PMI is typically assessed as a percentage of the mortgage loan, and can be satisfied once the homeowner reaches twenty percent equity. Private Mortgage Insurance: When a buyer makes a down payment of less than twenty percent on a home, they are typically required to pay a private mortgage insurance (PMI) fee.
Pre-Approval Letter: Homebuyers can get financially vetted and receive a loan approval estimate from their lender in the form of a letter, helping to add credibility to any offers they make. Mortgage Broker: This is the individual or entity who acts as an intermediary between borrowers and lenders, such as originating a mortgage or placing the loan with a funding source. A monthly mortgage is typically composed of interest and principal payments on a loan. Interest: Interest is the cost of borrowing money over time, and is ultimately the responsibility of the lender to set. It means that the owner’s property rights can be freely transferred or inherited at the owner’s discretion. The amount deposited is deducted from the total cost of purchase.Įscrow: A financial account that is funded by a homeowner’s mortgage payments, used to pay for homeowners insurance and property taxes.įee Simple: Fee Simple is term that describes the most common type of home ownership. The deposit is meant to demonstrate the buyer’s earnestness in purchasing the home. The deposit is about 1 to 2 percent of the home’s purchase price. Buyers who may want to renegotiate the contract based on the results.Įarnest Money Deposit: An earnest money deposit is typically made by the homebuyer when they enter into a contract with the seller. This is often done by hiring specific experts to inspect and perform tests. On the other hand, a listing agent represents the seller.Ĭash Reserves: Required by some lenders, cash reserves are funds leftover after the down payment and closing costs are paid, to be set aside for emergencies.ĭue Diligence: The due diligence period is a time frame allowing a buyer to fully examine a property. Be sure to also check out our to-do list: 10 steps if you are ready to become a first-time homebuyer.Īdjustable-Rate Mortgage: A homeowner has an adjustable-rate mortgage if their interest rate fluctuates at predetermined intervals throughout the course of their loan.Īmortization: Mortgage payments are amortized when they include both interest and principal payments, allowing the borrower to start building equity from the very first payment.Īssessed Value: The value of a property determined by a public assessor for tax purposes.įixed-Rate Mortgage: Contrary to an adjustable-rate mortgage, the interest rate of a fixed-rate mortgage remains the same throughout a loan term.īuyers Agent: A real estate agent who represents the interests of the buyer in the homebuying process is called the buyer’s agent. Although the list is not comprehensive by any means, it will help you build a foundation so you don’t get lost in translation. If you’re getting ready to buy a home, this section addresses important homeowner terms you need to know. Real Estate Terminology For New Homeowners
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