Saying that buying a home can be an overwhelming process is an understatement. There’s the real estate terms, the appointments, the viewings, mortgage rates—it’s a lot to take in.
After all, it’s a huge commitment, and you know it may be one of the biggest investments you’ll ever make.
Trust me—I get it. I was there once too. It’s even worse when you aren’t familiar with all the real estate terms and lingo of the trade.
I want you to be comfortable here, so let’s get some basics out of the way. You’re free to ask all the questions you want—that’s what I’m here for.
I also know the key to a successful first-time homebuyer experience is understanding the popular real estate terms, the process, and what’s expected of you.
So, let’s jump right into it. Here’s a list of 18 real estate terms every first-time homebuyer must know—that way, you can make an informed and confident decision for one of the biggest transactions in your life.
General Market TermsTerms in this list have to do with the market in general.
Buyer’s MarketIt’s considered a buyer’s market when there are more houses for sale than there are buyers. This gives the buyer more negotiating leverage since prices usually drop in the buyer’s favor to avoid having the home listed on the market for too long.
Seller’s MarketIt’s called a seller’s market when there are more buyers than houses for sale, so houses sell quickly. This gives the seller more negotiating power, as prices usually climb when multiple buyers bid on the same property. In a seller’s market, a conditional offer may not be accepted.
Balanced MarketThe number of buyers and sellers is approximately the same in a balanced market. Prices usually won’t fluctuate, and fair offers are generally accepted, which means homes won’t stay on the market for an extended length of time.
Real Estate AgentThere are two types of real estate agent representatives. The buyer’s agent and the seller’s (or listing) agent. The buyer’s agent has the homebuyer’s concerns and interests in mind, while the seller’s agent has the concerns and interests of the homeowner in mind.
Real Estate Process TermsAny terms in this list revolve around the different processes, components, and general requirements associated with real estate.
AppraisalAn home evaluation performed to estimate its current market value.
DepositAn amount of money paid to the homeowner at the time the offer to purchase is accepted. While a deposit isn’t necessary, it shows the homeowner how serious the buyer is. The deposit is held in trust until the transaction is complete and then put towards the purchase price.
Down PaymentAn upfront payment given to your financial institution to secure your mortgage. The minimum down payment amount in Canada is 5% of the total selling price. The purchase price, less the deposit and down payment, will be your mortgage amount.
OfferThe price and conditions listed as a legal agreement to purchase the house. Some common conditions that may be noted are “subject to home inspection” or “subject to financing.” If the seller does not meet the conditions, the buyer may cancel their offer.
Conditional OfferAn offer made to a homeowner that carries specific conditions. Common conditions may include a home inspection, repairs, financing, and more. A conditional offer can be revoked should the conditions not be met. In a seller’s market, conditional offers may be seen as less attractive than a firm offer.
Firm OfferAn offer to purchase a property that doesn’t carry any conditions. If the seller accepts a firm offer, it becomes binding.
Land SurveyThis is all about knowing where the property lines are. It’s not always required, but some lenders insist on having it done to avoid any future problems with neighbors or the city in regards to property restrictions. Fences, driveways, and garages are common examples that typically run close to property lines.
Home InspectionA thorough inspection of the home performed by a qualified home inspection company. The inspection aims to point out any existing problems or potential future problems with the home. Some issues may include structural damage, roof, windows, insulation, evidence of past basement flooding, cracked basement foundation or floors, problems with the heating or air conditioning systems, ductwork, and airflow issues. Sometimes the seller may have a home inspection done on their own so they can provide the reports to potential buyers to prove they aren’t hiding anything. More often, the buyer will prefer to have their own inspection done. This allows them to use any issues found during the inspection in their negotiations.
ClosingThe last step of the home buying process where all the conditions have been met, everything’s been signed and sealed, and the house is now yours! You’ll receive the keys to your new home according to the closing date on the offer. Congratulations, first-time homebuyer!
Closing CostsThis one’s good to know, so you can budget accordingly. These often “surprise” costs come into play at the closing of a sale and are most often associated with legal fees, insurance fees, land transfer fees, and survey fees.
Mortgage & Financial Terms
Mortgage Loan InsuranceInsurance that’s required for any mortgage that has less than a 20% down payment. The premiums are factored into your mortgage payment based on the amount of your down payment. The calculations change at the 5%, 10%, and 15% levels. Mortgage loan insurance in Canada is handled by the Canada Mortgage and Housing Corporation (CMHC) and is in place to protect the lender if the loan defaults.
Mortgage Pre-ApprovalWhen your lending institution calculates the maximum amount of mortgage you will be approved for. Knowing this amount ahead of time will allow you to narrow down your options when looking at the price of homes and to put an offer in easily when you find one you like. The lender holds the interest rate for a specified amount of time, protecting you from any future increases.
Fixed-Rate MortgageThe fixed-rate mortgage confirms your interest rate for a set amount of time. The most common mortgage term is five years. When the length of term is up, you can re-mortgage for another term with the same financial institution or change to a competitor that may offer a lower interest rate.
Variable-Rate MortgageWhen the prime interest rate goes up and down, so does your mortgage interest. Your mortgage payments won’t change, but the amount of money being put towards your interest and principal will.
Prime Interest RateThe prime interest rate is set by banks and is reserved for their most credit-worthy clients (government institutions and large corporations). This rate is then used to determine the interest rates for personal loans and mortgages, often consisting of the prime interest rate plus a designated percentage.
AmortizationThe time given to pay off a loan—when you and I talk about amortization, we’ll be talking about your mortgage. Canada usually caps amortization periods at 25 years.
Need Help Navigating the Real Estate Process? I Can HelpThe most important thing to remember is that you’re not alone when it comes to buying the perfect home in Toronto and the GTA. As your agent, I can help you make sense of the different real estate terms, processes, and anything else related to purchasing a home. Are you looking for an agent to guide you through the purchasing process? Get in touch with me today and see why first-time homebuyers love working with me.
Hi, I’m Joel, a real estate professional based in Toronto.
My approach is simple—I put you first. I believe in open communication, total transparency, and meaningful results. I’ll guide you through the real estate process, market values, and always keep the focus on you—and your needs.