Homebuying Terms Explained: A First-Time Buyer Cheat Sheet
Buying a home comes with its own language and no one hands you a dictionary. Mortgage. Escrow. PMI. Appraisal. Pre-approval. These words get thrown around fast, and if you don’t understand them, it’s easy to feel behind before you even start. This guide breaks down the most important homebuying terms in plain English, so you can follow the process, ask better questions, and move forward with confidence.
The Money Terms
Mortgage
The loan you take out to buy your home. You pay it back over 15–30 years with interest. Think of it as your home’s long-term payment plan.
Down Payment
The upfront cash you contribute toward your home (usually 3–20% of the purchase price). A larger down payment means borrowing less, but smaller down payments can still get you in the door.
PMI (Private Mortgage Insurance)
An extra monthly cost if your down payment is under 20%. It protects the lender, not you, but it allows buyers to purchase sooner with less cash upfront.
The Process Terms
Pre-Approval
A written commitment from a lender stating how much they’re willing to loan you. This makes your offer much stronger because sellers know you’re serious and qualified.
Escrow
Two types: For purchase escrow, a neutral third party that holds money and documents during the transaction to ensure everyone fulfills their obligations before the home officially changes hands. Mortgage escrow is the portion of your monthly payment that ultimately goes to homeowner insurance and property taxes.
Closing Costs
Fees paid at the end of the homebuying process (typically 2–5% of the purchase price). These include appraisals, inspections, title services, and legal fees.
The Protection Terms
Home Inspection
A professional review of the home’s condition before you buy. It uncovers hidden issues so you can negotiate repairs or walk away if needed.
Appraisal
An independent estimate of the home’s value. Lenders require this to confirm they’re not lending more than the home is worth.
Title Insurance
Protection against legal issues tied to past ownership. It ensures no one else can later claim ownership of your home.
What This Means for You
Knowing these terms helps but understanding how they apply to your situation is what actually moves you closer to buying.
Everyone’s numbers are different:
- Income
- Credit
- Debt
- Savings
- Timeline
That’s where clarity usually breaks down.
See How This Applies to Your Numbers
GetWyz helps you understand:
- When you could realistically buy
- What you need to work on first (credit, savings, debt)
- The exact steps that move your homeownership date closer