When buying a home, there is a lot to learn about each stage of the process. From appraisals and home inspections to negotiating closing costs and understanding premium mortgage insurance, each step of the way can feel overwhelming without an understanding of all the terms. This real estate glossary of buyer’s terms can help make the home buying process easier to understand and alleviate some of the pressure and stress of buying a house. These are some of the most common home buyer’s terms that you will encounter when purchasing your new home.
Loan Amount: The amount of the mortgage based on the purchase price, minus the down payment.
Down Payment: Cash that the buyer provides the lender as their portion of the purchase price. The down payment is considered the buyer’s equity (or cash investment) in their home.
Points: Fees charged by the lender to offset their interest rate, if it’s below the prevailing market rate. One point equals one percentage point—so one point on a $100,000 loan would be $1,000.
Appraisal Fee: The amount paid for the lender’s appraisal of the property.
Credit Report Fee: The fee charged by the lender to obtain a credit report on the buyer.
Title Insurance Fee: A one-time premium that a buyer pays for protection against loss or damage in the event of an incorrect search of public records or misinterpretation of the title. The title insurance policy also shows what the property is subject to in terms of liens, taxes, encumbrances, deed restrictions and easements.
Escrow Fee: The amount a buyer pays the escrow company or closing agent for preparing papers, accounting for all funds and coordinating the information between all parties involved in the transaction.
Closing Costs: A general term for all the estimated charges associated with the transfer of ownership of the property.
Prepaid Interest: The amount of interest due on the loan during the time period between the closing of escrow and the first mortgage payment, due at the time of closing.
PITI: The estimated house payment, including principal, interest, taxes, and insurance.
Principal and Interest: The loan payment, consisting of the amount to be applied against the balance of the loan, and the interest payment, which is charged for interest on the loan.
Total Cash Required: The total amount of cash the buyer will need, including down payment and closing costs.
Premium Mortgage Insurance (PMI): Insurance for the lender, to cover potential losses if the borrower defaults on the loan.
Hopefully, this collection of buyer’s terms puts to rest some worries and helps guide you through the stages of buying a house. If you’d like to learn more about buying a home, contact a realtor today!