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Buying your first home is exciting, but it can also be pretty confusing. You’ll be hit with a bunch of lingo that isn’t often used, and you’ll probably never need to learn real estate terms again. Still, it’s essential for first-time homeowners to understand several contextual home terms.
Terms All First-Time Home Buyers Should Know
If you live in Atlanta, Savannah, or Augusta, you can access Georgia’s programs for first-time homebuyers. These can help you save up for a home so you can get use out of the following.
Title insurance is a type of insurance that protects both the buyer and seller from unknown liens or debts the property may have acquired. Before an insurer issues title insurance, they search public records to ensure the current owner has legal rights to own and sell the property.
Adjustable-Rate and Fixed-Rate
Most lenders will ask you to choose between an adjustable-rate or fixed-rate loan. A fixed-rate loan has a pre-determined interest rate that says for the duration of the loan repayment period. Adjustable-rate loans have a rate that goes up and down depending on the current interest rate.
A down payment is the amount of money you’ll pay towards the total cost of the home. Banks require a down payment for security against the loan. The higher the down payment, the less you’ll pay in interest over time. Plus, a 20% down payment will void mortgage insurance.
Mortgage Insurance and Mortgage Points
Also called “Private Mortgage Insurance,” mortgage insurance is a monthly insurance payment that protects the lender if the borrower defaults. Mortgage points allow you to pay down the interest on a loan before buying the home. One point equals one percent of the loan amount.
Amortization describes the repayment schedule for a loan. The most common amortization period is 30-years. Higher amortization periods will cause you to pay more interest, whereas shorter periods have higher monthly payments, but you’ll pay less interest over the years so that you can relax and watch kickass torrent.
Buyer’s Agent and Seller’s Agent
If you’re buying a home, you’ll seek out a “buyer’s agent.” A buyer’s agent represents the buyer and specializes in purchasing homes for the buyer. The reverse is true for “seller’s agents.” A seller’s agent represents the seller and markets the home to potential buyers on their behalf.
A “contingency” or “contingencies” are conditions that must be met prior to closing a real estate transaction. These include but aren’t limited to inspections, financial contingency (releases the buyer if the sale falls through), or a contingency that the buyer sells their current home.
Appraisal and Assessed Value
Both of these terms relate to the value of a property or home. An appraisal is the estimated value of a property based on the analysis of a qualified appraiser. On the other hand, the assessed value of a property is assigned by a governing authority to levy taxes or fees.
A sales contract is a legal agreement between buyer and seller to purchase a property. When first presented to the seller, it’s called a purchase offer. The buyer can either accept the contract, give a counteroffer, or purchase the property for a limited period (also called a binder).
Pre-Approval and Pre-Qualification
Getting a mortgage “pre-approved” is the same as getting it “pre-qualified.” Both terms mean the buyer has a written guarantee that they’ll receive a loan up to a certain amount. A pre-approved loan can strengthen the negotiation power of the buyer, as it shows they’re serious.
Buyers are hit with several “closing costs” when they accept the terms of the sales contract. That means the buyer isn’t just paying for the purchase of the home; they’re also paying real estate commission, attorney fees, document preparation fees, credit report fees, and more.
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