Learn the Lingo: Commonly Used Home-Buying Terms
Buying a house can be stressful – especially if you aren’t familiar with some of the terms commonly encountered during the process. To build your confidence, familiarize yourself with the words and definitions listed below.
- Adjustable-Rate Mortgage: An adjustable-rate mortgage (ARM) features interest rates that can increase or decrease in predetermined increments (based on market rates) after an initial fixed-rate period.
- Appraisal: An appraisal is performed to determine a property’s market value. Appraisals are required by lenders before they provide financing to ensure that the home is worth the agreed-upon sales price.
- Closing costs: These are fees you must pay when you close on a home. Expenses that may be covered in your closing costs could include attorney’s fees, the appraisal fee, recording fees and more.
- Contingencies: Contingencies are conditions outlined in a home offer that must be met before the buyer and seller are legally obligated to proceed with the sale. Two of the most common contingencies are financing contingencies and inspection contingencies.
- Down payment: A down payment on a home is the portion of money you pay upfront. A 20% down payment is ideal, but may not be required.
- Earnest money: This is a deposit given to the seller by a prospective buyer to show he or she is committed to purchasing the home. If the sale goes through, this money will be applied to the buyer’s down payment or closing costs.
- Escrow: Escrow refers to the money or documents related to the purchase of a home that are held by an impartial third party until all conditions are met.
- Fixed-Rate Mortgage: With this type of mortgage, the interest rate is fixed for the life of the loan – allowing for easy budgeting since the monthly payment amount does not change.
- Home inspection: The purpose of a home inspection is to determine the condition of a home before the buyer takes ownership. The inspector performs a visual examination of the home and provides the buyer with a written report of his or her findings.
- Maturity date: The maturity date of a mortgage refers to the date when the final payment is due.
- PITI: This acronym stands for Principal, Interest, Taxes and Insurance – the four components that typically constitute a monthly mortgage payment.
- Title: A title is a legal document that provides proof of an individual’s ownership of a property.
Mortgage rates are currently at an all-time low, and inventory can be limited in certain areas. Speaking with industry experts, including the Mortgage Consultants at UNCLE, before home shopping can help make home-buying process less stressful. Don’t wait any longer—your dream home is waiting for you!