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.

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