Buying a home in Dearborn can be both exciting and overwhelming. Between navigating open houses, securing financing, and closing on your dream property, you’ll encounter a long list of real estate terms that may feel like a foreign language. Understanding these key terms before you begin the process will help you make informed decisions, communicate effectively with real estate agents and lenders, and avoid costly mistakes.

Here’s a breakdown of essential real estate vocabulary every Dearborn homebuyer should know.

1. Pre-Approval vs. Pre-Qualification

These two terms often confuse buyers, but they mean different things:

Pre-Qualification: An informal estimate from a lender about how much you may be able to borrow, based on information you provide.
Pre-Approval: A more detailed process where a lender verifies your financial information, such as credit score, income, and debt. A pre-approval letter carries more weight in Dearborn’s competitive market, demonstrating to sellers that you’re serious and financially ready.

2. MLS (Multiple Listing Service)

The MLS is a database where real estate agents list available properties for sale. When you work with a licensed Dearborn agent, they use the MLS to find homes that match your criteria. It’s more accurate and up-to-date than third-party real estate websites.

3. Contingency

A contingency is a condition that must be met before a real estate contract is finalized. Common contingencies include:

Financing Contingency: Protects the buyer if their loan is not approved.
Inspection Contingency: Allows the buyer to back out or renegotiate if a home inspection reveals significant issues.
Appraisal Contingency: Ensures the home’s appraised value matches or exceeds the purchase price.

In the Dearborn market, contingencies can make or break an offer, so understanding how they work is crucial.

4. Earnest Money Deposit

Also called “good faith money,” this deposit demonstrates to the seller that you’re serious about buying the property. Typically, 1–3% of the purchase price is held in escrow until closing. If the deal falls through for a valid reason (such as a failed inspection contingency), you typically receive your earnest money back.

5. Escrow

Escrow refers to a neutral third party that holds funds and documents until all conditions of the real estate transaction are met. In Dearborn, escrow ensures both buyer and seller are protected throughout the process.

6. Closing Costs

When you finalize your home purchase, you’ll pay closing costs in addition to your down payment. These can include:

Loan origination fees
Title insurance
Appraisal fees
Recording fees
Prepaid taxes and insurance

On average, closing costs in Michigan range between 2% and 5% of the purchase price. Knowing this helps you budget accurately for your Dearborn home.

7. Title and Title Insurance

The title is the legal documentation that shows who owns the property. Title insurance protects you against future claims or disputes over ownership. For example, if a previous owner failed to pay property taxes, title insurance ensures you won’t be held responsible.

8. Appraisal

An appraisal is an unbiased estimate of a home’s value, conducted by a licensed professional. Lenders require an appraisal before approving a mortgage to confirm the property is worth the agreed purchase price. In a city like Dearborn, where property values vary significantly between neighborhoods, this step is especially important.

9. Home Inspection

A home inspection is a detailed review of the property’s condition, usually performed after your offer is accepted. Inspectors check the roof, foundation, plumbing, electrical systems, and more. In Dearborn, where many homes were built decades ago, inspections are vital for uncovering hidden issues before you commit.

10. Fixed-Rate vs. Adjustable-Rate Mortgage

Two common loan types you’ll hear about are:

Fixed-Rate Mortgage: The interest rate remains constant throughout the life of the loan. Ideal for buyers seeking predictable monthly payments.
Adjustable-Rate Mortgage (ARM): The interest rate can change after an initial fixed period, often starting lower but carrying more risk.

Understanding your options helps you pick the right mortgage for your long-term plans in Dearborn.

11. Down Payment

Your down payment is the upfront amount you contribute toward the purchase price. While many think you need 20%, some programs in Michigan allow as little as 3% down, especially for first-time buyers. The amount you put down can affect your loan terms and whether you’ll need private mortgage insurance (PMI).

12. PMI (Private Mortgage Insurance)

If your down payment is less than 20%, most lenders require PMI. This protects the lender—not you—in case of default. While it adds to your monthly costs, PMI can help you buy a home sooner without saving a large down payment.

13. HOA (Homeowners Association)

Some Dearborn neighborhoods and condo developments have HOAs, which set community rules and charge monthly or annual fees for maintenance and amenities. Before buying, review the HOA’s bylaws and fees to ensure they fit your lifestyle and budget.

14. Equity

Equity is the difference between what your home is worth and what you owe on your mortgage. As you pay down your loan or your property’s value increases, your equity grows. Building equity is one of the main financial benefits of homeownership.

15. Closing

Closing is the final step in the homebuying process. This is when you sign all documents, pay your closing costs and down payment, and officially take ownership of the property. In Dearborn, closing is often facilitated by a title company or attorney.

Why These Terms Matter in Dearborn

Dearborn’s real estate market is unique. With a mix of historic homes, new developments, and strong demand from both local and out-of-town buyers, understanding these terms gives you an advantage. Whether you’re looking for a starter home near Michigan Avenue or a larger property in west Dearborn, knowing the language of real estate helps you make smarter offers, avoid surprises, and feel confident throughout the process.

Final Thoughts

Buying a home is one of the biggest financial decisions you’ll ever make. By familiarizing yourself with these key real estate terms, you’ll be prepared to navigate the Dearborn market like a pro. Remember, your real estate agent and lender are there to guide you, but the more you understand the process, the smoother your homebuying journey will be.

With this knowledge in hand, you’ll be ready to find the right property, negotiate effectively, and secure a home you’ll love for years to come.

Thank you for reading! If you enjoyed this article and want to explore more content on similar topics, check out our other blogs at Sonic Loans, Sonic Realty, and Sonic Title. We have a wealth of information designed to help you navigate the world of real estate and finance. Happy reading!

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