Are you a first-time homebuyer? The process can be intimidating if you’re not familiar with mortgage terms. To point you in the right direction, here’s a list of some of the most common terms you’ll hear when buying a home.
- Appraisal: A professional analysis used to estimate the value of the home. A necessary step in validating the home’s worth to you and your lender to secure financing.
- Closing Costs: The costs to complete the real estate transaction. Paid at closing, they include financing and title fees, title insurance, state and local transfer taxes, and items that must be prepaid or escrowed such as property taxes and homeowner’s insurance.
- Credit Score: A number ranging from 300-850 that is based on an analysis of your credit history. Your credit score helps lenders determine the likelihood that you’ll repay future debts. Your credit score is a main determinant of your loan program and terms.
- Mortgage Rate: The interest rate you pay to borrow money to buy your home. Interest is always paid on the remaining balance of your loan.
- Pre-Approval Letter: A letter from a lender indicating you qualify for a mortgage of a specific amount. This will be requested from your agent prior to seeing homes, and the listing agent and seller will expect it to be supplied with an offer.
- Down Payment: Down payments are typically 3-20% of the purchase price of the home. Some 0% down payment programs are also available.
- Debt-to-Income Ratio: The percentage of your gross monthly income that goes towards paying off debts. Your lender will use this ratio to determine the risk associated with extending you a loan.
- Principal: The remaining balance of your home loan. As a piece of your mortgage payment, it’s the amount that your loan balance is being reduced when the payment is applied.
- Title: A legal document listing the owner(s) of the property.
If you’re thinking about buying a home, contact our team. We’ll guide you through the path to homeownership.