Are you a first-time homebuyer? You’re not alone.
First-time homebuyers make up about 35 percent of the housing market. While that may seem like a big number, statistics indicate that number is shrinking in recent years.
Purchasing a home can be an exciting – and intimidating – experience. For many people, the sheer numbers, vocabulary, and mortgage terminology are enough to scare them away.
You don’t have to worry. We’ve compiled a list of some of the essential words to know for anyone interested in buying a home. Check out the helpful guide below.
How do you know how much your home is worth? By getting an appraisal.
An appraisal is an estimate of the value of a home made by a qualified professional. The appraiser determines this value by comparing trends, sales, and comparable properties. An appraisal is typically made to offer home financing.
In order to pay off your home, you have to pay off the principal balance and interest.
Amortization is the schedule of loan repayments over time. Typically, your payments will mostly go towards interest at the beginning of your payment cycle. Then, they’ll go more towards the principal near the end of your schedule.
Re-amortization occurs when you decide to pay an additional amount of money on your mortgage. This will reduce the principal balance on your fixed-rate loan.
Closing is the last step for homebuyers. This is when you’ll sign your deed and official documents.
The bank will charge closing costs at this time. These are expenses that cover the transaction, such as escrow costs, appraisal fees, and property taxes. Closing costs are around 2 to 5 percent of the mortgage.
Credit is an important factor when buying a house.
You’ll have to provide a credit report in order to get a loan. This will detail your payment history and any outstanding debt you may have.
It’ll also highlight your credit score. This number is between 300 and 850. Those with higher credit scores are more reliable and are, therefore, more likely to get a low mortgage rate.
Escrow is an often forgotten word in the mortgage vocabulary. It refers to an account that holds funds until transactions are final.
You’ll put money into this account in order to cover taxes or insurance. You may also have to put money in an escrow account during the closing process.
Fixed-Rate and Interest-Only Mortgages
There are two main types of mortgages available: fixed-rate and interest-only.
Fixed-rate refers to a mortgage where the interest rate remains the same during repayment. Interest-only refers to a mortgage where payments go towards interest. Eventually, payments will increase as more money goes towards the principal instead of interest.
More Mortgage Terminology
Buying a home doesn’t have to be scary. Familiarize yourself with these terms to have a pain-free homebuying experience.
Are you looking to learn more about buying a house? We can help. Contact us today to learn about your loan options and the financing package available.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Virginia, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.