8 Key Terms to Know in the Homebuying Process
Buying a new home is one of the most significant milestones that will change your life. When you become a homeowner, you’ll enjoy greater freedom to customize your own home and the satisfaction that comes from knowing you’re building equity in your property. Yet, the home buying process itself can be complicated. If you’ve never navigated the process before, you should take a few minutes to become familiar with the following key terms.
Closing Costs
As the name implies, these costs are payable upon closing on the property. The fees typically include financing fees, taxes, appraisal fees, credit score checks, and title insurance. Your lender should provide you with a list of closing costs upfront so that you’ll know what to expect.
Down Payment
This is the amount of money you’ll pay upfront towards the purchase price of your new home. Lenders typically require buyers to put down 3% to 20% of the total price of the home.
Inspection
Even if you’re purchasing a brand new home or condo, it’s a smart idea to schedule a home inspection. This is a thorough assessment of the home’s condition by an independent third party.
Mortgage Points
Also called discount points, these are amounts paid to the lender, usually as part of the closing costs. If you choose to pay mortgage points, you will lower the mortgage interest rate. For example, one lender might offer the option to purchase one discount point in order to lower the mortgage interest rate by 1%. The ratio of discount points to interest rate percentage can vary from one lender to the next.
Origination Fee
This fee is assessed to cover the lender’s costs of processing the loan.
Private Mortgage Insurance (PMI)
Not all homebuyers are required to pay for private mortgage insurance. Typically, lenders will require it of homebuyers who pay a down payment of less than 20%. This coverage protects the lender from losses in the event the homebuyer cannot satisfy the loan.
Title Insurance
Purchasing title insurance will protect you from liability if any title issues arise. For example, there may be a tax lien or other legal claim that would impact the legal ownership of the property.
Underwriting
Underwriting is a process that the lender undertakes. It involves reviewing all documents submitted by the homebuyer, and verifying the information in those documents. Based on the lender’s findings during the underwriting process, the lender will decide whether to approve the loan application.
Explore new construction homes in New Castle County, Delaware
When you’re ready to move into your dream home, explore the available homesites at Darley Green. Our homes in Delaware include beautiful, thoughtfully designed condos and townhomes within our walkable community of Darley Green.
At Montchanin Builders, we know that the home buying process can be stressful and confusing, whether you’re buying your first home or your third. We’re proud to partner with Cardinal Financial to offer our homebuyers excellent terms with uncompromising customer service. Our preferred lending specialist, Katherine, will walk you through the homebuying process. Call us today to learn more!
