At Goodwyn Building, we love helping all families find their homes, but we are extra excited to help first time homebuyers. First time homebuyers face a lot of hurdles in order to purchase a home, and along the way, they are likely to be confronted with terms that are new to them. If you are a first-time home buyer, we want to help make real estate lingo less confusing, which is why we are going to explain common real estate terms here today.
Prequalified and Preapproved
Before you seriously begin looking for homes, it is wise to get prequalified. Talk to a lender and ask them for a prequalification. This will give you a general idea of what price range to search in. This will protect you from falling in love with a home that is out of your price range. Preapproval is a more formal version of prequalification. This is when a lender will take a more in depth look at your finances and present you with an amount that they feel comfortable lending to you. When you are equipped with a preapproval letter, sellers will know that you are serious, and it can put you ahead of other buyers.
Debt to Income Ratio
When you are talking to a lender in order to get preapproved, you may hear the term debt to income ratio or DTI. This is the amount of money you bring in versus the amount of money that you owe in debts. This helps lenders determine an accurate picture of what you can realistically afford.
Unless you are paying for a home with cash, you are going to need a loan. And if you are a first- time home buyer, there are several loan types available to you. One of which being FHA. FHA loans are backed by the Federal Housing Administration and give you the opportunity to put little to no down payment up. You need to meet specific requirements to get this loan. A conventional loan may still be right for you, but it is good to know and weigh out all your options.
Escrow is an especially confusing term. Once you purchase your home, an escrow account will be set up for you. This is a third-party account that holds money for future use. When you pay into this account it works to cover your home insurance and property taxes for the year.
Hopefully you found this breakdown of terms helpful! And if you have yet to begin your home search, why not start here with Goodwyn? We would love to help you find your forever home.
By Goodwyn Building 6-17-2022