#1 Mortgage A Mortgage, or mortgage loan, is the funds that a purchaser borrows from a bank or creditor in order to buy a property or real estate. The creditor or bank may also claim the title or deed to the property until the debt of the mortgage, and its interest, is paid off. If the purchaser does not pay the creditor or bank, the property can be seized.
- The most common types of mortgages are 15-year and 30-year mortgages, the year denoting the amount of time the repayment will be in place.
# 2 Lender A lender can be a company or a person, and they provide funds to borrowers, sometimes with interest, to pay for a property or real estate.
#3 Rates A rate is a percentage of additional cost, usually charged annually, that is added in exchange for your borrowed loan.
- Annual Percentage Rate: your annual percentage rate can vary and is usually an annual charge that can include not only your interest rate, but broker fees, points, and any other charges associated with your loan.
- Interest Rate: the additional charge you will pay each year to borrow the funds to purchase property. Variable Rate is a term to describe interest rates on your loan that vary over time and can periodically change depending on a number of factors such as market interest rates.
- Fixed Rate: a term to describe interest rates that are fixed at a set rate indefinitely throughout the period of the loan.
#4 PMI PMI, an acronym for Private Mortgage Insurance, is insurance that a lender may require a borrower to have as a way to protect the lender from losing money in the event that the borrower must forfeit on making payments or is sent to foreclosure.
#5 Pre-Qualification A pre-qualification is an assessment that gives lenders an idea of your overall financial picture. From your debts to your income, a pre-qualification can help a lender determine what your buying power should be. A pre-qualification also is a great tool to help you determine what kind of home you can afford and how much of a loan you can get approved for.
#6 Home Inspection A home inspection is exactly as it sounds. A professional consultant comes and inspects the condition of your future home, from your home’s major systems to things like termite damage. Usually a home inspector will only inspect aspects of the home that are easily accessible and visible, and it is focused on the function and performance of the home, not so much the cosmetic details. Sometime your home inspector will give you suggestions or advice if they notice something about your home. A Home Inspection usually takes place before you actually purchase the home, which can help you when negotiating closing credits and the asking price of the home. You will receive a full report from the inspector once the inspection is completed and notated. A Home Inspection is generally not required but is highly recommended to give you insight during the homebuying process.
#7 Home Appraisal A Home Appraisal is an estimate of the fair market value of your home’s worth. Your lender will require that you have an appraisal done in order to assess your loan request’s validity. The Home Appraisal can include pricing of surrounding comparable properties, your home’s condition, and the location or any other assets such as land that are included with your home. Home Appraisals are performed by licensed professionals who are heavily regulated.
#8 Closing The actual closing of your home is where you meet with a notary and possibly your Realtor on- or off-site of your home to sign your official purchasing documents and any final walk-through documents. Closing Costs can include your down payment, appraisal fees, taxes, attorneys fees, and several other costs that allow you to officially purchase your home.
#9 HOA The Home Owners Association is an organization that enforces community and home rules and regulations for properties within a certain area. From lawn maintenance to the color one can paint their house, the HOA can determine a range of factors for the community. If a community has an HOA, there is a fee associated with living there, but that could also mean the HOA takes care of select things about your home for you. Most HOA fees are charged to you monthly, but can also be an annual cost that may include lawn care, valet trash, and community amenities such as pools or golf courses.
#10 Fee Simple Fee Simple is a term that means an estate, property and/or land owner has absolute ownership of their property, allowing the owner to do whatever they choose on their property. So, the owner is responsible for the costs of the interior and exterior structural maintenance of their home. This typically means the HOA fees are lower because they generally only cover the costs of maintenance and repair of the common areas.