It’s so exciting to buy a new home, and at Rockford Homes, established home builders in Columbus, Ohio, we love making your dreams come true when you build a personalized home with us. Whether this is your first home or not, do you know everything you need to when purchasing a home? The following list of terms might come in handy, helping you be completely informed.
You agree to the terms of the offer, which creates a contract. Once the seller signs the purchase offer you made, you’ve both accepted and can’t back out unless there are mitigating circumstances.
Adjustable Rate Mortgage:
This type of mortgage has a variable interest rate, (making it the opposite of a fixed rate mortgage) and is usually used for 5-10 year mortgage loans. Most of these loans start with a low interest rate, but become adjustable as time passes and the market changes. ARMs do limit how often and how much the interest rate can change.
Agreement of Sale:
When you agree to purchase a home you may sign one of these. It is also signed by the seller, and includes conditions and terms like the purchase price, location of the home, and any other dues.
Annual Percentage Rate:
You’re probably going to have to borrow money, and the APR provides you the true cost of the money being financed, including the total finance charges added to the principal.
Closing is when the title passes from the seller to the buyer and the seller has been paid. The deed will be turned over to you as the buyer. Closing costs are the costs incurred when buying the home (beyond the actual cost of the property) and transferring the title. Plan to pay a lot of costs, they are usually 25 to 5% of the purchase, and will also include other fees.
These are loans that people typically apply for. You need to have a credit score above 650, but are able to put down a lower down payment than 20%.
Earnest Money Deposit (EMD):
These are funds provided by the buyer, held in an escrow account until the closing. This money shows the seller that you want to buy the home. A set amount of money is put into an account, and then when you close on the home, it’s added to the down payment.
This money is held by a third party in an “escrow account” and is used to pay taxes and insurance. Your mortgage may include funds to pay future taxes and insurance paid in addition to your principal and interest. Escrow can also refer to the EMD above.
Fixed Rate Mortgage:
With this type of mortgage, the interest rate and monthly payment will remain the same and won’t change much over the life of the loan. These are commonly used for 15 or 30-year loans. Your payment may change slightly if taxes, insurance, PMI, or homeowner’s association dues change.
This abbreviation stands for the mortgage payment expenses – principal, interest, taxes, and (homeowners’) insurance.
This is a map that shows the boundaries of the property you are buying.
This is the bank approving a loan for you to purchase a home. The bank goes through all of your records, credit and financials, to determine your ability to take on the debt. Once you’ve been preapproved you don’t want to incur credit card debt or do anything that could mess up your credit.
This is different than being preapproved, it just means that you are a good candidate to start the process of being preapproved. This does not guarantee that you will be given a loan though. It gives you a general idea of what you might qualify for and what kind of home you can afford.
Private Mortgage Insurance (PMI):
This insurance is paid if the down payment is less than 20% of the appraised value or sale price of the home. You’ll only pay this until the equity of your home reaches the 20%.
There is so much to know and understand when you’re buying a home, and it can make your head spin. We can assure you that when you build your customized home with us at Rockford Homes, we’ll do our best to keep you informed. We’re here to help you through the process and answer any questions you might have.