Buying a House in San Jose: Vocabulary Words You Need to Know

Are you thinking about buying a home but struggling to understand real estate terms? You’re not alone! There is a ton of vocabulary unique to real estate that’s difficult to get a handle on.

Many home buyers, especially first-time home buyers, are overwhelmed with home buying terms and definitions. Many find themselves confused between agents, loan officers, and how everyone works together to make a transaction happen.

That’s why we’ve put together this list of home buying vocabulary (or real estate vocabulary) terms. Knowing these terms– even at a surface-level– will help you strategically plan as you strive to buy a home in San Jose.

There are several different sectors of people you're going to work with throughout the home buying process and many different terms that will come up.

Here are the terms we’re covering:

• Adjustable rate mortgage
• Buyer’s agent
• Closing costs vs. cash to close
• Contingencies
• Earnest money
• Escrow and title
• Fixed rate mortgage
• Home inspection
• Homeowners Association (HOA)
• Lender or loan officer
• Listing agent
• Mortgage application
• Multiple Listing Service (MLS)
• Residential purchase agreement (RPA)
• Selling agent

Adjustable Rate Mortgage

An adjustable-rate mortgage is only locked at an interest for a shorter time, and then, adjustable after that; hence it's called adjustable-rate mortgage. You may choose an adjustable rate mortgage to get a lower starting interest rate (to help you afford more home/ a larger loan), but it should be fully understood that by doing so you have timing risks and potential payment increases after the fixed time period.

Buyer’s Agent

A buyer's agent is a licensed real estate professional who represents and advocates on your behalf when you’re buying a home. They locate suitable properties, negotiate terms, and facilitate the transaction. The primary responsibility of a buyer's agent is to protect and guide the buyer through the complex process of acquiring a property. They help clients understand market conditions, assess property values, review seller-provided property disclosures, and coordinate activities such as property showings, inspections, and the closing process. The buyer's agent typically earns a commission from the seller's proceeds at the closing of the sale, and their loyalty is exclusively to the buyer.

Closing Costs vs. Cash to Close vs. Down Payment

Down payment is the amount that you're going to put down for the property, such as 20% down. Closing costs are the loan fees and transfer fees (city transfer taxes, escrow fees, HOA transfer fees, etc).

Cash to close is also sometimes called closing costs, but properly used, cash to close is the full amount of money you need to bring to close escrow, including your remaining down payment (after your earnest money deposit). To clarify, cash to close is the total down payment + closing costs.

Contingencies

Contingency in a real estate contract is an investigation period where your earnest money deposit is not at risk. The contingency period allows the buyers to look into details of the property or their loan further without risk of another buyer trying to purchase the property. During your investigation period (AKA contingency period), the buyer could choose to back out of the purchase if they find something not satisfactory.

There are three main contingencies in the California purchase: the loan contingency, the appraisal contingency, as well as the property investigation contingency. You can do homework ahead of time with your agent to minimize those contingencies and make your offer very attractive.

Earnest Money

Earnest money, sometimes referred to as “earnest money deposit” or EMD is a deposit made by the buyer to demonstrate their commitment to the purchase. It is held in an escrow account until the sale is finalized. Your EMD is typically 1-3% of the sale price– in San Jose it’s typically 3%.

Escrow and Title

Escrow and title can be used interchangeably, but escrow is a third-party company, an intermediary, that brings together the buyer and the seller to make sure that the financial aspect (in terms of the contract) is followed. Escrow is going to make sure the buyer gets their earnest money deposit in and they're going to make sure the seller fills out all the paperwork to clear the title for transfer. Escrow is also going to transfer title/ownership of the property and calculate funds and expenses to the closing day. They will then disperse the funds to make sure that the title/ownership can be transferred into the new buyer’s name.

Fixed Rate Mortgage

Fixed rate means that your interest rate is fixed on your home loan for a set time, typically 30 years.

Home Inspection

You’ll hear real estate terms like general property inspections, roof inspections, termite inspections, foundation inspections, and even soil inspections.

There are several details involved, however, you must remember that your buyer's agent is your reference from the very beginning of your home purchase, so ask your agent any questions. As your project manager, the buyers agent will help advise as to which inspections you might want or who you should hire for those inspections.

Homeowners Association (HOA)

A homeowners association is a group responsible for managing common areas and enforcing rules and regulations in a planned community or condominium complex. If you buy in certain communities, particularly if you buy a condo, you may need to factor in a monthly HOA fee to the cost of buying the home.

Lender or Loan Officer

When you’re buying a house, you're going to be working with is a lender or loan officer and they are a critical part of your team. Your lender is going to be your project manager for the financing or home mortgage. The loan officer should work well with your agent and have great communication during the process, especially through the home purchase contract steps. You want your buyer’s agent and loan officer to work together as a team. For this reason, talk to your buyer’s agent to get their recommendations for lenders.

Listing Agent

A listing agent, sometimes known as a seller's agent, is a licensed real estate professional hired by a property owner to represent their interests when selling real estate. The listing agent's primary role is to assist the property owner in marketing, pricing, and ultimately selling the property. 

They are responsible for creating and managing property listings, conducting market analysis to determine an appropriate listing price, coordinating showings, and negotiating with potential buyers or their agents. The listing agent works to ensure the seller's goals are met, and they typically earn a commission from the sale proceeds once the property is successfully sold. Their loyalty lies exclusively with the seller.

Mortgage Application

A mortgage application is the first step to getting pre-approved for a loan. What's the difference between a pre-qualification and pre-approval? Watch Mortgage Pre-Approval | Differences from Pre-Qualification on YouTube if you want to know the difference between these two.

A mortgage application is part of the process to determine what amount of loan you can qualify for. A pre-approval is going through the formal application process, plus submitting all of your financial paperwork to the lender. Once the lender has reviewed all your financials in details then hopefully they say, “Yes, you can afford this amount of mortgage.” And you are pre-approved!

Multiple Listing Service (MLS)

The MLS is a database that real estate agents use to list properties available for sale. It’s accessible to other agents and potential buyers. You can set up searches with your real estate agent that will comb the MLS for homes that meet your criteria, sending you an email each day with potential listings. Public portals like Realtor.com don’t have the coming soon listings or other details that the local MLS has.

Residential Purchase Agreement (RPA) Offer

Your buyer's agent will guide you through this residential purchase agreement (the technical terms for the many pages that are the purchase contract).

Selling Agent

You're going to be working with the buyer's agent, but technically, your buyer's agent is also called a selling agent because they are selling the property. It’s a little confusing. That’s why it’s best to refer to the person representing the seller as the listing agent, and the buyer, a buyer’s agent (skip the term selling agent).

Knowing the right vocabulary can put you in a better position to buy a home in San Jose. Think you’re ready to buy a house in San Jose? Read our guide to buying a house in San Jose and schedule your buyer consultation today so we can talk more about your home-buying goals.