If you are a first home buyer then there are certain points that you should definitely know. The most important of them all is to know the various terminologies and jargons that will help you to understand the whole process of house buying. If you are thinking that there is no needs to know them so think that the experienced buyers are not able to understand then the first time buyers have very little chance.
Critical terms should first-time house buyers know
An important question that the buyers ask about these terms is whether these are used for one type of house buying type or for all like Stop renting to own your own home? For every type of house buying scheme the procedure is almost the same; but with a few changes. So for all buying methods, the following terms have to be known.
The rate of interest changes during the whole period of the loan term. During the basic term period, the rate is fixed. But after the end of that specific time; the interest rate changes at monthly, quarterly or yearly intervals. You have to be careful as the rate can increase or decrease while the loan is in term period.
This is the most important part of buying a house as it is the first payment that the buyer gives to the seller. This is an amount that is usually 20% of the total price of the house. The percentage of the amount can be as low as 5 or 10% or higher than 30%.
This is an account that is created by the lender so that the money for the property tax and home insurance is kept. In this, a third party takes responsibility for keeping the money and doing transactions between the two parties. The time of the creation of this account is short because it is created only for transactions.
Unlike the Adjustable Rate Mortgage in which the rate of the interest changes during the whole term; the fixed-rate loan has the interest is steady. If the rate of interest is determined 15% then by the end of the loan term it remains the same. The rate if this loan is more than the adjustable one.
The closing cost of the house
At the end of a deal of the house, there is a certain amount that the buyer has to pay, but this payment is given when the buyer has bought the house. Mainly this cost includes the following;
- Discount points
- Title insurance
- Loan origination fee
- Appraisal fee
- Deed record fee
- Credit report charges
The Rate of Interest
This is a kind of fee that the lenders take for their charges of the whole loan application procedure. Normally the rate of interest is taken on an annual basis but there are others who can charge on monthly payments as well. If the lender thinks that the borrower will have difficulty in paying back then the rate will be high; otherwise, a normal rate is charged. For further assistance you can get help from experts like Stop Renting Bunbury.
The Stamp Duty
This is a kind of a government tax that the buyer has to pay. This amount has to be paid before the end of the settlement and after the contract has been exchanged. This takes usually 3 to 4 months. So the payment has to be made within this time period and it should not take more.
The Offset Account
It is an account that is only used for transactions of home loan. A certain amount of loan is shifted into the offset account. So the remaining amount in the mortgage account is charged with interest. There are various online calculators that can help you make an estimation of the account amount.
Pre-Approval and Pre-Qualification
Pre-approval of the loan means the lender has approved the loan amount that the borrower has applied for. It takes time for the approval, but eventually, a letter will prove that the loan has been preapproved. Pre-qualification states that the lender has settled that the borrower will get the amount. There are several terms and conditions that are important.
Loan to Value Ratio
This is typically used by banks to determine the amount of the loan against the value of the house you want to buy. This loan to value ratio is used by banks for their specific loans.
Lender Mortgage Insurance
It is an amount that gives the lender insurance that if the borrower is unable to pay the loan. This amount is applicable on the down payment that is more than 20%. This is for the lenders and the borrowers have to pay it with the down payment.
Stop renting to own your own home Bunbury
Stop renting to own your own home Bunbury is a kind of scheme that people can apply to for buying a house. In this the buyer goes through two phases; one is renting period and the closing one. The buyers have the choice to also back out of the deal.