Local Records Office – First homebuyers often find themselves in unfamiliar territory when purchasing property. Between loan applications, credit checks and the protocol for viewing properties and making offers, purchasing real estate is a world of its own says, Local Records Office. One of the biggest areas of confusion comes down to terminology. Realtors, lenders, builders and the like seem to have their own language, which can be confusing to an outsider. More importantly, it can be costly.
Many of the housing terms first homebuyer hear end up costing money. Fees, taxes and insurance come in many forms and they all spell greater cost for the buyer. Brush up on these terms so you understand what is going to cost you money and why. An informed purchaser is a confident purchaser.
These are the Terms You Should Know
Local Records Office says, “Here are some terms you’ll need to understand during your home-buying process. There are many, many real estate terms that you’ll become familiar with; here, we’ve focused on terms that have some kind of cost to the buyer associated with them”.
- Appraisal. An estimate of a property’s value as determined by a professional property appraiser. Typically involves a physical inspection of the property and neighborhood along with an evaluation of market trends and an analysis of recent sales in the area. The buyer pays the fee for the appraisal. Lenders require appraisals before approving a purchase loan.
- Deposit. The amount of money the buyers put down towards the home price at closing. Typically 10-20% of the purchase price.
- Holding Deposit. This is a portion of the deposit that is presented to the seller along with the offer to purchase the property. It is typically 1% of the sale price. Once the offer has been accepted the deposit is held in a trust account and used at closing.
- Home Inspection. The buyer has the option of paying a professional home inspector to inspect the property for defects after the offer has been accepted. The lender may require home inspections.
- Stamp Duty. This is a tax over and above the purchase price that is paid to the state government and used to fund public services. Rates vary between the states in the U.S, but the tax can be quite heavy. It is based on a percentage of the purchase price of the property.
- Household Insurance. This is insurance coverage that is paid annually to cover the cost of repairs/rebuilding the home and replacing the content in the even it is damaged or burglarized.
- LMI – Lenders Mortgage Insurance. This insurance is a one-time fee paid at closing by the buyer. It insures the loan against a buyer default. Usually required by the lender if you provide less than a 20% deposit.
- Title Search. Fees paid to conduct a search of the property title. Searches are done to make sure there are no liens or encumbrances on the title that may prevent the property from being sold.
- Transfer Registration Fees. These fees are assessed by the state government to cover the transfer of the title from the sellers name into the buyers’ name.
- Application, Settlement and Lender’s Fees. Many lenders charge a loan application fee as well as settlement and mortgage registration fees. These fees cover the cost of drawing up legal contracts and conducting a title check and a credit check.
This is just a brief overview of some of the terms first homebuyers should become familiar with as they embark on their first purchase. If you ever don’t understand a term don’t be afraid to ask for clarification from your lender, realtor or builder. As you can see, many of these terms have costs associated with them and you don’t want to be surprised by an unexpected cost.
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