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13 New Jersey Home Buying Terms You Need To Learn
The world of real estate involves a language unto itself. Consequently, it’s important to understand the common terminology as it affects the outcome of your New Jersey home buying process. To start you on your New Jersey home buying path with confidence, we’ve compiled a list of some of the most commonly-used real estate terms:
Annual Percentage Rate (APR) – A broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower must pay. Because these costs are rolled in, the APR is usually higher than your interest rate.
Appraisal – A professional analysis used to estimate the value of the property. This includes examples of sales of similar New Jersey properties. This necessary step validates the home’s worth to you and your lender, thereby assisting in securing your financing.
Closing Costs – Costs needed to complete the real estate transaction. These costs exist in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed, and other costs. Ask your lender for a complete list of closing cost items.
Credit Score – A number ranging from 350-800, based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood you’ll repay future debts. The higher your score, the better. Many New Jersey home buyers believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750.
Discount Points – A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). If you pay points, you buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage.
Down Payment – A portion of the cost of your New Jersey home that you pay upfront to secure the purchase of the property, typically 3 to 20% of the purchase price of the home. VA loans for Veterans provides zero-down programs and USDA loans exist for rural areas. Eighty percent of first-time buyers put less than 20% down last month.
Escrow – The holding of money or documents by a neutral third party before closing. Additionally, it may be an account held by the lender (or servicer) into which a New Jersey homeowner pays money for taxes and insurance.
Fixed-Rate Mortgages – A mortgage with an interest rate that stays constant for the entire term of the loan, typically 15 or 30 years.
Home Inspection – A professional inspection of a home to determine the condition of the property. Evaluations typically cover plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation. Your inspector, agent or attorney might also recommend an Open Pit Septic Inspection (for homes without public sewers), a Level 2 Chimney Inspection, a mold test, and/or an Underground Tank Sweep (if evidence shows the heating fuel source could have once been from an underground fuel storage tank). For home buyer ease, Team Nest Builder provides a list of licensed inspectors. (New Jersey requires licensing of all inspectors.)
Mortgage Rate – The interest rate paid to borrow money to purchase your New Jersey home. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage hovered between 4 and 4.25% for most of 2017 thus far.
Pre-Approval Letter – A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a New Jersey home seller that you're a serious buyer. Having a pre-approval letter in hand while shopping for homes helps you move faster, with greater confidence, in competitive markets.
Primary Mortgage Insurance (PMI) – If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you’re unable to pay your mortgage, and can be cancelled from your payment once you reach 20% equity in your New Jersey home.
Real Estate Professional – An individual who provides services in buying and selling homes. Expert New Jersey real estate professionals assist with confusing paperwork, help you find your New Jersey dream home, negotiate any of the details that arise, and ensure you’re educated regarding the housing market. Many real estate professionals refer you to local lenders or mortgage brokers along with other specialists you’ll need throughout the home-buying process.
Feel smarter? You should! Just remember, if ever you’re confused during your New Jersey home buying process, just pick up the phone and call Team Nest Builder. We’re here to help you every step of the way!
Additional Source: KeepingCurrentMatters.com