Buying a house is an exciting time. It is also a time when you get a crash-course into the real estate industry. Your Los Angeles real estate broker will throw around a lot of terminology you may be unfamiliar with. Fortunately, you can keep this guide handy so that you always stay in the loop.
Interest Rates
Anyone with a credit card should be familiar with interest rates. Most people will need to borrow money from a lender, usually a bank, to afford a house. The interest is what you pay the lender to borrow that money. You want as low of an interest rate as possible because you will end up paying less over time for the same loan amount.
Down Payment
When looking at Los Angeles condos for sale, you should pay attention to what your down payment will be. The down payment is what you pay upfront for the house. You may have to pay 10 or 20% of the overall cost as a down payment to buy the home. You can acquire this money either from saving it or from a gift from a relative.
Closing Costs
Getting a loan is a lengthy process. Throughout this process, you will have to deal with closing costs, which generally come from third parties. Closing costs include things like the home appraisal and title fees. You have to pay for these as they come up, and your lender can help you understand how much you have to pay total.
Equity
Equity is the overall value of your home once you take away everything you currently owe in loans. For example, you may have a home that is worth $500,000. Your current balance is $400,000, so you have $100,000 in equity.
Seller’s Market
Your real estate agent may tell you it is either a seller’s market or buyer’s market. When it is a seller’s market, then that means there are presently more buyers than homes available in a given area. This makes things much more competitive, and bidding wars are common under these conditions. You may want to consider waiting until it is a buyer’s market, which means there are more homes available than people looking for housing.
Escrow
Once you decide you want to buy a home, you have to go into escrow. This is the additional amount that gets added to your monthly payments. It makes it so that the lender has to take care of paying certain expenses, such as the insurance costs and property taxes, for the home.
Loan-to-Value
The term “loan-to-value” is used to describe the overall size of your loan vs the home you are purchasing. It is always expressed as a percentage in terms of the loan size divided by the home’s value. It is critical to understanding how much you will be able to borrow.
It is natural to feel a little loss when purchasing a home for the first time. Instead of going into this venture by yourself, you can get a lot of help from an experienced real estate agent. Your agent will guide you through the process step-by-step, so it does not seem as daunting.
