Today I’m back with the final installment in my two-part series on terms that all first-time homebuyers should know. When you have a better understanding of real estate terminology, you’ll have a better understanding of the process as a whole. To watch the first installment and hear the five terms I covered in that part, click here. Now let’s move on to today’s terms. 6. Appraisal. This is a process that allows the lender to ensure the buyer isn’t taking out a loan for more than the value of the property. During this process, a licensed appraiser will give their opinion on the property’s value based on components of the home and data from recent comparable sales. Every loan must have an appraisal.7. Mortgage insurance. If you put down less than 20% when purchasing a property, you’ll need to take out mortgage insurance. This is true for both conventional and FHA loans. However, mortgage insurance on an FHA loan will last for the life of the loan while mortgage insurance on a conventional loan can be removed once your property value reaches 80%. This coverage is designed to protect your lender.“When you have a better understanding of real estate terminology, you’ll have a better understanding of the process as a whole.”8. Closing costs. Typically, homebuyers will pay anywhere between 2% to 5% of the list price to cover a number of final expenses, called closing costs. Closing costs are made up of title fees, lender fees, application fees, and more. 9. Buying down the interest rate. Sometimes, contributing a certain amount of money toward your loan can allow you to lower your interest rate. Every lender has their own guidelines for this process, but consider this example: Say you’ve purchased a home with a 30-year mortgage at a list price of $150,000 and an interest rate of 5%. In this case, the lender might require you to pay $1,500 to buy down your interest rate to 4.25%. 10. Escrow. This refers to the account set up by the lender in order to collect fees to be paid at a later date. These fees could include insurance, property taxes, and other costs.If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.