Only 32% of those looking to buy a home are first-time buyers. The majority then has some experience in purchasing real estate. But depending on how long ago that first purchase was made, it is likely that they have forgotten a few things surrounding the process.
The terminology used with real estate law can be confusing. You’ll feel more confident about your decisions if you have a better understanding of both the overall process. With that aim in mind, here are a few terms you’ll want to know.
Why You Must Have a Basic Understanding of Real Estate If You Plan to Make a Purchase.
Simply put, buying real estate is an expensive financial endeavor. Any magazine or flyer with a house for sale states the price clearly, so this should not be surprising. However, the interest the buyer pays for their home can vary depending on the terms of the mortgage. Below are the types you may come across.
Adjustable-Rate Mortgage (ARM).
An adjustable rate mortgage, sometimes called a variable rate mortgage, has an interest rate that varies according to an index set to the lender’s borrowing on the market credits. Essentially, the interest you pay on the mortgage can fluctuate, so that at times you might be paying a very low interest on the mortgage, and a higher rate at other times. This type of mortgage can be for the entire length of the loan, or for just five years.
Fixed-Rate Mortgage.
The fixed rate mortgage is a traditional option for many buyers. The standard option is either a 15- or 30- year fixed interest rate mortgage. Home buyers like this type of mortgage because they know that their interest payment will never rise. Conversely, it won’t drop with a fluctuating market either. Some home owners like the stability.
Escrow: What It Is, And What It Isn’t.
Escrow is simply an added charge on top of your monthly mortgage payment that is set aside by the loan company for future expenses such as annual property taxes and insurance. When the bill for either of those comes, the loan company pays with the accumulated funds in the escrow account. An escrow can be adjusted if the loan company finds that it is necessary to raise the amount to pay higher property taxes, or it might be lowered if a surplus begins to accumulate.
A realtor will do their best to explain the buying process to you, however it is always a wise idea to have a baseline knowledge. About 52% of home buyers insist it is not the paperwork, but the hunt to find the right property, that is the most challenging aspect. If purchasing a new home is in your near future, try looking online and heading to Open Houses to get an idea of what you would like best. You’ll be able to rest confidently in the knowledge you’ve accumulated.
