I LOVE helping educate buyers whether you are are first time homebuyer or a purchased multiple times! The excitement and pride in owning a home on closing day, never fails to make me smile. With buying a new home, there is a lot of real estate terminology that if you understand, can help you navigate the process more smoothly. To help get you started on your home-buying adventure, here are my top 10 words I educate you on when you buy with me.
- Mortgage
- Definition: A loan that you take out to buy a home if you do not purchase it with cash. It is usually paid back over a specified number of years, and is borrowed from a lender or bank.
- Why it’s important: Understanding the basics of mortgages is crucial as it directly relates to how you’ll finance your home and the monthly mortgage payment.
- Down Payment:
- Definition: A percentage of the home’s purchase price that you pay upfront at closing. It is not included in the mortgage amount.
- Why it’s important: The down payment affects your loan amount and monthly payments, so knowing how much you want to put down and how that affects your payment is important!
- Interest Rate:
- Definition: The percentage of your loan amount that you pay to the lender as a fee for borrowing money.
- Why it’s important: The interest rate makes a huge difference in your overall mortgage cost and influences your monthly payment.
- Closing Costs:
- Definition: Fees associated with finalizing the home purchase in addition to your down payment, including appraisal, title search, title fees, inspections, etc.
- Why it’s important: Understanding closing costs helps you budget for additional expenses beyond the home’s purchase price and down payment. Many first time home buyers don’t realize what these additional expenses are!
- Equity:
- Definition: The ownership interest in a property. It increases as you pay down your mortgage or as the property’s value rises.
- Why it’s important: Building equity is a long-term benefit of homeownership and helps create wealth. Equity can have great power and leverage if you want to purchase multipul properties.
- Appraisal:
- Definition: An assessment of the property’s value by a licensed appraiser.
- Why it’s important: Lenders require appraisals to ensure the property is worth the amount of the loan. They don’t want to loan you $200,000 if the home is only worth $150,000.
- Home Inspection:
- Definition: A thorough examination of a home’s condition, conducted by a professional inspector to identify any issues with the home before you buy.
- Why it’s important: Identifying potential issues through a home inspection can save you from unexpected repair costs and help the sellers repair things before closing for you.
- Pre-Approval:
- Definition: A lender’s written commitment to finance your home purchase up to a specified amount based off of your financial statement.
- Why it’s important: You need a pre-approval to submit offers on a property and it outlines a budget as you start your home shopping!
- Amortization:
- Definition: The gradual repayment of a mortgage through regular installments over time.
- Why it’s important: Understanding amortization helps you see how much of your monthly payment goes towards interest and principal.
- Earnest Money:
- Definition: A deposit made by the buyer to show their good faith in completing the transaction. It is often held at an escrow account (most likely a title company) and applied toward your purchase price as instant equity.
- Why it’s important: Earnest money demonstrates your commitment to the purchase and shows the sellers you are serious about purchasing the property. If someone were to back out of the transaction, this money is most likely up for grabs between the buyer and seller.
I love teaching and explaining these words and vocabulary to all of my buyers! Don’t let these words intimidate or scare you! Questions? Ask! That’s what I’m here for!
