If you’re planning to buy a home sometime soon, you’ll want to get familiar with the vocabulary – or “lingo” – that’s typically used by industry experts. Doing so will help you become a more informed buyer who is well-versed in the home buying process, which will inevitably help you come out the winner with a successful purchase transaction.
So, what are some of the home buying terms that you should get familiar with?
Your mortgage lender will want your home to be appraised in order to find out what it’s current assessed value is before a loan is secured. An appraisal is a professional analysis used by appraisers to estimate the value of your home.
In addition to the actual purchase price of your home, you will also be required to cover a number of closing costs when your transaction closes, which typically need to be prepaid or escrowed. These can include title insurance, taxes, discount points, and financing costs, among others. Generally speaking, closing costs range anywhere from 2% to 5% of the purchase price of a home.
Escrow is a common term in real estate and mortgage transactions. It generally refers to money or documents being held as part of the transaction until certain steps are completed.
Your credit score paints a picture of your financial profile and health. It is something that your lender will use to determine your creditworthiness and ability to get approved for a loan. Credit scores range from 300 to 850 and are based on an analysis of your credit history. The higher your credit score is, the higher your chances of getting approved for a mortgage at a more affordable interest rate.
A down payment is a lump sum amount that your lender will require to secure a home loan and is a percentage of the purchase price of the home. The amount you have to pay will depend on the type of loan you are applying for, as well as other factors. Generally speaking, down payment amounts range from 3% to 20% of the purchase price of a home, though there are 0% down payment options available. You’ll want to speak with your lender for more detailed information about down payments.
Earnest money is a term buyers often hear early in the home buying process. It generally refers to money provided as part of an offer to show that a buyer is serious about moving forward with the purchase.
Your mortgage will come with an interest rate that will be paid in addition to the principal portion of the loan. The lower the rate, the better. You can secure a lower rate by having stronger financials, such as a high credit score and low debt load. The rate will also depend on the going rate for today, which you can get more info on with your lender.
Principal is the portion of your home loan amount that you borrow and repay over time. It is separate from the interest charged on the mortgage.
This is a letter that your lender will provide you with that indicates that you qualify for a home loan for a specific amount. Buyers are encouraged to apply for pre-approval to help speed up the lending process and show sellers that you are a qualified and serious buyer.
This is an expert who provides services in buying and selling homes. They are trained to help you navigate the confusing paperwork of real estate transactions, help you find your dream home, and negotiate with sellers so that you are well-informed of what’s happening in the real estate market in your area.
The best way to make sure that your home buying process is a success is to work with a real estate professional who can guide you through every aspect of the transaction with the ‘heart of a teacher’ by putting your family’s needs first.
Are you ready to apply for a mortgage or simply have questions about them? Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been offering multiple mortgage programs with flexible qualification criteria to borrowers across the Pacific Northwest, including our Diamond Homebuyer Program, Cash Buyer Program, and Bridge Loans. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, contact us if you’re ready to get pre-approved for a mortgage.
An appraisal is a professional estimate of a home’s market value that a lender uses before approving a mortgage.
It helps confirm that the home’s value supports the loan amount being requested.
Closing costs are fees and prepaid expenses paid at the end of a home purchase, such as title charges, taxes, discount points, and financing costs.
Closing costs typically range from 2% to 5% of the home’s purchase price.
A credit score is a number that reflects credit history and helps lenders evaluate loan eligibility and pricing.
A higher credit score can improve the chances of approval and may help a buyer qualify for a lower interest rate.
A down payment is the upfront portion of the home’s purchase price that a buyer pays when getting a mortgage.
Down payment amounts often range from 3% to 20% of the purchase price, although some loan programs offer 0% down options.
A mortgage rate is the interest charged on a home loan in addition to repaying the principal balance.
A mortgage pre-approval letter is a lender document stating that a buyer qualifies for a home loan up to a specific amount.
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