Your first time buying a home is an amazing journey of discovery and learning, and it’s also incredibly rewarding! It’s the American dream and an experience unlike any other. It can also be daunting at first and time-consuming. It may take months to choose the home that’s right for you, your family, and your future. Plus, you’ll have to fill out a lot of paperwork before you get the keys in your hand. Of course, the entire home-buying process comes with its own unique terminology, a great deal of which you may never have heard before so below are some first time home buyer tips.
As you move through the process, you will probably hear real estate agents talking about closing costs, title insurance, fixed-rate mortgages, contingency, or pre-approval. It’s perfectly okay if this is the first time you’re hearing a lot of these terms. Again, you’re on a journey of discovery and learning, and you should never be afraid to ask questions. To make the journey a little easier, we’ve compiled a list of real estate terms to know as part of our series of first-time home buyer tips.
Real Estate Terms to Know for First-Time Home Buyers:
Realtor – Realtors are agents or brokers who work with home buyers and sellers to help sellers find buyers and buyers find homes.
Appraisal – A written estimate of the market value of a piece of real estate.
Credit Score – If you’ve ever bought a car, you’re probably already familiar with your credit score. It’s simply a numerical value that lenders use to determine your credit risk.
Home Inspection – Before you buy a home, you’ll want to get one of these. A professional looks over the plumbing, wiring, HVAC, and more and gives you an idea of what problems to expect.
Mortgage Broker – A mortgage broker is someone who helps to match borrowers with lenders in order to finance mortgages. Think of them like a realtor, but for your mortgage.
Net Income – This simply describes the money that you bring home after all taxes and other withholding are taken out of your check.
Pre-approval – Your mortgage lender will give you this when they have approved you for the loan amount of your mortgage.
Prequalified – Before you get pre-approval from a lender, you will be prequalified to see how much money you can borrow. This helps you know what you can afford to pay for a new home.
Down Payment – While most of the price of your new home will be paid via the mortgage, the down payment is a percentage that is paid in a lump sum at the beginning in order to close the sale.
APR – If you already have a car payment or credit cards, you may already be familiar with annual percentage rate, or APR. It simply tallies the total cost of borrowing the money in terms of interest and fees.
Conventional Loan – Most mortgages are conventional loans, which are simply loans that aren’t secured by government agents. Examples of non-conventional loans would include VA loans and FHA loans.
Escrow – Real estate transactions involve large sums of money, and often a portion of that money is placed with a third party during the process. This is known as escrow.
PMI – Private mortgage insurance (PMI) is simply insurance that protects a mortgage lender in the event that you default on your payments.
Closing Costs – There are a variety of one-time fees that accompany a transaction as large as a home purchase. These are collectively known as closing costs.
Title – What you’re actually buying. The title is the written evidence that you own a piece of property.
Mortgage Payment – When you buy a house, you’ll negotiate a monthly mortgage payment that covers interest and gradually pays back the amount you borrowed over a course of years.
Buyer’s Agent – We already mentioned that realtors can represent both buyers and sellers. A buyer’s agent is one that represents you when you set out to buy a new home.
Earnest Money – Think of this like a down payment. It’s the money you pay a seller to show that you’re serious about buying the house.
Interest Rate – One part of the calculation that makes up your APR, the interest rate is a percentage of the balance of your mortgage that you are charged in order to borrow the money.
Lender – Someone, usually a bank, who loans you money. In this case, it’s the money to cover the purchase of your home.
Principal – We’ve mentioned a few times that interest is a percentage of the amount of your loan. The actual amount you agree to pay for the house, not including the interest that your loan will accrue, is known as the principal.
Fixed Interest Rate – There are a couple of options when it comes to interest rates. One is a fixed rate, which never changes over the entire life of the loan.
Variable Interest Rate – The other is a variable rate, which is adjusted, usually every quarter. The risk of a variable interest rate is that it may go higher than it was when you started, but the advantage is that it may also go lower.
First Time Home Buyer Tips
These are just a few of the many terms you may encounter when buying a new home, but they are also some of the most common. One our first time home buyer tips is to keep this list handy as you begin to shop for homes will help you keep track of all the jargon. And remember, don’t hesitate to ask questions. This is an exciting time for you and your family, and it’s one that you’ll never forget!
If you’re interested in learning more about Risland Homes and what you can expect from your future home here in Texas, just head on over to our Contact Us page today!