16 Terminologies Every New Homeowner Should Know
We have compiled a list of important homeowner terms that you should be familiar with if you are planning on buying a home.
This mortgage type refers to a loan with a variable interest rate that fluctuates at predetermined intervals during its term.
As soon as the first payment is made, the borrower starts building equity, since interest and principal payments are amortized together.
Identifying a property’s value for tax purposes by a public assessor.
Fixed-rate mortgages have a constant interest rate throughout the term of the loan, unlike adjustable-rate mortgages.
Buyer’s agents represent the interests of buyers during the homebuying process. An agent representing the seller, on the other hand, is known as a listing agent.
When the down payment and closing costs are paid, cash reserves are left over for emergencies after the down payment and closing costs are paid.
When a buyer performs due diligence, they are able to examine the property thoroughly. An expert can be hired to conduct an inspection. The results may lead to buyers wanting to renegotiate their contract.
Earnest Money Deposit:
When a homebuyer enters into a contract with a seller, they typically make an earnest money deposit. It is estimated that the deposit will amount to one to two percent of the purchase price. Buying a home requires an earnest deposit that demonstrates the buyer’s commitment to the purchase. Deductions are made from the total purchase price based on the deposit.
Homeowners insurance and property taxes are paid from this account, which receives funds from the homeowner’s mortgage payments.
There are several types of home ownership, but fee simple is the most common. Owners have the right to freely transfer or inherit their property rights.
The lender is ultimately responsible for setting interest rates when lending money over time. An interest and principal payment is typically made on a monthly mortgage.
Individuals or entities acting as intermediaries between borrowers and lenders, such as those who originate mortgages or arrange financing.
Financial vetting and a loan approval estimate can add credibility to any offer home buyers make by getting a letter from their lender.
Private Mortgage Insurance:
Private mortgage insurance (PMI) is typically required for home buyers with down payments under twenty percent. Once the homeowner reaches twenty percent equity, PMI can be satisfied. It is usually assessed on a percentage of the mortgage loan.
It is common for homeowners to refinance their home loans to obtain a lower interest rate.
In the event that any outstanding liens on a property exist, title insurance provides protection for buyers. It is typically required as part of the closing process.