Key Real Estate Terms for Buyers

There's a lot to understand when buying a home, starting with some of the key terms you'll hear from your Realtor, Lender and Bank.  So what do they mean?

Credit Score - Your credit score helps your lender determine the likelihood that you'll repay your future debts, including your mortgage. Scores range from 300-850 and are based on an analysis of your credit history. The higher your score, the more creditworthy you're deemed, and costs for borrowing may be less than if you had a lower credit score.

Affordability - This is a measure of whether you earn enough to qualify for a loan based on the most recent price, income and mortgage rate information. When home prices and/or mortgage rates are higher, it can impact affordability, meaning you may not be able to afford a property that you previously would have qualified to purchase.

Down Payment - This may be a term you've heard, but do you know how much money you need to save to purchase a home? Common down payment amounts are between 3.5% and 20% of a home's purchase price, but there are some programs that allow for 0-3% down. Your lender will be able to outline the various programs.

Mortgage Rate - The interest rate you pay to borrow money when purchasing a home. Mortgage rates fluctuate, so you will need to discuss how changes in the interest rate may affect your monthly mortgage payment.

Pre-Approval - A pre-approval letter from your lender will help you determine a target price range and will show a seller that you're qualified to purchase a home.

Inspection Contingency - This is a provision in the purchase contract that gives you the opportunity to have a home inspection. The inspection will give you information on the home's condition and potential maintenance and repair issues in the future.

Appraisal - After your offer is accepted your bank will want to confirm the home's value, and be sure they aren't lending you more money than the home is worth. A licensed home appraiser will examine the home and compare it to similar homes in close proximity to create a valuation.

Closing Costs - Your lender will be able to give you a complete list of the fees required to complete the real estate purchase. These charges are paid at the closing.