Buying a home is an exciting and nerve-wracking process. It's important to understand the steps along the way, including mortgage closing terms that may be unfamiliar.
An escrow account is a place where money is held for safekeeping until all of the conditions of a real estate sale are met. The funds in the escrow account are used to pay any fees associated with the purchase of a home, such as taxes, insurance premiums, and other closing costs.
PMI (Private Mortgage Insurance)
When buyers put down less than 20% on a home purchase, they may be required to purchase private mortgage insurance (PMI). PMI protects lenders in case borrowers default on their loan payments. This type of insurance ensures that the lender will still receive some payment if the borrower fails to make their payments on time or cannot repay their loan in full. Borrowers may also have to pay for PMI if they refinance their mortgage with less than 20% equity in their home.
A home inspection is an important part of buying a house and should be done before closing on a loan. A professional inspector will check out all aspects of your potential new home and provide you with a report detailing any issues they find that could affect your ability to purchase or insure your house. They'll also assess any repairs that might be necessary and provide recommendations for improvement projects you should consider taking on after moving in.
Closing costs refer to any fees associated with buying or refinancing a house. These can include appraisal costs, title searches, transfer taxes, attorney’s fees, and more. Buyers should be aware of these costs ahead of time so they don't get caught off guard during the closing process; most lenders will give buyers an estimate beforehand so there are no surprises when it comes time to sign on the dotted line! Homeowners should also consider setting aside funds for these costs as part of their budgeting plan when preparing for homeownership expenses over the long term.
Navigating mortgage closing terms can seem daunting at first but understanding them ahead of time can help ensure that everything runs smoothly during your purchase process and afterwards as you settle into life as a homeowner! Knowing what each term means will help you understand more about how mortgages work and help protect yourself from unexpected surprises as you move forward with your real estate transaction!