Buying a home can be intimidating if you are not familiar with the terms used during the process. To help navigate you along the home buying maze and to help you gain confidence in the process, I have compiled a list of some of the most common terms used when buying a home:
Appraisal - A professional analysis used to estimate the value of the home. It is a necessary step in validating a home's worth to you, as the buyer, and your lender to secure financing. An appraisal fee is usually paid to the buyers mortgage company at the time of a buyers mortgage application after the buyer has a signed contract on the home. Your lender will order the appraisal on your behalf.
Closing Costs - The cost to complete the real estate transaction. Outside of your inspection fees, mortgage application fees and appraisal fees, most of your closing costs are paid at the time of the closing of the home purchase and include: points, taxes, title insurance, inspection fees, financing costs, and prepaid or escrowed fees. You can ask your real estate agent and lender for a complete list to the closing cost items. Now, although closing costs may be high in our area, the good news is that a seller can also assist a buyer by paying a portion of their closing costs, subject to the limitations of the buyers mortgage program. In addition, a family member may provide a financial gift to a buyer, subject to limitations of the buyers mortgage program, that can be used to help pay for the closing costs.
Credit Score - A number ranging from 300 to 850, that is based on analysis of your credit history. Your credit score helps a lender determine the likelihood that you'll repay future debts, especially your mortgage. The higher your credit score the easier it will be to get qualified for a mortgage. In addition, a high credit score could help you secure a lower interest rate. Now if your credit score is on the low side, there is no time like the present to start improving your score. There are many options available today to help you improve your credit score so be sure to discuss these options with your real estate professional and lender.
Down Payment - Down payments are typically 3 to 20% of the purchase price of the home. 0% down programs are available for VA eligible buyers and may be available on for other buyers on a limited or occasional basis.
Mortgage Rate - The interest rate you pay to borrow money to buy a house. The lower the rate, the better for you.
Pre-Approval Letter - A letter from a lender indicating that a buyer qualifies for a mortgage of a specific amount. I highly recommend that you work with your real estate professional to get pre-approved for a mortgage before you start looking at homes. This way you know the price range of the homes and areas you should be looking at.
Real Estate Professional - An individual who provides services in buying and selling homes. Real Estate professionals are there to help you through the confusing paperwork, find your dream home, negotiate any of the details that come up, and to help you know exactly what's going on in the housing market.
Now, the best way to ensure that your home buying process is a great experience is to find a real estate professional who not only puts your family's needs first, but will help navigate you through the complex maze of the home buying process.