Buying a home for the first time is a learning process that often requires developing a whole new vocabulary. Trying to figure out what your realtor is talking about gets confusing if you aren’t up-to-date on all of the main terms. Learning the definition of these common phrases makes looking for homes for sale in Sherburne County much easier. You’ll also look smarter as you move through the process of obtaining a loan and putting in an offer on your dream home.

Know What a Lender Means by Saying Fixed Rate Mortgage

You’ll talk about mortgage rates when you apply for a home loan. Lenders offer fixed rates, which simply means that the interest rate will stay the same for the life of the loan. In most cases, going with a 30-year loan will help you lock in the lowest rates.

Understand How an Adjustable Rate Mortgage Differs

Adjustable mortgage rates are the opposite of a fixed rate. Essentially, your interest rate will fluctuate over time to reflect the current market trends. This can be advantageous for people who would otherwise have a higher interest rate, but there can also be some downsides. For example, you won’t always know exactly how much your mortgage payments will be during times of rapid economic change.

Find Out If You Need to Pay Private Mortgage Insurance

Private mortgage insurance is meant to protect the lender financially if you were to default on the loan for some reason. These payments can substantially add to your mortgage costs each month. The good news is that you might be able to avoid having to pay private mortgage insurance if you put at least 20% down on your home.

Recognize What Is Happening to Your Money In Escrow

You’ll often hear this term more as you get closer to closing on a house. Escrow simply means that a neutral party will hold funds until certain conditions are met for its disbursement. In a home buying situation, you may be asked to make a good faith deposit called earnest money.

This protects the seller in case something happens on your end that stops the purchase. If the sale goes through, then the money will typically go towards your down payment. Holding it in escrow until everyone knows where it should go gives the seller confidence that you have the appropriate amount of funds available.

Make a Contingency During the Process

A contingency is something that impacts whether or not the home purchase goes through. Both buyers and sellers can place contingencies on an agreement. For example, you might say that you’ll buy the home only if an inspection report comes back with no major problems.

Finish the Sell by Paying Closing Costs

This is one of the more confusing terms for people buying homes for sale in Sherburne County. This is because it includes a range of different expenses that all must be paid at the point that ownership of the home is transferred. You might need to pay loan origination fees, discount points, and other common costs at the end of the entire home buying process.

Knowing how to use and understand basic home buying lingo helps you to make smart decisions and tell the other people involved what you need. Now, all you have to do is get out there and start practicing. Using your new vocabulary is fun, and it’ll help you score that house that you’ve got your eye on.