Are you beginning to search for your dream home in Tampa Bay? If you are a first time homebuyer or if you have purchased a home before, there are many terms that are important for you to understand. Below are important terms to understand before you being the home buying process.
- Prequalified – Before beginning to look for a home it is important to know how much you can afford. Prequalification requires little time and documentation but help you determine an estimated price range for your new home. Keep in mind that this is not a preapproval and once you are committed to home you will have to provide a lot more documentation (tax returns, bank statements and pay-stubs) in order to be preappoved for a loan.
- Appraisal – This is an estimate that determines how much the property is worth. The banks do this to ensure they are not loaning you more money than the house is worth.
- Private Mortgage Insurance or PMI – If you are planning on putting down less than 20% of the home price you will have to pay for monthly mortgage insurance. If you do not want to pay that fee, you will have to put down a larger amount. But typically, after your payments reach 20% of the home value, you will be able to stop paying PMI.
- Closing Costs – The fees related to buying a house that the lender will charge you. These fees include items such as: home inspections, title insurance and surveyor fees. The closing cost on your home can be 2-5% of the purchase price, so make sure you are prepared for these fees as well.
- Escrow – An easy way to describe this term is, a neutral 3rd Party. Your home deposit could go into an escrow account or more commonly – your insurance and tax payments are kept in an escrow account until they are paid.
- Types of Loans and Interest Rates – There are different types of interest rates and loan options when purchasing a new home. It is important to understand your options and make sure you are choosing the right option for you. Below is a list of a few types you should make sure you understand.
- Fixed-Rate – Interest rate that will never change over the course of the loan
- Adjustable Rate – Fixed rate for 5-10 years and then the interest rate adjusts
- Conventional Loan – Need a credit score of 650 or higher but you will only need to put down 3-5%
- FHA Loan – For borrowers with poor credit that offers lower upfront costs and low down payments
Still have questions? Contact Brad at Compass Mortgage for help with your financing needs. Brad is the oldest son of the William family and will make sure he answers all your questions.
Contact Covenant Homes for more information on building your dream home and make sure you look at our Models.