🔑🏠Key Terms to Know When Buying a Home

Affordability: a measure of whether someone earns enough to qualify for a loan on a typical home based on the most recent price, income, and mortgage rate data. When home prices and mortgage rates are higher, it can impact affordability.

Appraisal: A report highlighting the estimated value of the property completed by a qualified third party. Lenders rely on appraisals to validate a home’s value and ensure they’re not lending more than the home is worth.

Closing Costs: The fees required to complete the real estate transaction. Paid at closing. Ask your lender for a complete list of closing cost items, including points, taxes, title insurance and more.

Credit Score: A number ranging from 300-850 that’s based on an analysis of your credit history. This helps lenders determine the likelihood you’ll repay future debts.

Down Payment: Down payments are typically 3.5%-20% of the purchase price of the home. Some 0% down programs are also available. Ask your lender for more information about what you may qualify for.

Equity: the value of your home above the total amount of liens against your home. Many homeowners are realizing they have more equity than they thought and they’re using it to move.

Inspection Contingency: A provision in a contract requiring an inspection to be completed. This essential step gives you information on the home's condition and potential repairs.

Mortgage: A loan using your home as collateral. It also may be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage often is the purchase price of the home minus your down payment.

Mortgage Rate: the interest rate you pay to borrow money when buying a home. As mortgage rates fluctuate, consult a lender so you know how it can impact your monthly mortgage payment.

Pre-Approval Letter: a letter from a lender that shows that they’re willing to lend you for your home loan. This, plus an understanding of your savings, can help you decide on your target price range.