We know the real estate process can be quite confusing, even for the most experienced home buyers or sellers. If you are new to the process or just wanting to have a good understanding of what your realtor is talking about, check out this guide for some commonly used words and phrases in the real estate world.
PRE-APPROVED
Pre approved is a very important step in the home buying process. This means that the buyer has provided documentation to to the lender that validates their income, assets, and debts, and the lender has been able to verify that the information given qualifies them for a loan up to a certain amount during their home buying process. It is important to remember that the pre-approval is conditional, the loan is not fully approved until a property is ready to go under contract.
FIXED MORTGAGE RATE
A fixed mortgage rate is a home loan that allows the bowser to have the comfort of knowing what their monthly payments will be for the lifetime of the loan. So even as interest rates fluctuate higher and lower over time, the monthly payment will always stay the same.
ADJUSTABLE MORTGAGE RATE
An adjustable mortgage rate is a unique home loan that only certain borrower should consider. In most cases, the rate set at closing is for a period anywhere between one to seven years. The rate then, adjusts based upon current interest rates in the market. The means that the borrower is taking the risk that the rate will be lower on the reset date. If it isn’t, their monthly payments will increase compared to the current amount. This reset will continue for the life of the loan, until it is repaid.
INSPECTION
After you have found the perfect home to make an offer on, you’ll need to schedule an inspection. The inspector will go through every inch of the home and review things like the plumbing, electrical, foundation, walls, heating and appliances.
Once the inspection is done, you’ll review the list of things that need to be updated, replaced or fixed and decide if you would still like to move forward with the offer.
APPRAISAL
When you apply for a mortgage loan, the lender will require an approval of the home that you would like to buy. A licensed appraiser will estimate the homes value based on comparable homes that have hold in the area and an investigation of the property.
CONTINGENCIES
When you put in an offer on a home, you can specify certain conditions that must be met before the deal will go through – these are called “contingencies”. You’ll have to make sure that you can actually get the loan, that the inspection doesn’t show anything too crazy, and that the appraisal value of the home is close to what you’re offering to pay.
CLOSING COSTS
In addition to the final price of the home, there will also be closing costs to pay. They typically make up about two to five percent of the purchase price, not including the down payment.
ESCROW
Ensures that the buyers’ money is secured by a third party until the transaction is 100% completed. Then the money will be transferred to the seller.
TITLE INSURANCE
Due to a variety of potential issues, title insurance is secured by both home buyers and their lenders. The insurance covers them in case another party tries to lay claim to the residence.
