The 3 Questions You’re Too Embarrassed to Ask When Buying Your First Home
When navigating your way through your first real estate transaction, there are plenty of instances that can make you stop and think, "Am I supposed to know what everyone’s talking about right now?" Here are some helpful questions and answers that will save you from having to ask them yourself.
"Who is Earnest, and why does he want my money?"
Most of us understand that we should have some amount of down payment for a traditional mortgage (more on that later), but if you’ve never been under contract on a home before, you can be taken aback when you’re asked to put down earnest money: your deposit to the seller that represents your good faith to purchase the home. The money is held in escrow(see below – we’ve got you covered on that one too). But don’t worry – when the deal closes, earnest money is typically applied to your down payment and closing costs.
"Where in the heck is Escrow?"
When you write your check for earnest money, you won’t be handing it straight to the seller. Instead, it’s placed in escrow: an impartial third-party account where it’s held until the loan closes and the transaction ends. Lenders also use escrow accounts to hold money collected from you in advance to pay your homeowners insurance and property tax bills on time.
"What is PMI – some kind of medical condition?"
Traditional loan guidelines typically recommend a 20% down payment, but with today’s burgeoning home values, many times that’s not a realistic amount for buyers to have easily squirreled away. The good news is you can still close on loans with less than 20% down. When that happens, the loan requires Primary Mortgage Insurance (PMI) – a little extra peace of mind for the bank in case you default on the loan. It is paid as part of your monthly payment in addition to the principle and interest.
There are plenty of questions that arise when buying your first house. Reputable mortgage lenders and realtors are the best way to take the guess work out of the home purchase process. Make sure to ask for referrals from colleagues, family and friends and choose one with which you have rapport…just in case any more embarrassing questions come up.
Opportunity Bank of Montana