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General Terms -

There are several terms that you will need to be familiar with when planning to buy a home.

Fixed-rate mortgage - payments stay the same for the life of this mortgage, usually 15 or 30 years. The shorter term mortgage (15 years) would have a larger monthly payment than the 30 year mortgage, as the payback term is cut in half.

Adjustable-rate mortgage - payments are not fixed and are based on the current interest rate. The term can be 15 or 30 years. Rates on these mortgages can change at anytime, and are tied to the interest rate. When interest rates are very low, it is wise to get an adjustable rate mortgage; you can usually refinance it into a fixed mortgage, if interest rates begin to climb.

Conventional Mortgage - the most common type of mortgage, it is one that is not insured by the Federal Housing Administration or guaranteed by the Dept of Veterans Affairs. Most banks issue and finance conventional mortgages.

Private Mortgage Insurance (PMI) - this is required in cases when your down payment is less than 20 percent of the cost of the home you are buying. Once you have paid your loan to less than 80 percent of your home's value, you can cancel the PMI insurance.

Contract - once the seller accepts a purchase price, a contract is usually drawn up. This document will outline the terms of the sale, including the price, down payment amount, mortgage amount, what is included with the sale of the home (and what is not) and when the closing is expected.

Closing - this is when the buyer and seller (and usually both their lawyers and brokers) sit to finalize the actual sale of the home. Papers are signed to transfer the property from the seller to the buyer. Money and titles are transferred (a title company representative is usually also present). Once the closing is over, you official own the home.

Inspection - it is very important that a potential homebuyer have the property inspected by an independent home inspection company. The inspector should be found by the buyer and not work for or with the seller or broker. The inspector will view the property and offer you an unbiased review of the condition of the home. Homebuyers should attend the inspection and question the inspector with any concerns they may have about the condition of the home.

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Related Articles:
Buying a Home
Visiting Homes
General-terms
Selling a Home
Choosing an Agent
Preparing your House for Sale
Accepting a Bid
Closing on your Home
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