Home Buyer

terms to know

• Adjustable-Rate Mortgage (ARM)
  

A type of mortgage that begins with a lower initial interest rate for a set number of years, then adjusts at specified intervals during the remainder of the loan term.

• Appraisal
  

The estimated value of a house based on a qualified appraiser’s written analysis. Banks usually require appraisals before issuing loans to ensure the estimated value of the property exceeds the amount borrowed.

• Buyer’s Agent
  

A real estate professional who represents the buyer and their interests in transactions.

• Closing Costs
  

Money paid by the buyer or seller that is associated with completing a real estate transaction. This may include fees for document preparation, deed recording and appraisals. Closing costs will often vary based on the property you buy, where you live, and the type of loan you choose. Can be around 3-4% of sale price.

• Contingencies
  

Conditions that must be met before closing a real estate transaction. This can range from a home inspection to being approved for financing.

• Discount Point

Is when you pay money to the mortgage company, up front, to reduce your overall interest rate on the loan. One discount point is equal to one percent of the loan. Some times known as ‘buying down the rate’.

• Down Payment
  

A percentage of the total purchase price that you pay upfront. Traditionally, down payments are 3.5-20% of the purchase price. It is possible to put less than 20 percent down, but mortgage insurance would then be required.

• Earnest Money
  

Funds, also called a “good faith” deposit, which are held by a neutral party to demonstrate the buyer has a serious interest in purchasing a property.

• Equity
  

Is a ratio that compares how much you owe on a mortgage versus what the property is worth. Equity can increase as you pay down the loan, but it can also increase as your house appreciates.

• Escrow
  

There are two kinds of escrow accounts you might use. One is a collection of funds that your mortgage company sets aside to pay for taxes and insurance. That escrow amount can be added into your monthly mortgage payment. The other escrow is an account where your down payment is stored until closing.

• Fixed-Rate Mortgage
  

A conventional loan with a pre-determined (or “locked-in”) interest rate for the duration of the loan repayment period.

• Home Inspection
  

An evaluation that occurs before a house is purchased. An inspector will evaluate the structural and mechanical condition of the property, which includes plumbing, foundation, electrical, HVAC systems and more. While a home inspection is optional, it is highly recommended to get one before you close on a property. Typically cost around $300-$600.

• Private Mortgage Insurance (PMI)
  

A monthly insurance payment that might be required if a buyer’s down payment is less than 20 percent of a home’s purchase price. PMI protects lenders against loss if a borrower defaults on their loan.

• Seller’s Agent
  

The real estate agent who represents the seller of a piece of property. Their job is to act in the best interest of the seller. This includes marketing the home to potential buyers and negotiating on the seller’s behalf.

Malory

Luthy

Home Buyer

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