We know that buying a new house can be overwhelming at times, so we want to help by defining some of those terms your realtor keeps using that you aren't sure what they mean. Hope this helps to ease your search!
We put together some terms (in alphabetical order) you will need to understand when buying a home to make it easier for you.
Agreeing to the terms of an offer, thereby creating a contract. This happens when the seller and the buyer agree on the selling price of the house. Once this has happens, neither the buyer nor the seller can back out without facing consequences.
2. Annual Percentage Rate (APR)
A yearly interest rate that includes upfront fees and costs paid to acquire the loan. Mortgage lenders are required to disclose the APR so the buyer can accurately calculate and compare the cost of different loans – rates may vary with different lenders.
A determination of the value of something, in this case the house. An expert who has no interest in the house examines the house – property, initial purchase price and the sale of houses in the area – and comes up with the worth of the house for lending purposes.
4. Assumable Mortgage
A home mortgage that allows the buyer to take over the seller’s mortgage, which means the buyer can ‘step’ into the seller’s shoes and make mortgage payments and comply with all the terms of the existing loan.
5. Balloon Mortgage
A mortgage that is not fully paid off over the term of the load (five, seven or ten years) leaving a balance at the end. The balance must be paid off or refinanced.
6. Closing Costs
Charges that need to be paid at the close of escrow when the property is transferred. These typically include lender’s fees, prorated share of property taxes, transfer taxes, credit check fees, real estate agent commissions, inspections and attorney’s fees. They are negotiable and paid by either the buyer or the seller.
A provision in a contract starting that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event. For example a contingency to sell your house, which means the sale of the house, can only go through if you sell your current house first.
Making something known that had previously been hidden. It is common for the seller of the house to ‘disclose’ major physical defects in the house such as a leaking roof or a flood in the basement. It is something that happened and was fixed but that the buyer should be aware of.
9. Earnest Money Deposit (EMD)
A partial payment that is commonly made in real estate transactions at the time of making the offer. It demonstrates commitment in the contract and goes towards the closing costs in the end.
A neutral third party who holds your funds prior to the closing of your home sale. PITI: Abbreviation for the major expenses that make up a mortgage payment principle (the amount borrowed), interest (property) takes, and (homeowners’) insurance.
11. Private Mortgage Insurance
This is insurance that a buyer who cannot put 20% down on the house will need to pay. It will reimburse a mortgage lender if the buyer defaults on the loan and the foreclosure sale price is less than the amount owed to the lender.