Shopping for a new home is an exciting time – especially if this is your first time! It’s a major milestone to own a home, and it adds tremendous value to your life. As you begin looking at mortgage loans, the common home buying terms professionals in the field use might start to sound like alphabet soup! Here’s a quick guide to help you sort through the ABCs of homebuying.
ABCs: Common home buying terms to understand
A – APR. An annual percentage rate, or the entire cost of your loan including fees and the mortgage interest rate.
B – Bankruptcy. A court proceeding that allows someone to liquidate their assets in order to pay off their debts.
C – Closing costs. Costs outside of mortgage loans that are required to complete the sale of a home, including prorated property taxes and lender’s fees.
D – Down payment. The amount of money required to close the sale on a home, as part of the home’s purchase price.
E – Escrow. A neutral third party that retains money during the sale of a home.
F – FHA loans. The acronym for the Federal Housing Administration. These loans require a smaller down payment and are designed for low-to-moderate income homebuyers.
G – Gross income. Your income before taxes and deductions are removed.
H – Homeowner’s warranty. Covers major systems in the home such as HVAC, plumbing and the furnace.
I – Inspections. Tests done by a neutral third party to examine a home before the sale is complete.
J – Jumbo mortgages. Mortgage loans that exceed the limits put in place by the Federal Housing Finance Agency.
L – Loan-to-value ratio. Calculated by dividing the amount borrowed by the appraised value of a home.
M – Market value. The amount of money a home would sell for under typical conditions.
N – Net income. Your take-home pay after taxes and deductions have been removed.
O – Open-ended credit. Credit where you can make withdrawals and deposits, such as a credit card.
P – Principal. The amount you borrow for your mortgage loan.
Q – Pre-qualification. An estimation of how much you’ll be able to borrow, as calculated by your finances and credit.
R – Rates. The interest charged on a home loan that is made up of the strength of the economy, your finances and the lender.
S – Seller disclosures. A report of known defects and damage to a home.
T – Title. A legal document that details who owns a piece of property.
U – USDA loans. Department of Agriculture loans that require zero down payment for rural homebuyers.
V – VA loans. Backed by the Department of Veteran Affairs. These are home loans for qualified veterans, service members and select military spouses.
W – Walk-through. A final step of the buying/selling process, a last inspection of a property.
Y – Year-end statement. A document that details your mortgage, including interest, mortgage points and property taxes paid.
Z – Zero-down-payment mortgage. A loan that requires no money upfront and is ideal for first-time buyers.
Partner with professionals for mortgage loans
You don’t have to tackle the home mortgage process alone. The home financing experts at First Centennial Mortgage excel at helping first-time buyers afford their dream home. Partnering with a professional you trust will make understanding common home buying terms, and the whole mortgage process, simple, easy and fast. Contact us today to learn more.