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Getting ready to buy a house

Real estate and mortgage terms you need to know

By Shelley Sines

March 2023

Whether you’re a first-time homebuyer or a seasoned house hunter, it never hurts to brush up on your real estate and mortgage vocab before you dive headfirst into the homebuying process. Read on to get more familiar with the lingo you’ll surely encounter as you browse listings, visit open houses and navigate offers (and maybe even counteroffers).

Contingent vs. pending

When a home is listed as “contingent,” that means the seller has accepted an offer on the property, but the deal is contingent on certain conditions that must be met within a specified amount of time. If the conditions aren’t met, the deal is off. The property stays active on the local multiple listing service (MLS), where real estate agents provide information on properties that are currently available, until the contingencies are successfully met.

Some common contingencies include a home inspection contingency, an appraisal contingency and a home sale contingency. For example – if the seller accepts a buyer’s offer, but the home inspection must come back without any issues, that is a contingent real estate contract.

A pending home sale occurs after the seller has accepted an offer and the contract between the seller and buyer is signed. That means all (if any) contingencies were successfully met, and both parties have agreed to move forward with the home sale transaction. When a home sale is pending, it is no longer considered “active” on the MLS.

Offer and acceptance vs. counteroffer

Offer and acceptance signify a binding contract and occur when the seller accepts the buyer's offer on the property, typically by signing a purchase and sale agreement that has already been signed by the buyer. This is also known as “mutual acceptance.”

When a seller gets an offer from a prospective buyer, they can choose to accept, reject or counter the offer. An initial counteroffer is an offer made by the seller back to the buyer in response to the buyer’s original bid. Accordingly, if the seller counters, a buyer can also choose to accept, reject or counter that offer.

Purchase and sale agreement (PSA) vs. purchase agreement

A purchase and sale agreement, or PSA, is a legally binding contract signed by the buyer and seller after they agree on the price and terms of the home sale transaction. The PSA includes details like earnest money needed, closing date, and any contingencies that the buyer and seller agreed on. Signing the PSA is the catalyst that sets the transaction in motion toward the closing table.

However, a PSA is different from a purchase agreement. Unlike signing the PSA, which outlines the terms of the transaction leading up to the loan closing date, signing a purchase agreement completes the sale of the home. When the buyer and seller sign the purchase agreement, generally at the loan closing, this finalizes the home sale transaction.

So there you have it – a quick breakdown of some common terms you’ll run into as you begin your homebuying journey. If you’re looking for information on even more mortgage and real estate terms, check out our Readynest glossary. And be prepared to impress your real estate agent and loan officer when you’re able to speak to them in their language!

Related to This

Chris Perry •

How about detailing ARM language: index, margin, caps, start rate

Liz •

Chris, check out this story for an explainer of those ARM terms! https://readynest.com/homebuyer-stories/should-you-adjust-your-thinking-on-adjustable-rate-mortgages

Vallie Green •

Helpful

jasell i cuesta guzman •

I learned the terms of the contracts of the payments and the offers and the terms of the transaction and the closing date

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Shelley

Read more articles by Shelley
Shelley Sines has been writing for MGIC since she graduated from college in 2007. Currently raising a sweet little family with her husband in the suburbs of Milwaukee. Happiest when cooking or gardening. Competitive Scrabble player. Enthusiastic about road trips, wine, good TV.
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