Home buying can be a tricky process. Home buying terms are even more teasing. Do you know what amortization means in a real estate transaction? Well, there are some home buying terms that one may come across as they go about purchasing a home. Once you decide to go on home buying , please familiarize yourself with these must know home buying terms for they will help you understand the whole process easily and make an informed decision.

Amortization: This is the time schedule that outlines your home loan payments. This schedule is drafted for the complete duration of your home buying loan. Amortization describes in detail how much of your monthly payment goes towards the principal and how much goes toward your home loan. At initial stage, huge portion of your payments get accounted for interest.

Appraisal: This is an estimate of the property’s worth. This is generally put forth by the buyer to the lender. The lenders require the appraisal amount before approving your home loan. Appraisal must be done by a licensed appraiser.

Buyer’s Agent: A buyer’s agent is the one who solely represents a buyer and not the seller. In the process of home buying there should be a mutual agreement between the buyer and the buyer’s agent. But for that agreement the person may represent the seller as well. In a real estate transaction a buyer’s agent tries to work toward buyer’s interests.

Closing: The final step in the home buying process is closing. In closing stage the transfer of title deed from the buyer to the seller takes place. At this point, the mortgage is also finalized.

Closing Costs: Costs to be paid at the time of closing that include attorney fees, recording fees, loan origination fees etc. Closing costs usually range from 3% to 5% of the home price. As part of your home buying negotiation you can ask the seller to pay a share of the closing costs. If you are lucky you can get a seller who pays all of the closing costs!

Earnest Money: In home buying, Earnest money is the deposit made by the buyer to demonstrate the seriousness of his/her offer. Once the deposit is made the earnest money is held in the escrow until closing of the deal. After closing, earnest money is added to the down payment.

Escrow: This refers to the funds held by third party usually the earnest money deposit made by the buyer. Home owner’s insurance and future taxes held by the mortgage company even after closing are also considered escrow.

FSBO-For Sale By Owner: A property that is sold by the owner directly without a mediating real estate agent is referred as FSBO-For Sale By Owner. In home buying process, FSBO refers to both the property and its owner-the seller who sells an FSBO property.

Foreclosure: Once home buying is complete, the process by which a lender repossesses and resells the property after the owner has defaulted is termed foreclosure.

Lien: In home buying process, the term Lien means a lot to a buyer. Lien refers to the legal claim that prevents the home from being sold until lien is paid off. A buyer should be watchful about any lien on the property.

Loan Origination Fee: Usually lender charges you a fee for processing your home loan. In home buying terminology that is called Loan Origination Fee. This has to be paid before closing.

Private Mortgage Insurance: If you make a down payment less than 20% of the loan amount, the lender will ask you to pay private mortgage insurance. This will protect the home buying lender if you the home buyer default on the loan payment.

Title Insurance: In home buying, title insurance protects you from claims against it.

An understanding of the above important home buying terms is mandatory to make your home buying experience easy and meaningful.

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