Real estate is both exciting and confusing for many all at the same time. For first time home buyers, the process can be overwhelming and stressful. It can often suck the fun out of purchasing the home of your dreams. While there is not concrete explanation to explain the source of the stress, it could be the lack of understanding associated with real estate in general. What is a deed? What is an interest rate? Why do I have to pay PMI? These are all valid questions that many first time home buyers don’t have the answers to. So let’s do a brief roundup regarding some things that would be helpful to understand:
- Deed – A deed is proof that you legally own your home. A deed is filed and recorded at your local clerk’s office.
- Interest Rate – This rate varies depending on your credit and is the percentage that the bank can charge in addition to your principal for securing your home loan.
- PMI – Private Mortgage Insurance is what banks use to guarantee your loan in case of default. PMI is required for most home buyers who put down less than 20% on their mortgage loan.
- Home Inspection – A home inspection will let you know of any potential issues that a home has prior to purchase. While this is not a free service, it is worth the investment. A home inspection can be the difference between purchasing a diamond or a dud.
- Escrow – This is a special bank account that is set up to hold funds during a real estate transaction. This account holds your earnest money deposit and down payment until the home purchase deal is done.
While these terms are just a small fraction of what is out there, any knowledge can go a long way in easing the home buying process. Stay tuned for additional information in regards to purchasing a home.