Important Terms for Homebuyers to Know
When buying a home, it's important to know the most common terminology used. These terms are just a few for you to add to your vocabulary.
Appraisal. An appraisal is a written estimate of the home's value. A professional will give their professional opinion on the home's market value at a specific date. Lenders rely on appraisals to validate the home's value so they don't lend out more money than the home is worth.
Closing Costs. To complete the real estate transaction, you'll likely have to pay closing costs. These are the fees regarding processing the paperwork so you can purchase the home. These fees are paid at the time of closing, but you will know the estimated costs when you apply for a loan. Expect closing costs to be about 3 to 4% of the price of the home. For example, if you purchase a home for $200,000, the closing costs are usually between $6,000 to $8,000.
Credit Score. A credit score predicts the likelihood that you'll repay any future debts to lenders. Most lenders require a credit score of at least 620 to secure a conventional loan. However, it is still possible to get a loan with a lower score, but you might have a higher interest rate or need to put more money down.
Down Payment. A down payment is the portion of the price of the home you pay to close the sale. There's an understanding that you will pay the balance at settlement. The down payment is also the difference between the sales price and the amount of the mortgage.
Knowing a few of these words can help you feel more comfortable during the entire process.
Sources: Keepingcurrentmatters.com, HUD.gov, Homebuying.realtor, Incharge.org