May 11, 2017 | Bob Myers
Buying a home can be intimidating if you are not familiar with the terms  used during the process. To start you on your path with confidence, we  have compiled a list of some of the most common terms used when buying a  home. 
Annual Percentage Rate (APR)– This is a broader  measure of your cost for borrowing money. The APR includes the interest  rate, points, broker fees and certain other credit charges a borrower is  required to pay. Because these costs are rolled in, the APR is usually  higher than your interest rate.

Appraisal – A professional analysis used to estimate the value of the property.  This includes examples of sales of similar properties. This is a  necessary step in getting your financing secured as it validates the  home’s worth to you and your lender.

Closing Costs – The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing.  They include points, taxes, title insurance, financing costs, items  that must be prepaid or escrowed and other costs. Ask your lender for a  complete list of closing cost items.

Credit Score – A number ranging from 350-800, that is  based on an analysis of your credit history. Your credit score plays a  significant role when securing a mortgage as it helps lenders determine  the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to  qualify when, in actuality, over 55% of approved loans had a score below 750.

Discount Points – A point equals 1% of your loan (1  point on a $200,000 loan = $2,000). You can pay points to buy down your  mortgage interest rate. It’s essentially an upfront interest payment to  lock in a lower rate for your mortgage.

Down Payment – This is a portion of the cost of your  home that you pay upfront to secure the purchase of the property. Down  payments are typically 3 to 20% of the purchase price of the home. There  are zero-down programs available through VA loans for Veterans, as well  as USDA loans for rural areas of the country.  Eighty percent of first-time buyers put less than 20% down last month.

Escrow – The holding of money or documents by a neutral  third party before closing.  It can also be an account held by the  lender (or servicer) into which a homeowner pays money for taxes and  insurance.

Fixed-Rate Mortgages – A mortgage with an interest rate  that does not change for the entire term of the loan. Fixed-rate  mortgages are typically 15 or 30 years.

Home Inspection – A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Mortgage Rate – The interest rate you pay to borrow  money to buy your house. The lower the rate, the better. Interest rates  for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017.

Pre-Approval Letter – A letter from a mortgage lender  indicating that you qualify for a mortgage of a specific amount. It also  shows a home seller that you're a serious buyer.  Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets. 

Primary Mortgage Insurance (PMI) – If you make a down  payment lower than 20% on your conventional loan, your lender will  require PMI, typically at a rate of .51%.  PMI serves as an added  insurance policy that protects the lender if you are unable to pay your  mortgage and can be cancelled from your payment once you reach 20%  equity in your home.

The best way to ensure that your home-buying process is a  confident one is to find a real estate professional who will guide you  through every aspect of the transaction with ‘the heart of a teacher,’  and who puts your family’s needs first.


My team and I  are real estate experts in Montgomery County and the surrounding Metro  area. When buying or selling a home, please consider us your resource  for all things real estate. If you need referrals for obtaining a home  loan or are refinancing, want a recommendation on a home warranty, need a  service or just have a home related question, please give me a call at  301-910-9910 or email me at bobmyersteam@gmail.com.
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