House Buying Vocabulary Real Estate Agent- The professional who helps you buy and sell a house. If you are buying a house, you don’t have to pay the agent. But, when you are selling a house you do. They earn around 6% of the sales price. Mortgage- A loan document specifying the terms and conditions of the loan. Variable Interest Rate- An interest rate on a loan that changes periodically. Fixed Interest Rate- A rate on a loan that does not change for the entire term of the loan. Down Payment- an initial payment made when something is bought on credit. Closing Costs- Costs associated with the purchase of your home such as attorney fees, title fees, transfer stamps, etc. These are in addition to your down payment and are usually 2-3.5% of the purchase price depending. Equity- The difference between what your house is worth and how much you owe on your loan. For example, if your house is worth $300,000 and the balance of your mortgage is $225,000 you have $75,000 in equity. Foreclosure- Foreclosure is a legal process in which a lender reclaims your home due to lack of payments made. The lender will sell the home as a way to get back the money he loaned. Lien- A claim to some of the equity of your asset. When you owe someone money, they can place a lien on your house so they get their money when you sell your house. Homeowner’s Association- An organization in a planned community that makes and enforces rules. The purchase of the property automatically makes the homeowner a member of the HOA and dues are required.

3. Do I plan to live there for at least 5 years? What to consider before buying your first home (analyze like you did for apartment, plus these things)   1. Can I afford it? Many online calculators tell you how much you can afford, based on your current income and debts. It’s best if you can aim for a house even less than what the calculators tell you so you don’t end up house poor. The 30/30 rule says when buying a house to have a 20% down payment with 10% in non-retirement savings and your mortgage payment less than 30 percent of your monthly income. 2. Am I mortgage worthy? Say you saved enough cash, but what about your credit? Getting a mortgage these days is harder than it used to be. Lenders are looking closely at all the money you have. The best interest rates (5% or less) only go to buyers with credit scores above 700. 3. Do I plan to live there for at least 5 years? Your first few years of mortgage payments will primarily pay off interest, not principal. So, you won’t have much equity for the first few years. Unless you live in a house for at least 5 years, you won’t have enough equity to get back any of the expenses associated with buying and later selling the house. It is better to rent until you know you are settled.

Housing Costs in Major US Cities