5 Terms That First-Time Homebuyers Need to Know


    Buying your first home can be daunting. You’re making a large financial commitment for 15 to 30 years, and finding the right home at the right price is only the beginning. We think it’s important to know a bit about the home buying process before you jump in and try it for yourself. Knowing what certain terms are and what they mean can help make the home buying process easier to understand.

    To help get your arms around the process, we’ve put together our top five terms for first-time homebuyers to know.

    1. Earnest Money Deposit – In many real estate offers, the potential buyer will offer an earnest money deposit to the seller as a sign they are serious about buying the property. If the seller accepts the offer, he accepts the deposit also. That money is factored into the overall selling price. If the buyer backs out of the real estate transaction, any earnest money deposit is kept by the seller.
    2. Appraisal – An appraisal is an examination used to determine the fair price of real estate. Appraisals are done by qualified, disinterested real estate specialists, known as appraisers. An appraiser will examine the property, compare it to other properties in the area, and look at recently sold properties to determine the appraised value. That value is used by lenders to determine if a property is worth the amount the potential buyer needs to purchase the property.
    3. Closing Costs – These are fees associated with real estate purchases. These fees can include title insurance, home inspection fees, lender’s fees, prorated property taxes, filing fees, and real estate commissions. Closing fees are above and beyond the cost of the property itself.
    4. Private Mortgage Insurance – Private mortgage insurance will compensate the lender for any losses if a buyer defaults on the mortgage. This type of insurance is usually required if the buyer is making a deposit that is less than 20 percent of the appraised value of the property.
    5. Points – One point equals 1 percent of the value of the mortgage. So, one point for a $250,000 home is $2500, two points $5000. A lender may offer a lower lending rate if the buyer pays one or more points up front. The more points paid, the lower the mortgage rate will usually be. That means lower monthly payments and less interest paid over time.

    We hope knowing these five terms used in real estate will make your first time home purchase easier to understand. We’re happy to help you understand any other terms, and walk you through the details and ups-and-downs of the home buying process. Give us a call at DeSelms Real Estate 615-550-5565 or drop us a line today!


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