Archives: February 2024

Key Terms for a Home Buyer to Know

Before shopping for a home, here are a few key terms a home buyer should know:

Affordability: This measures if you earn enough to qualify for a loan for a typical home based on current prices, your income, and mortgage rates. Higher prices and rates can make it harder to afford a home.

Appraisal: A report done by a qualified third party estimating the value of a property. Lenders use this to make sure they’re not lending more than the home is worth.

Closing costs: Fees needed to finish the real estate deal, paid when you close. Your lender can give you a full list, including points, taxes, and title insurance.

Credit score: A number from 300 to 850 based on your credit history. This helps lenders predict if you’ll pay back loans in the future.

Down payment: Usually 3.5% to 20% of the home’s price, though some programs allow 0% down. Ask your lender about what you qualify for.

Equity: The value of your home beyond what you owe on it. Some homeowners find they have more equity than expected and use it to move.

Inspection contingency: A contract clause requiring an inspection. This helps you learn about the home’s condition and needed repairs.

Mortgage: A loan using your home as security. It can also mean the money you borrow, with interest, to buy your home.

Mortgage rate: The interest rate on your home loan. Changes in rates can affect your monthly payments, so talk to a lender about how it might impact you.

Pre-approval letter: A letter from a lender showing how much they’re willing to lend you for your home loan. This, along with your savings, helps you decide your price range.

If you are thinking about buying a home in the next six months, contact me today to discuss the process and prepare yourself for the buying process.

What Type of Loan Should I Get For My Home?

There are several types of real estate loans available to borrowers, each designed to suit different needs and financial situations:

1. Conventional Loans: These are traditional loans not backed by any government agency, typically requiring good credit and a down payment of at least 3% to 20% of the property’s purchase price.

2. FHA Loans: Insured by the Federal Housing Administration, these loans are popular among first-time homebuyers due to their lower down payment requirements (as low as 3.5%) and more flexible credit criteria.

3. VA Loans: Reserved for eligible veterans, active-duty service members, and their spouses, VA loans are guaranteed by the Department of Veterans Affairs and often allow for 0% down payment.

4. USDA Loans: Offered by the U.S. Department of Agriculture, these loans are designed for rural and suburban homebuyers who meet certain income requirements. They often feature low or no down payment options.

5. Jumbo Loans: These are non-conforming loans that exceed the loan limits set by government-sponsored enterprises like Fannie Mae and Freddie Mac. They are used for high-priced properties and typically require larger down payments and excellent credit.

6. Adjustable-Rate Mortgages (ARMs): With ARMs, the interest rate can change periodically, usually after an initial fixed-rate period. These loans often start with lower initial interest rates, making them attractive to some borrowers.

7. Fixed-Rate Mortgages: With fixed-rate mortgages, the interest rate remains constant throughout the loan term, providing predictable monthly payments. They are popular among borrowers who prefer stability and don’t want to worry about fluctuating interest rates.

8. Interest-Only Loans: These loans allow borrowers to pay only the interest for a specified period, typically the first few years of the loan. After that, borrowers must start paying both principal and interest, which can result in higher monthly payments.

9. Bridge Loans: Bridge loans provide short-term financing to help borrowers “bridge” the gap between the purchase of a new property and the sale of an existing one. They are often used in real estate transactions where timing is critical.

10. Hard Money Loans: These are short-term, high-interest loans typically used by real estate investors for purchasing or renovating properties quickly. They are based on the value of the property rather than the borrower’s creditworthiness.

Understanding the different types of real estate loans can help borrowers choose the option that best fits their needs and financial situation.