Buying a Home? Do You Know the Lingo? – Buying
can be intimidating if you are not familiar with the terms used during the process. To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home
has compiled a more exhaustive glossary of terms in their “My Home
” section of their website.
Annual Percentage Rate (APR) – This is a broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay. Because these costs are rolled in, the APR is usually higher than your interest rate.
– A professional analysis used to estimate the value of the property
. This includes examples of sales of similar properties. This is a necessary step in getting your financing secured as it validates the home’s worth
to you and your lender.
– The costs to complete the real estate transaction
. These costs are in addition to the price of the home and are paid at closing
. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.
– A number ranging from 300-850, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers
believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750
– This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments
are typically 3 to 20% of the purchase price of the home
. There are zero-down programs
available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers
put less than 20% down last month.
– The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner
pays money for taxes and insurance.
– A mortgage
with an interest rate that does not change for the entire term of the loan. Fixed-rate mortgages
are typically 15 or 30 years.
– A professional inspection of a home
to determine the condition of the property. The inspection should include
an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
– A letter from a mortgage
lender indicating that you qualify for a mortgage
of a specific amount. It also shows a home seller that you’re a serious buyer
. Having a pre-approval letter
in hand while shopping for homes
can help you move faster, and with greater confidence, in competitive markets
Primary Mortgage Insurance (PMI)
– If you make a down payment
lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage
and can be cancelled from your payment once you reach 20% equity in your home. For more information on how PMI can impact your monthly housing cost, click here
The best way to ensure that your home-buying process is a confident one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher,’ and who puts your family’s needs first.
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