feel pressured to waive these to compete in hot markets, but that can backfire. What many don’t realize is that contingencies aren’t all or nothing. They can be narrowed, time-limited, or structured creatively.

For example, you can shorten your inspection period to make your offer more attractive without waiving the right entirely. Some buyers even use “informational inspections,” where they inspect the home without requesting repairs but keep the right to exit if major issues arise. These tactics give you more leverage than simply dropping protections altogether and are commonly explained in any first time home buyer guide.

Earnest Money Deposit

This is an important term in any real estate glossary. The deposit is typically 1–3% of the purchase price and shows the seller you’re serious. But it’s not automatically refundable. If you back out for a reason not covered by a contingency, you lose it. What many first-time buyers overlook is that this deposit can be contested. If a deal falls apart, the seller doesn’t just take the money; they have to sign a release.

In messy cases, it sits in escrow for weeks or even months. Buyers also miss the option to split the deposit into two stages: a small amount up front, and the rest after the inspection. This keeps more of your money protected in the earliest (riskiest) part of the deal.

Home Inspection

Home inspections reveal issues with the structure, systems, and safety of the property. First-timers often settle for a basic checklist report. A better move is to choose an inspector who provides photos, detailed notes, and clear explanations. While inspectors typically won’t give repair estimates, since most aren’t licensed contractors, they will point out concerns and recommend specialists for further evaluation.

Few buyers know they can walk through the home during the inspection to ask questions directly. Also, if the home has been flipped or heavily renovated, it’s smart to ask for receipts or permits tied to the work. Cosmetic upgrades can hide deeper flaws, and rushed flips often skip corners behind the drywall. Use the inspection as a way to slow down and really learn what you’re buying, a key tip when you’re buying a house for the first time.

Appraisal

An appraisal ensures the home’s value supports the loan amount. If it comes in low and you’ve waived your appraisal contingency, you’re stuck either paying the difference out of pocket or losing your deposit. What buyers don’t always know is that appraisals can be challenged. If you or your agent spot errors, like wrong square footage or bad comps, you can request a reconsideration. Also, appraisers are human. If the seller provides their own “highlight sheet” listing upgrades, and your agent doesn’t provide a counter-sheet with recent data, the value might skew. A seasoned agent will know how to support the appraisal process and flag these risks. This is a point often missed in a basic real estate glossary.

Closing Costs

Closing costs, often 2–5% of the home price, catch many first-time buyers off guard. They include lender fees, legal fees, taxes, and prepaid items like insurance and property taxes. What most don’t realize is that some of these costs are negotiable. Title fees, lender origination fees, and even escrow charges vary between providers. You can shop for better rates or ask for a “closing cost credit” from the seller instead of a price cut. Why? A lower purchase price reduces your loan amount slightly. But a seller-paid credit directly lowers the cash you need at closing, which makes a bigger difference if you’re short on liquid funds. When you’re buying a house, understanding this gives you more control over how and when you pay.

Fixed-Rate vs. Adjustable-Rate Mortgage (ARM)

A fixed-rate mortgage gives you predictability. An ARM gives you a lower initial rate that can rise later. Most first-time buyers steer clear of ARMs, assuming they’re always riskier. But if you know you’ll only be in the home for 3–5 years, an ARM with a 7-year fixed term might save you money. What people miss is that ARM caps matter more than the starting rate. Some ARMs limit how much your payment can increase each year and over the life of the loan. If those caps are low, your worst-case scenario isn’t that bad. Don’t just look at the rate. Ask about the index, the margin, and the adjustment frequency. A good first time home buyer guide can help you weigh this decision based on your long-term plans.

Title Search and Title Insurance

The title search confirms the seller has legal ownership and uncovers any liens or claims on the property. Title insurance protects you in case something was missed. Buyers often think this is just legal fine print. But unpaid taxes, surprise easements, or claims from ex-spouses or heirs can surface years later. Title insurance is a one-time fee, and it’s worth reviewing what’s actually covered. Not all policies include boundary disputes, which matter in older neighborhoods with unclear lot lines. Ask about survey coverage and exceptions, and don’t skip the buyer’s policy just because the lender’s policy is mandatory. These are key terms in every comprehensive real estate glossary.

Private Mortgage Insurance (PMI)

If you put down less than 20%, most lenders require PMI, an extra monthly cost to protect their loan. First-time buyers often assume PMI is permanent. Many loans let you request removal once you reach 20% equity, but there’s also automatic cancellation at 78% loan-to-value based on your original payment schedule, as long as you’re current on payments. Keep in mind this applies to conventional loans; FHA loans have their own mortgage insurance rules, which are usually more restrictive. You might also speed up PMI cancellation by making extra payments or getting a new appraisal once home values rise. And if you’re choosing between two homes, factor PMI into your monthly payment. Sometimes the lower-priced home has higher costs once you include insurance, taxes, and HOA fees. When you’re buying a house, these monthly extras can quietly push your budget past what you expected.

With REMAX, you don’t have to rely on a first time home buyer guide alone. Our agents break down complex terms so nothing gets overlooked. Let us walk you through the process and give you the support you need.