One of the most intimidating factors in any field is industry lingo that outsiders don’t understand. At times it’s intimidating, and you may even worry if you’re being taken advantage of. If this sounds familiar, it’s time for Buying a House 101: Learning the Lingo.
Buying a House 101: Learning the Lingo
Adjustable-Rate Mortgage (ARMs)
There are two types of mortgages: adjustable-rate and fixed-rate. An adjustable-rate mortgage starts out with an attractive low interest rate. After a set period, the rate goes up to market levels plus a bit more. The rate will fluctuate throughout the life of your mortgage, moving up and down with market rates. This type of mortgage is ideal for those who know they’ll be able to pay in just a few years or who anticipate selling not far down the line.
An appraisal requires an appraiser: someone qualified to give a written report about a property and say exactly what it’s worth. The appraisal is the written report. Your bank or other mortgage lender will use the appraisal to estimate the value of a home you want to buy, see whether a seller’s price is fair, and decide how much they’re willing to loan you.
The assessed value of a property is how much the government thinks your property is worth for the purposes of property taxes. This amount could be very different from the appraised value. Appraisals are done by carefully inspecting a property and the surrounding area, while an assessment is often automatically increased year-on-year from the last time a home sold. If the assessed value is a lot higher than the appraised value, you should challenge the assessed value with your local tax office.
Closing costs are fees you pay in the final stage of your real estate transaction. Closing costs can include lawyers’ fees, fees for credit reports or the preparation of documents, appraisal fees, and more.
Contingencies refer to certain conditions the buyer and seller agree must happen before the sale is absolutely final. For example, in some cases there’s a contingency that the buyer will only buy if they’re able to sell their current home, or that the buyer is released from the sales contract if the loan ends up falling through.
A fixed-rate mortgage and an adjustable-rate mortgage are the two most common choices of home loan. With this type of loan, the interest rate is fixed, or locked in, for the whole loan period. The buyer always knows exactly how much their monthly payment will be. These loans are usually for 30 years, though they can sometimes be for 15 or even 10 years.
A home inspection usually takes place after a buyer has made an offer and the seller has accepted. The buyer pays for a home inspection, and the inspector looks at the whole property and flags up any problems. The inspector will look at the foundation and roof, the electrical and plumbing systems, the HVAC system, and many more areas. Normally there’s a clause in real estate contracts saying that if the inspector finds any serious, expensive issues, the buyer and seller will re-negotiate.
A listing is the description of a property for sale. Listings include details about the property, the price, and usually some pictures. Listings can be online or in physical print.
Before looking at homes for sale, a buyer often gets pre-approval from a lender. During this process, the lender takes a close look at the buyer’s financial situation and then decides how much the financial institution is willing to loan the buyer. Sellers usually prefer to work with pre-approved buyers, and pre-approval also gives a buyer a clear idea of their budget when looking at houses.
Beyond Buying a House 101
These are just some of the most important terms you’re likely to run into when you go to buy a house. Contact Teresa Mack today and let her take the mystery out of all the lingo surrounding buying a house and get you into your dream home quickly.