5 terms every home buyer should know
Here are a few terms to arm up with upon entering the battlefield in the game of property.
Mortgage- Get ready for a big number, as this is likely the largest debt you will ever accrue. A mortgage is a loan to finance the purchase of your house. A mortgage is comprised of different elements, including insurance, taxes, principal and interest payments, and the collateral you used to be approved for the loan in the first place.
Property taxes- Property taxes are what you pay toward your community to help finance public services like school and roads. The amount you pay in property taxes is largely based on the appraised value of your property. The equation works this way: The property value is multiplied by the mill rate of the community and then divided by 1,000. As of 2014, Des Moines had property tax rates of $16.92 (per $1,000) whereas Altoona had the lowest tax rates in the metro at $9.14.
Appraisal- A professional appraiser enters the home you are looking to purchase. The appraiser gives an objective opinion on elements such as function, overall quality, size and general condition of the home. This inspection is taken and compared with other home values in the area to determine what's fair in the current market. This is a good thing because you do not want to get stuck with a property that is worth less than what you paid for it—the goal is for the investment to grow in value, and if it is behind in the beginning, that's not a great start.
Buyer's Home Inspection- An expert inspector will walk through the property giving it the visual up-down checking for proper usage and safety. If the inspector finds a repair that needs to be made, it is then part of the property negotiation process to determine if it is an immediate fix and who (the buyer or seller) will be responsible for the fix. The price could be adjusted on the property, depending on how major the issue is.
Conventional Home Loan- A conventional mortgage follows the guidelines Fannie Mae and Freddie Mac put into place; the federal government does not insure or guarantee these loans. There is a maximum to this type of loan. For Iowans (and the rest of the continental U.S.) the general loan limit for one property is $417,000. These can either be a fixed-rate or adjustable mortgage. For 30 years an adjustable-rate mortgage has interest rates that begin low and then shift periodically based off of benchmark interest rate indexes, like LIBOR. A fixed-rate mortgage is just like it sounds; a fixed interest rate applies for the duration of the mortgage, anywhere from 10 to 30 years.
— Mackensie Smith