It is really tricky to understand the home buying process. The following are some home buying terms that you will most likely encounter while you are buying a home. It would be helpful for you to make decisions regarding purchase by familiarizing yourself with these home buying terms.
Appraisal
The appraisal, which is generally paid for by the home buyer, provides an estimate of the property's worth. Required by most lenders, it must be performed by a licensed appraiser before your home loan will be approved.
Amortization
Amortization is a schedule that outlines your loan payments for the duration of the home buying loan. It provides the details about how much of each monthly payment goes toward the principal and how much goes toward the loan. Primarily, the most of your payment amount will be applied toward the interest.
Buyer's Agent
With converse to the seller's agent, a buyer's agent represents only the interests of the home buyer. An agreement must be made between the buyer and the agent for an agent to be considered a buyer's agent. If a buyer does not have such an agreement, then the agent could end up representing the seller in a real estate transaction.
Earnest Money
Along with an offer, buyers can make a deposit on the home to demonstrate the seriousness of the offer. When an earnest money deposit is made, it is held by an escrow until closing. It is then added to the down payment.
Escrow
Funds held before closing by a third party, which generally includes the earnest money deposit is known as Escrow. Future taxes and homeowners insurance, held by the mortgage company after closing, are also considered escrow.
Closing
The final step in the home buying process is known as "Closing" Closing involves transfer of the deed is made from the buyer to the seller. At this point itself, mortgage is also finalized.
Closing Costs
The costs that are to be paid at the time of closing are known as closing costs. In general, closing costs ranges between 3% and 5% of the price of the home and include such fees as loan origination fees, attorney fees, and recording fees. You might get the seller to pay some, or all, of the closing costs as part of your home buying negotiation.
Foreclosure
Foreclosure is a legal process through which the mortgage lender forces the lender to take back the home, and then resell it to the public in order to recover their losses after the owner has defaulted.
FSBO, For Sale by Owner
For sale by owner, which is also known in short as FSBO is the tem that refers to property is being sold without a real estate agent. FSBO is also used to refer to the home owner who is selling the property.
Loan Origination Fee
Loan organization fee is the fee charged by the lender for processing the loan. The loan origination fee is due at closing.
Lien
Lien is a legal claim that keeps the property from being sold until the lien is paid off.
Title Insurance
Title insurance is the insurance that protects your title from claims against it.
Private Mortgage Insurance
The home buying lender requires you to pay private mortgage insurance if you make a down payment less than 20 percent of the loan amount. This insurance protects the lender if you default on the loan.
Make sure to remember these terms while going through the home buying process.
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