Buying a Home? Do You Know the Lingo?

Home / Blog / Buying a Home? Do You Know the Lingo?

Buying a Home? Do You Know the Lingo?

Buying a home can be intimidating if you are not familiar with the terms used during the process. To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.

Freddie Mac has compiled a more exhaustive glossary of terms in their “My Home” section of their website.

Annual Percentage Rate (APR) – This is a broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay. Because these costs are rolled in, the APR is usually higher than your interest rate.

Appraisal – A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties. This is a necessary step in getting your financing secured as it validates the home’s worth to you and your lender.

Closing Costs – The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.

Credit Score – A number ranging from 300-850, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750.

Discount Points – A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage.

Down Payment – This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers put less than 20% down last month.

Escrow – The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Fixed-Rate Mortgages – A mortgage with an interest rate that does not change for the entire term of the loan. Fixed-rate mortgages are typically 15 or 30 years.

Home Inspection – A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Mortgage Rate – The interest rate you pay to borrow money to buy your house. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017.

Pre-Approval Letter – A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you're a serious buyer. Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets.

Primary Mortgage Insurance (PMI) – If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage and can be cancelled from your payment once you reach 20% equity in your home.

e0bbc9e3 9008 4116 89dd 6b1f020515b5 04b47b05 4eae 40c7 b61c 55a2e46d04af 111df2bf 4373 43b9 8bfb aa727df5416a 921e9a1b fae3 4a80 b639 17e4e909dd46 fc6831c9 49e0 4628 b9c7 c569de359d86 534df122 24b0 4225 8f28 3cf085b8284a 5687f72f d6ec 4b2b bf46 7cfce534c5b7 24875223 f364 46c0 a109 b3ecda00d0a9 e7c5ab60 707d 4bc9 8477 1fe33e6b444e 983ae57e 1a13 4a0b aa2f 2add668dd376 f2b43582 8bfe 48a4 94ee 8717f0b6581a df31bb59 b0ad 4d17 a349 6f8e8394e131 4d3791b0 5c91 4e87 8817 2925004f3bee 3074a35a f071 4fdc b382 81e40a22a7ed dcf8bd59 2740 423b bc14 ab1885450916 78f2793f 4d5f 49e9 b3a2 f6e17d05cc04 c82da904 1a53 4a56 8339 1fe529a221e7 dd15231f f9bc 41bf 878e e54a1ff087bf f8472503 a39d 4629 9645 e5ffdb2cf279 c24ae808 e6b0 4204 88a6 e7cf6c1eb46f 31da7e46 b2d0 45a9 99d0 fcb94317891c 640cf5a6 b959 4a45 8349 96d598560b0a 3bfafe2b 8295 4adc a849 74b8a59a3369