Understanding The Homebuying Process Starts With Understanding The Language
Buying a home can be confusing in many ways. One of the hardest things to understand about purchasing a home is the language. Real estate professionals and people who are familiar with the home buying process often seem to forget that everyone doesn’t speak that language. Here are some real estate terms to become familiar with.
Fixed-Rate Mortgage vs Adjustable-Rate Mortgage
One mention of anything mortgage-related and your mind is boggled. That is until you decipher the meaning. Fixed-rate means whatever interest rate you initially get on your home loan is the same interest rate you will pay until your home is paid off.
Adjustable-rate means your interest rate will go up or down periodically. It’s easy to see how an adjustable-rate would be better when interest rates are down. Get more information from your real estate broker before deciding. There are pros and cons to either option.
Private Mortgage Insurance (PMI)
This is primarily for people who use an FHA loan for their down payment or most anyone who puts less than 20% down. This is a guarantee to the lender that if the buyer defaults the loan will be paid off. It also can cover if the home goes into foreclosure or if the buyers get behind in payments.
Your home is in escrow when you have the funds for your down payment, but it’s not time to transfer them to the seller yet. You would give the money to an escrow company for safekeeping until the sale goes through. They will hold the funds in an escrow account for as long as necessary.
Homes for sale in Austin and throughout Texas as well as most anywhere in the US are similar in that they will often have a contingency clause in the contract. Either side can put this into the paperwork. It tells the other party that if a certain occurrence happens, the contact will be considered altered and possibly voided.
Buyers might put in a contingency that says if the home they currently own does not sell by a certain date that they will not be held to the contract for the home they are trying to purchase. A seller can stipulate that the buyer has to get insurance on the new property. The seller or the buyer can withdraw if this is not done.
It’s almost over when closing costs are paid. Who pays them can determine in large part what the buyers and sellers agree to. When all is complete and money has been transferred from the escrow company to the seller, there is the matter of some unpaid bills. Closing costs usually fall to the buyer, but the seller can pay, or the closing fees can be split. The fee is usually a percentage of the home’s purchase price. It is meant to cover costs incurred such as recording the sale, a credit report, payment to the home inspector if not already paid, legal fees, and other payments that may have accrued since the proposed sale began.
You will get past this milestone of becoming a homebuyer and come out the other side more knowledgeable and confident. Next time you purchase property you will better understand the foreign langue of homebuying.