ARM. PMI. APR. HOA. Home buying has its own vocabulary with acronyms and terms you aren’t likely to hear in everyday conversation. If you are buying your first home, not knowing the lingo can be nerve-wracking. To help you crack the code, we’ve put together a list of the terms you will hear the most.
Adjustable-rate Mortgage (ARM) – This is a mortgage option where the interest rate is not fixed for the life of the loan. Instead, it is fixed for an initial period (typically five, seven or 10 years) after which the rates adjust to reflect market conditions for the remaining years of your loan. In other words, your interest rate can go up, increasing your monthly payments or down, lowering them.
Amortization – The term for the repayment schedule of your loan, including payments of the original amount borrowed and interest. This is displayed as a table, included with each payment and lets you know what your remaining balance is.
Appraisal – The estimated value of the property you wish to purchase. A bank usually requires this before issuing your loan to ensure the estimated value of the property does not exceed the amount borrowed.
Annual Percentage Rate (APR) – The method of calculating the cost of your mortgage, it is stated as a yearly rate that includes interest, mortgage insurance, points and credit costs. You use this to compare different loan options.
Closing Costs – The fees you are expected to pay when you close on your loan. They can attorney’s fees, credit report fees, document preparation fees, deed recording fees, appraisal fees and more depending on the state you live in.
Down Payment – The portion of the sales price you agree to pay in order to close the sale. This must be paid at closing. Most buyers put down 20 percent of the purchase price but it is possible to lower your down payment by securing certain loans.
Earnest Money – A deposit that shows you are serious about purchasing a property. Many builders will require this. The money is held by a neutral party.
Fixed-rate Mortgage – The most common type of loan. Your interest rate is pre-determined or locked in for the life of your loan. Such loans are generally 30 years in length, but loans can be issued for other durations.
Home Inspection – An evaluation by a professional inspector of your home’s structural and mechanical condition of a property (plumbing, foundation, roof, electrical, HVAC systems, etc.). Even if your home has just been built, it’s a good idea to have this done. The buyer pays for this.
Homeowners Association (HOA) – A nonprofit that manages the common area of a master-planned community. You pay a fee often called dues to jointly maintain any amenities your community offers.
Homeowner’s Insurance – An insurance policy that protects your investment, it usually includes personal liability insurance and hazard insurance coverage for your home and its contents. Lenders generally require this before you can close.
Points – Points allow you to prepay interest on your loan equal to one percent of the loan amount. Paying points upfront can lower your interest rate.
Pre-approval – Your lender’s guarantee that they will grant you a loan. It is recommended that you get this before home shopping as it demonstrates both your seriousness and the amount of home you can afford.
Private Mortgage Insurance (PMI) – If you need to put down less than 20 percent on your home’s purchase, you may be required to have this insurance, which is a monthly payment that protects lenders against a loss if you default.
Sales Contract – A legal agreement that sets out the terms of the sale. For a new construction home, this will often include both the base price of the home and any options and upgrades you agree to pay for.
Title Insurance – Another type of insurance you must pay for, this protects against any unknown liens or debts that may be placed against your property. Before being issued, a title search will be conducted to ensure that the current owner has the right to sell the property.
Buying a new home shouldn’t be complicated. That’s the philosophy of one of our newest builders —Adams Homes. It’s a philosophy that has made the company one of the largest privately held homebuilders in the nation and one of the few that delivers value and a high-level of satisfaction with their homes.
Keep It Simple
Adams starts by keeping it simple. Rather than offering bare bones floor plans with the option of adding pricy upgrades, the builder’s designs include many of the standard features that homebuyers want and expect in their new home.
They don’t believe in “upselling.” The builder’s approach is straightforward without a lot of smoke-and-mirrors. Just a beautiful, high-quality home at a budget-friendly price. That means countertops, backsplashes and appliances that would be considered upgrades in your kitchen and secluded primary suites with plenty of room in the walk-in closet. Adams’ representatives don’t try to upsell you on options and upgrades outside your budget.
If you do want to tailor your home a little more, options are available, and they will work with you until you have crafted a home that fits your lifestyle.
Quality You Can Trust
This simplified approach to homebuying doesn’t mean you have to sacrifice quality or value. All Adams homes come with a written, third-party guaranteed warranty. The warranty covers certain system defects for up to two years and certain structural defects for up to 10 years.
To further customer satisfaction, the builder has implemented a zero-defect policy intended to limit after-closing issues. That means you don’t have to wait for a builder to take care of an issue after you move in. Adams tries to address the issues before closing.
Does it work? Well, Adams has a more than 20-year track record for customer satisfaction.
Homeownership the Easy Way
In addition to offering thoughtfully designed floor plans and superior customer service, Adams helps homebuyers get the home they want without a huge outlay of cash. They only require a $1,000 deposit and will pay closing costs with the use of an approved lender. And unlike many other builders who only allow you to one lender, Adams offers you several approved lenders with no construction loan needed. All permit/ impact fees, site preparation costs, surveys and homesites are included in the price.
Adams Homes in Vanbrooke
Adams Homes offers seven striking floor plans in Vanbrooke. Homes range from 1,434 to 2,335 square feet and are priced from the mid $220,000s. Homes feature spacious family rooms, kitchens with miles of counterspace, primary suites with spa-inspired baths and enormous walk-in closets and two-car garages. A model home will be open soon; make an appointment to speak with an Adams Homes representative today.
Whether you are buying your first home or your third, you’ve probably heard of closing costs. But what are they exactly? How much will you need to pay? Is there a way to reduce that amount? Don’t worry, here’s a quick tutorial on everything you need to know about closing costs.
What are Closing Costs?
