When you are a new homebuyer, home buying is hard to know the difference between a large number of real estate terms. Don’t worry; we’re here to help. At Hamlet Homes, we strive to be a support for our buyers, helping them keep their escrows and their down payments straight.
Before you begin the home buying process, becoming familiar with these terms will help make your journey into your new home a bit simpler.
Adjustable Rate Mortgage (ARM):
A mortgage that has a lower initial rate that could possibly raise or lower over time. After a set number of years, the rate will fluctuate based on the index rate used for determination.
These types of loans are great options for short-term buyers. If you see yourself in a home for 3-5 years, a low, temporary fixed rate could be a great fit.
If, however, you plan on staying your home long-term, consider a mortgage with more stability. Sure, you could save money on your monthly payment if the market is low. If interests rise, on the other hand, you could be stuck paying a much higher rate than you anticipated.
Closing Costs:
Fees you will need to pay that are outside the property sale price. Some elements of closing costs include the loan origination fee, insurance fees, appraisal fees or attorney fees. Costs can vary from market to market or even house to house! Before submitting your mortgage application, your agent and broker will go over what costs you will need to pay prior to close.
Earnest Money:
You’ll pay this deposit when you sign a contract with the seller. The deposit illustrates your sincerity in purchasing the home and is deducted from your closing costs. If you decide against purchasing the home, you will be forfeiting your earnest money.
Escrow:
Possibly one of the more confusing of the homebuying terms because it has two meanings.
During the home buying process, your escrow agent acts as a safe keeper of funds. The seller wants to ensure you’re serious about buying the home, but you don’t want to hand over money until the home for sale passes inspection.
To fix this problem, the agent will hold certain monies from the buyer and certain documents from the seller and then distribute the assets to the correct party after close.
After close, escrow takes on a new meaning. Your mortgage lender will retain extra money from you each month for taxes and insurance. Then, your lender will pay these important bills each year on your behalf.
Fixed-Rate Mortgage:
Exactly as it sounds, a fixed-rate has a fixed interest rate that stays the same throughout the duration of your loan. While this option can be more reliable, there are drawbacks, too. For instance, if the market interest rates happen to drop, you’re stuck with your higher rate.
Title:
The title is your written evidence of property ownership. Through title ownership, you can access your land and property and transfer your ownership to others as you see fit.
We realize that this list isn’t exhaustive, but that’s what we’re here for! Call us to get started on the homebuying journey. We can help you through the process and make sure you understand every aspect, so you can feel great about getting into your new home.
