Six Key Terms New Home Buyers Need to Know
Whenever you are ready to purchase your first home, it may feel like you are having to learn a whole new language as well. Along with every step in the process, you will likely encounter technical and industry terms that may leave you scratching your head. With approximately one-third of Americans planning to purchase a home in the next five years, according to NerdWallet, you won’t be alone in your pursuit—or confusion.
At Stanley Martin Homes, we’re committed to helping you find your ideal community to call home. Part of that commitment is empowering our clients with the knowledge to make an informed decision. Here are some of the most common terms you may encounter during your journey to homeownership.
Adjustable Rate Mortgage
ARM for short, this type of home loan will have changing interest rates over the life of the loan until it reaches a predetermined maximum. If you apply for this type of loan, you will be given details of when and why rates will change over time to help you plan accordingly.
Fixed Rate Mortgage
FRM for short, this type of loan is exactly as the name implies in that the interest rate for the loan will remain the same through the entire life of the loan. This means that the monthly principal and interest rates will remain steady and predictable, making this a popular choice for frugal homeowners.
A portion of the down-payment that is held by a third-party, neutral title agent—often a lawyer—as a safety net until the closing date. After the purchase is complete, the funds held in the escrow account typically go toward taxes and insurance on the home.
Earnest Money Deposit
For an interested party to show a commitment to purchasing a property, they may make this partial payment as a deposit to give the selling party further assurance. The remaining payment will be made on the date of the closing. Should this payment not be made on time and in full on the agreed upon closing date, then the seller will still get to keep the earnest money deposit.
These are the conditions that must be met in order to complete the sale. Examples of common contingencies include successfully completing a home inspection with no major issues found or requiring that the interested party sell their current property before closing on the new one.
In addition to the price of the property, the homebuyer will pay additional costs to cover fees from the loan origination, attorneys, and insurance. While they vary depending on each transaction and the location of the sale, closing costs are generally 2-5 percent of the home price.
These are just a handful of the terms that first-time homebuyers are sure to learn as they embark on this exciting achievement. If you’re ready to take that leap here in Central Florida, then Stanley Martin Homes is ready to help. Learn what sets our properties apart and browse our available homes in the Tampa and Orlando areas. With ten beautiful communities and more than 30 diverse floor plans, we can’t wait to help welcome you to your new home.