Key Terms to Know

                               This may be the year you've chosen to buy your next home.  It can be an overwhelming process with many terms that may not be familiar to you.  The best way to ensure your homebuying process is a confident one is to understand the factors that are relevant to a home purchase.  Here is a list of some of the most common terms in the home buying process.

APPRAISAL

A professional analysis used to estimate the value of a home.  A necessary step in validating a home's worth to you and your lender as you secure financing.  It is required by most lenders and is arranged by your lender following the home inspection period.

CLOSING COSTS

The fees required to complete the real estate transaction.  These fees are paid at closing and include points purchased to lower your mortgage rate, taxes, title insurance, financing costs, escrow fees and items that must be prepaid or escrowed such as property taxes or home insurance.  The best way to find out what closing costs you'll be required to pay is by asking your lender for a complete list of closing cost items.

CREDIT SCORE

A number ranging from 300-850 that is based on an analysis of your credit history. This score helps lenders determine the likelihood you'll repay future debts.

DOWN PAYMENT

Down payments typically range from 0% - 30% of the purchase price of the home. A 0% down program may be available from certain financial institutes or available for homes in USDA rural communities.  Most common down payments for urban or suburban homes range from 3.5% for FHA financing, or 5%-20% for Conventional financing.  A 20% or more down payment is needed to avoid mortgage insurance premiums.  Investors typically need to have a 25%-30% down payment when purchasing an investment property.  Ask your lender for more information about the various financing programs and which will work best for you.

MORTGAGE RATE

The interest rate you pay to borow money when buying a home.  The lower the rate, the better.

PRE-APPROVAL LETTER

A letter from a lender indicating you qualify for a mortgage of a specific amount. A lender will typically gather more documentation and credit history from you for a pre-approval letter than a pre-qualification letter.  The pre-approval letter is a critical step in today's competitive market, and many sellers won't fully consider an offer if it is not accompanied by the pre-approval letter.

REAL ESTATE PROFESSIONAL

An individual who provides services in buying and selling homes.  Real estate professionals are there to help you through the confusing paperwork, help find your dream home, negotiate any of the details that come up, and ensure you know exactly what's going on in the housing market.

The next best way to ensure your homebuying process is a confident one is to find a real estate pro who will guide you through every aspect of the transaction with 'the heart of a teacher' by putting your needs first.