Recent studies suggest that buying your own home is still cheaper than renting one. Purchasing a home especially your first home can be an exciting experience accompanied by a touch of uncertainty and confusion. Buying your first home will make you enthusiastic about the feeling that you are close enough to officially owning a home. This entire process is unfamiliar, intimidating and time-consuming. Almost all first time home buyers are naive and inexperienced in this real estate market. As a first time home buyer, finding the right information to help and guide you through the all process is crucial. In this era of advanced technology, you can find so much information online. This article talks about the ten terms first-time home buyers should know before venturing in the actual home purchase.

1. Fixed-rate mortgage

This is a familiar term in the real estate industry meaning the interest rate you will pay for your home loan won’t change. Mortgages payments are likely to change due to the rise in taxes, or due to change in the insurance policy. If you have a fixed-rate mortgage, your monthly fee won’t vary despite changes in taxes or insurance policy.

2. Adjustable-rate mortgage

This is the variable interest rate you will be paying on your home loan that is subjected to change under different conditions such as a change in indexed interest rate.

3. Pre-qualified

This is a term in the real estate industry indicating that you are eligible for a house. It is a process that involves less documentation and provides an overall idea of the total loan you might qualify.

4. Appraisal

An appraisal is an estimation directed towards determining the worth of your property. It’s a requirement for almost all banks for your home to be appraised before they loan you.

5. Federal housing administration loan

This is a low-interest loan meant for first time home buyers with poor credit scores.

6. Conventional loans

This is basically the typical loan that most people apply for when in need of a mortgage but should have a credit score of above 650.

7. Private mortgage insurance

The monthly insurance payment first time home buyers have to pay in case the down payment on their homes is less than the appraised value or the market sale price. You stop paying the private mortgage insurance immediately you complete paying 20 percent of the value of the home.

8. The closing costs

These are charges related to the house buying process and are charged by the lender. The closing costs may total to 2 to 5 percent of the total price of your house. These costs may include insurance money, surveyor and attorney levies.

9. Real estate buyer’s agent

A real estate buyer’s agent is a person who operates as an intermediary between the buyer and the seller of real property. The real estate agents market the property on behalf of sellers at a small fee.

10. Escrow

This is a term used in the real estate industry to represent a financial plan where a third party regulates and take control of the payment of the funds for two parties involved in a home selling and buying transaction. It usually appears at the end of the home buying process.

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