Do You Know Real Estate Lingo?
Thinking about buying a house but really don't understand the process or even the language or the process? Stick around, I'll give you some free advice.
Okay, so when it comes to buying a home, a lot of people are nervous. They don't even understand what some of the words and terminologies mean. I mean, for God sakes, what's an appraisal? What's closing costs? What's the credit score got to do with it? Your down payment, the mortgage rate, your preapproval letter and the real estate professionals? So we're going to cover those right now, kind of go over them in detail just so you're a little bit more educated and feel a little more comfortable when you're thinking about buying your next home.
So what is an appraisal? Well, we'll just start there because it's alphabet. An appraisal is when there's a person that's actually an appraiser that actually goes out to the homes and analyzes what's at that home, the condition of what's in the home, all the different amenities, whether it's got tile counters or granite or quartz. Whether it's got a pool or of the overall condition of the home and compares it to the most recent sales of homes similar in a given neighborhood to come up with the actual value of the home for the mortgage. So that's what an appraiser is. Generally, right now in our market, you're seeing those costs be anywhere from about 400 to $600 in a home and on bigger properties that goes up from there. When you order the appraisal, it takes usually about a week to 10 days to get it back. But those days have to be dealt with when you're buying the property.
What is closing costs? Well, closing costs are the cost... I'm just gonna read it to you. The cost to complete the real estate transaction paid at closing. So when the escrow closes, you have to come in with that amount. That is not your down payment. These are the additional monies on top of your down payment. Usually you want to figure about 2 to 5% extra for closing costs. But talk to a great lender about it. A lot of times you can get those fees waived or we can actually have the seller pay for them for you. We have that happen quite a bit.
The next thing is your credit score. I mean, you know what a credit score is, but to today's market, you really got to be somewhere around 600 and up to even think about buying a home. If you're thinking about buying a home, but your credit's not the best right now, give me a call. I have a lender that can sit down with you and go over where you are now and help you create a plan to get your credit where it needs to be in the future to buy a home. Don't worry about the credit score right now, but it is very important when you're buying a home. The better the credit the better the interest rate.
Your down payment. Now, when it comes to a down payment, sure, the more you put down, the better. However, there's a lot of programs out there that'll help you with your down payment. There's programs out there that you can put down as little as 5%. In some cases three and a half if it's FHA. There's also programs out there. I've helped somebody recently, it was about a year ago I think, they only put down $1,200 out of their pocket to buy a home, including everything because the seller paid the closing costs. So it doesn't take a ton of money, but it does happen. There's a lot of combination between the credit score, the down payment, down payment systems where the seller could help us. There's a lot of stuff too. We have to put together to make it work for you.
The mortgage rate. The mortgage rate is basically what the interest rate is today on a home loan. And it varies depending on your credit, your down payment, all that information so it varies from lender to lender. On a given day it varies. And right now our interest rates are very volatile and they keep going up and down, up and down daily, but they're staying still at pretty much under 4%. so right now is a phenomenal time to to buy a home or refinance on one.
The next thing is a preapproval letter. We did a video about this a while back, the difference between a preapproval letter and a prequalification letter. A prequalification letter means you went in, you talked to a lender, they said if you do X, Y, and Z and provide this information, you can be qualified, but you haven't provided all of that yet. A preapproval letter means you've provided all of that to the lender and you are approved for the loan. Now, most of the time that doesn't happen until we're into the real estate purchase contract and we have until about I think it's 21 days according to contract to get that approval done. So it's something you really got to work on ahead of time to get set up. If you're pre approved ahead of time, the mortgage goes swimmingly easy.
The final thing, a real estate professional, that's me. You've got to get a good real estate person, whether it's me or somebody else. Just make sure they have the experience and the knowledge and the capability of getting you into your dream home. Because there are a lot of pitfalls along the way, if you don't have that experience or don't have that knowledge, things happened that that you hear all the horror stories about from your friends and family.
So, as always, I hope this was helpful. You like it, please like and share it below. I appreciate it. And as always, make it a great day.