The homebuying journey comes with a complete new language, new words and jargon that you may not have heard before. Getting acquainted with this homebuying lingo will help you understand the process better and communicate with your Real Estate Agent and Mortgage Banker more efficiently. Here are some of the main homebuying terms you should know.
Adjustable-rate mortgage (ARM): in an ARM loan, interest rates can change after an initial fixed rate period. This variation depends on the interest rate index the ARM is tied to. While this type of mortgage loan may be less predictable, you might be able to pay lower interest rates during certain periods.
Fixed-rate mortgage: in a fixed-rate loan, your interest rate is set and will not vary for the entire duration of loan. The 15 year and 30 year fixed rate mortgage loans are the most popular, accounting for about 75% of all residential mortgage loans in the US.
Pre-approval: this is a lender’s written guarantee that the borrower will be able to have a loan up to a specified amount. Having a pre-approval can help your chances of getting a home when you put in an offer, especially in a highly competitive market.
Amortization: the repayment schedule of the mortgage loan, which includes both the principal payments and the mortgage interest.
Appraisal: the estimated value of the property as defined by a qualified appraiser. Mortgage lenders require appraisals in order to make sure the property is being sold for a fair price, and its value exceeds the amount of the loan.
Private Mortgage Insurance (PMI): is an insurance policy required for most types of loans when the borrower does not put down at least 20% of the value of the property. This is an extra cost that is generally included in your mortgage loan, but can sometimes be paid upfront.
Closing Costs: the closing costs may include appraisal fees, credit report fees, attorney’s fees, deed recording fees, and others. Your Mortgage Banker will be able to give you an estimate of your closing costs so you can be prepared for them.
Escrow: this term can actually have two different meanings. The first refers to an amount of money being kept in a separate escrow account once an offer on a home is made, until the conditions of the homebuying contract are met by the buyer. The second refers to your lender collecting extra money for an escrow account in your monthly mortgage payments, that is then used to pay your property taxes.
Home Inspection: a professional examination of the property that evaluates it’s structural and mechanical condition. Home inspections are not mandatory but highly recommended, as it will let you know about any current or potential future issues with the house before you purchase it.
Now that you have learned some of the main homebuying terms you are on your way to make informed real estate decisions. Your best ally in making those decisions will be your Mortgage Banker, reach out to one of our experts, they are ready to help you get started!
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At Resource Financial Services, we love making people’s dreams of home ownership a reality. Visit us online today at rfsmortgage.com to get started. Then contact a Resource Financial Services mortgage banker at 877.797.4545 to discuss your mortgage options and your financial goals. Let us walk you through the process and welcome you home to a better mortgage.