Understanding real estate terms prior to purchasing a home will help you make better decisions about your purchase. With a firm grasp on the language, you can have a healthy conversation with your realtor, seller, appraiser and attorney. The following terms are integral to purchasing your next home.
Best and Final Offer – When purchasing a home in a seller’s market, it isn’t uncommon to get into a bidding war with other potential buyers. Sellers familiar with the process may request your best and final offer to expedite the process. As a buyer, you must make a favorable offer to encourage them to sell it to you. Without a clear understanding of the term, you could miss the home you desire.
Good Faith Estimate – The law requires financial institutions to provide you with a Good Faith Estimate. The Good Faith Estimate shows you how much you will pay at closing.
Amortization – The schedule of interest and principal for your home. Understanding how the interest impacts your payment will help you pay off your loan quicker.
Underwriting – The process of getting you approved for your mortgage, reviewing financial documents, paying off the sellers and a host of other things are all underwriting procedures. The financial institution that is responsible for your loan carries out this process. Once approved, this establishes your mortgage with them.
Buy Down – As a buyer, you have the option to reduce your interest by paying discount points. You can only do this during the initial contract. Buying down your interest rate makes your mortgage payments more affordable over the life of the loan.
Loan-to-Value Ratio – The amount of your mortgage relative to the value of your home is the loan-to-value, and it is usually a percent. This ratio helps financial institutions determine how much to lend on homes.
These are only a few terms you need to know to have a better idea of the purchase process. Eastland Escrows in Covina, California can assist you with your escrow when you are ready to purchase a home.