We know that buying your first home can be intimidating. For one thing, there are a lot of new terms to learn. To help get you started, here are 11 of the most common terms you’ll hear when buying your first home.
- Mortgage—a loan from a bank (or other financial institution) to pay for your house. Commonly comes in 15-year or 30-year version (which is the amount of time you get to pay back the loan).
- Note—the actual loan document for the house. It details your monthly payments, interest rates for repayment, and the total amount that you owe to the bank.
- Title—this is the legal document that shows who owns the house. It will be transferred to you when you buy the home.
- Equity—the total dollar amount that the homeowner actually owns in his home (minus any liens on the home). Usually, equity grows as the mortgage gets paid off and the property increases in value.
- Escrow—a part of your monthly mortgage payment that is used by the bank to pay your property taxes and insurance.
- Title insurance—special, one-time insurance that protects you (the home buyer) and the bank from any last-minute disputes over the home.
- Closing—final meeting where the buyer and seller sign the paperwork to transfer ownership of the home.
- Inspection—when a home specialist performs a thorough review of the home you’d like to buy—looking for any issues or red flags with the structure or safety of the home.
- Home warranty—a home service contract that covers repairs and replacements for any issues that come up immediately after buying the house—such as a broken toilet, leaky pipe, broken refrigerator, or HVAC issue. (For example, every home listed for sale with ReeceNichols automatically comes with a free seller’s warranty from AB May, including 24-hour emergency service—which can be extended by purchasing a warranty at closing.)
- Points—the fee the bank charges you to provide the loan. 1 point = 1% of the mortgage. (Our in-house lending service, HomeServices Lending, can better explain how this impacts your mortgage loan.)
- Foreclosure—a home where the owner has failed to pay off the loan, and the home now belongs to the bank who provided the mortgage.
Buying your first home? We can help. Contact us today.