There are a number of costs and fees required to finalize your mortgage before you take possession of your home. Most of these costs will fall on the buyer although the seller is responsible for a few things such as the real estate agent’s commission. All of these fees must be paid before you get the keys to your new home.
How Much Do I Pay?
Typical closing costs range from 2 percent to 5 percent of the loan amount. That means if you take out a $200,000 loan to purchase your home, you will be responsible for paying anywhere from $4,000 to $10,000 in closing costs. While these costs are typically paid the same day you finalize the purchase of your home, it is sometimes possible to roll your closing costs into your mortgage.
OK, But What Exactly Am I Paying For?
Closing costs can be divided into property-related fees, title fees and loan-related fees. You also may have to pay mortgage insurance fees, property taxes and homeowners association fees.
Property-related fees include the cost of the appraisal, which verifies the amount your home is worth and the home inspection. The home inspection ensures that your home is structurally sound.
Title fees relate to who legally owns the home you are purchasing. Before you buy your home, your lender will request a title search to ensure that the person selling the house actually owns it. Lenders also require title insurance, which protects them in case an error was made during the title search. While not required, many buyers choose to purchase owner’s title insurance to protect against any claims are made on your home after closing.
By far the most numerous fees you will be paying are related to your home loan. These can include the initial application fee, attorney fees, loan origination fees, mortgage broker fees, prepaid interest and any discount points you may have agreed to buy.
Can I Reduce How Much I Pay?
There are ways to reduce the amount you have to pay. Nerd Wallet has put together an extensive list of the many ways you can lower your closing costs. Closing costs are often negotiable.
A great way to not have to write a big check when you close is to purchase a new home from a builder. Builders often run incentives offering to pay your closing costs up to a certain amount. That can reduce your costs or even negate the costs you pay. Want to learn more? Visit our builders’ model homes to find out what incentives they are offering.
Think a budget-friendly home in Vanbrooke is a dream? It isn’t. Lake Ridge Builders has a beautiful home ready to move into at 5206 Windy Plantation Drive. It’s sophisticated, well equipped and the perfect home for 2021. Warm up by the cast-iron fireplace, relax in the spacious primary bedroom or serve up a gourmet dinner in the formal dining room. See it today because it won’t last long.
Additional features:
This charming 1,776-square-foot home is priced from the $280s.
Make Your Move Today
Ready to make your move to Vanbrooke? You won’t regret it. Our prime Fulshear location puts you near all Fort Bend attractions including the Fort Bend Children’s Discovery Center, George Ranch Historical Park, Great Southwest Equestrian Center and Smart Financial Centre at Sugar Land. Enjoy Fulshear festivities such as the Fulshear Art Walk, Fort Bend County Fair and Livestock Show and more. When you’re in the mood to stay home, our wealth of amenities are outside your front door. Visit us today. Make your move tomorrow.
Conventional wisdom says that prospective homebuyers need to put 20 percent down on the purchase of a new home. That isn’t necessarily true. It is possible to buy a new home with a much lower — or in some cases — no down payment. How? We’ve put together a primer to help you through the intricacies of down payments and home loans.
What is a Down Payment?
A down payment is the money you’ll put down during your mortgage closing. It is the check you write before your home is officially yours. This money is separate from your home loan, which is provided by your lender.
The suggested amount for a down payment is 20 percent of the purchase price of your new home. In Vanbrooke, homes are priced from the $200,000s, which means you would need to put $40,000 down. A $300,000 home would require $60,000 down. If that amount seems unrealistic, you are not alone but there are many home loans out there that require a much lower cash outlay.
Types of Loans
There are a number of loan types that allow you to put anywhere from zero to 3 percent down. These loans come with conditions, but they are not onerous and can help you buy the home of your dreams for less than you may think.
Conventional Loans: Conventional loans are offered by lenders at higher interest rates. Lenders have different requirements and set their own percentages, but it is possible to get a loan that allows you to put anywhere from 3 to 5 percent down. If you have a credit score above 620 points, you are more likely to get a better loan percentage.
FHA Loan: FHA loans are government-backed and require you to put at least 3.5 percent down. In order to obtain this type of loan, you will need a minimum credit score of 580. It is possible to get an FHA loan with a credit score between 500 and 579 but you will be required to put at least 10 percent down.
VA Loan: Veterans do not need a down payment to qualify. There are service requirements, however, and veterans should check with the Department of Veterans Affairs to see if they qualify. Spouses of active-duty military or veterans who have died in service or have a service-related disability also may be eligible.
USDA Loan: Homebuyers who are have not served can get a USDA loan that will relieve you of having to put money down. To qualify, your home must be in an approved rural or suburban area. Members of your household will need to meet income requirements as well.
Is a Lower Down Payment Right For You?
If you don’t have $40,000 or more in savings to put toward a down payment, pursuing a lower down payment will help you get into a home sooner than anticipated. Note, however, that you will be required to purchase private mortgage insurance (PMI). This is insurance that protects your lender if you default on your mortgage loan. However, you can request that your lender remove PMI once you’ve reached 20 percent equity in your home. Some lenders will do this automatically once you have built more than 20 percent home equity. With home values growing, reaching that 20 percent equity threshold can happen quickly.
Your interest rate will most likely be higher. This means you will pay more interest over the life of your loan. The good news is that interest rates are very low right now so even a higher interest rate may not dramatically increase the amount of your mortgage payment.
The Bottom Line
The bottom line is that if you don’t have 20 percent of the purchase price to put down on the home you love, that doesn’t mean your new home dreams have been dashed. Your lender may be able to lower your down payment and get you moving into a new home much faster than you originally thought.