Let’s face it: if you aren’t in the real estate industry, buying and selling a home can be pretty confusing. There is a lot that goes into it, and it’s all very important! If you are preparing to buy your first home, you may have no idea what to expect. Even if you have bought a house before, it has probably been several years since you’ve gone through the process and therefore you may have forgotten much of it. With that in mind, let’s take a look at five important, yet often confusing, terms you will hear quite a bit:
#1 PITI. When buying a home, you cannot just factor in how much of a mortgage payment you can afford. You need to know how much PITI you can manage as well. This is an acronym for a payment that is the sum of monthly principal, interest, taxes, and insurance. If the actual mortgage payment you owe each month tops out your budget, you cannot actually afford that house. If you don’t take PITI into account, you may find yourself going into the red, possibly hundred of dollars, each month.
#2 Comps. This term is actually short for “comparables,” but those in the industry regularly shorten it. This refers to the prices that houses of a similar size, location, and condition have recently sold for and it’s important to know when both selling and buying. You need to have a realistic expectation, and having your Real Estate Professional sharing comps with you is the only data-based way to do that.
#3 PMI. Private Mortgage Insurance (or PMI) is required with a down payment of less than 20 percent. It typically costs about $30 to $70 a month for every $100,000 on the loan you borrow. Hypothetically, if you are borrowing $300,000 to purchase a home, you could have a PMI of up to $210 a month on, which is very important to budget for.
#4 Closing Costs. Your closing costs will typically total between 2% to 5% of the home’s purchase price. This amount comprises things like appraisals, title insurance and taxes owed. It is owed on the day you sign the closing papers. Sometimes the buyer will have written into the contract that the seller will pay the buyer’s closing costs up to a certain percentage or amount, which is a good thing to keep in mind if you’re particularly motivated to sell.
#5 Equity. This is a big one to know and understand. Real estate is a good investment because of equity! Equity is the current market value of a house, or another property like a vacant lot, minus what you owe on the loan. Over time, you pay off more of the loan through your mortgage payments and, typically, the market goes up and so you have more equity.
Understanding these terms is not all The Beattie Realty Team can help you with. When it’s time to buy the house of your dreams, we want to be there to help you through all of it! We offer both buyer representation as well as seller representation. Don’t let the perfect house for your family be bought out from under you, or miss the opportunity to attract the ideal buyer for your current home. Contact us today by filling out this simple online form so we can get to know your real estate needs better.