When you’re planning to buy a home, you should see to it that you learn these 5 important terms, especially if you’re a first-time home buyer.
5 Terms Every Home Buyer Must Know
Don’t be too surprised if you see a big number. Mortgage is most probably the largest debt you will ever have. So what does it mean? Mortgage is a type of loan that would finance the home you will buy. It’s made up of different elements such as insurance, taxes, payments (both principal and interest) plus the collateral you will use to get the approval for this loan.
2. Property Taxes
Just what are property taxes and why do you have to pay for it? Property taxes are actually paid to your community. When you pay for property taxes you help pay for public services or infrastructure such as schools and roads. So basically, what you’re paying in property taxes help the community. How much will you be paying for property taxes? This is based largely on the appraised value of the property you bought.
Here’s how it’s computed:
Value of the property x Mill rate of the community / 1000
*Property tax rates in Des Moines as of 2014 is at $16.92 (per $1,000) while Altoona holds the lowest rate in the metro at $9.14
The appraisal is given by a professional appraiser. The appraiser will check on different elements of the property including function, overall quality, size and general condition. After inspecting the property you are planning on buying the appraiser will then compare it with other home values in the area to come at a fair appraisal in the current market. An appraisal is important since it will help ensure that you don’t get a property worth less than what it cost you.
When investing in a property, you’d want the value to grow. And if it’s already behind from the get-go, you’re already trying to catch up which is a bad start.
4. Buyer’s Home Inspection
A visual top to bottom inspection of the property will be done by an expert inspector to ensure proper usage and safety. Anything that the inspector finds needing repair must be made. Come property negotiation process, it will then be determined if an immediate fix is needed and if the buyer or the seller will do the fixing. Pricing of the property can be adjusted depending on how serious or huge the problem is.
5. Conventional Home Loan
Just what is this? This is a type of mortgage that follows the guidelines Fannie Mae and Freddie Mac put in place and these loans are not guaranteed or insured by the federal government. A conventional home loan also has a maximum cap. For example Iowans and those living in the continental U.S. can generally get a maximum loan of $417,000 for one property. The loan can either be a fixed rate or adjustable mortgage.
What’s the difference between the two?
Fixed rate – means fixed interest rate for the entire duration of the mortgage ranging from 10 years to 30 years
Adjustable rate mortgage – Interest rates start low and then gradually shift. The shift is based off of benchmark interest rate indexes such as LIBOR. The adjustable rate mortgage is a 30-year loan.
So there you have it. The 5 terms every home buyer must know about. These terms can help you decide if you’re ready for a property or not and if you’re getting a property worth investing in.
Buying a home is a huge decision. You should be well-informed always.
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