If you’re searching for your first home, you will hear many terms you’ve likely never heard before. The home-buying process is complex, so understanding certain words and phrases will help you get ahead of the game. Here are ten home-buying terms in a Colorado purchase to be familiar with before starting your home search.
A thorough assessment of your income, assets and other data to determine a loan amount you qualify for.
A lender document is sent to you within three days after you apply for a home purchase loan. The document includes loan terms, expected monthly payments, and closing costs.
Mortgage Interest Rate
This is the price of borrowing money to buy your new home. The interest rate is subject to your credit score, down payment, the property type, and any points you can pay at your option to lower the rate.
Private Mortgage Insurance (PMI)
A fee is charged to borrowers who make a down payment of less than 20% of the home’s value. The fee, usually 0.3-1.5% of the yearly loan amount, can be canceled in certain circumstances when the home’s market value exceeds 20% of the loan amount.
A deposit you make upon acceptance of an offer and an executed contract by a seller.
An educated and documented valuation of a home prepared by a licensed and certified appraiser. The appraised value is based on the appraiser’s walkthrough of the property and comparable homes in the neighborhood and area.
The final meeting during which ownership of a home is conveyed from the seller to you. Several documents are signed by the buyer(s), the seller(s), both real estate agents, and the lender if the buyer used one.
Lender-related fees associated with the purchase of a home. Fees typically include an origination fee, appraisal, pre-paid items, and more. You should budget for an amount that is 1-3% of the purchase price.
Similar to “Pending,” this term indicates a period of time, usually 30 days or so after you have made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised. The title is searched for liens, information about any homeowner’s association is reviewed, and any other due diligence is completed, so you are confident in closing.
A process a lender follows to assess all the risks involved in completing the purchase for you.
If there are any terms that you’ve heard and are unfamiliar with, please feel free to reach out, and I’ll be happy to help you understand what they mean and how it applies to you and your situation.