How would you rate your knowledge of real estate terminology? Most first-time homebuyers have limited knowledge of important real estate terms associated with purchasing a home. Keep reading for a quick overview of the term amortization and learn more about its integral role in the real estate industry today.
Many homebuyers in the U.S are unable to pay for a home up front in cash. As such, a majority of homebuyers require a loan. In real estate terminology, this loan is known as a mortgage. The schedule of a homeowners monthly mortgage payments is defined as amortization. This term encompasses the breakdown of which portions of a monthly payment are put towards interest and which are intended for the principal amount. When a homebuyer first receives a loan, they will notice that their monthly payment is applied mostly towards interest on the home. With this, only a small percentage is applied to the principal balance. As the homeowner continues to pay their monthly mortgage payments over time, this portion will decrease and a larger portion of the payment will apply to the remaining balance owed of the property. An amortized loan is entirely paid off when a loan term comes to a close.
Many types of loans use an amortization schedule detailing payments on a loan. Such load includes auto loans and personal loans that people often receive from banks or third-party lenders.
In most circumstances, both the borrower and the lender benefit from amortizing loan. The borrower primarily benefits from making their payments on time each month, as this prevents both negative impacts against their credit and additional charges. Lenders benefit from receiving a reliable schedule of payments, including principal and interest payments, each month.
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To purchase a home in the United States, you generally need to put down a percentage of the home. This fee is known as the down payment. While many real estate professionals believe you should try to put down around 20% of the total purchase price, there are programs available today which allow people to purchase a home for significantly less, sometimes as little as 3% down. In addition to the down payment, a home buyer will also be faced with closing costs which typically range between 2% to 5% of the purchase price. These fees are paid at the time of the real estate transaction.
If you are a first-time homebuyer, it is crucial to be aware of closing costs, as such costs could move a home out of your price range. In many cases, certain fees are negotiable and you can always compare quotes between lenders until you are satisfied with the fees attached to the loan. Closing costs will vary drastically based on the home location as well as the type of loan. Keep reading and discover just a few examples of fees that are due when a buyer closes on their mortgage.
Your credit score plays an integral role in determining the interest rate a buyer will get on their home loan. Fees for credit reports are not uncommon, as there is sometimes a cost to have a credit report pulled for a potential buyer to obtain their credit score and history.
In many cases, the first year of insurance is paid at closing. Homeowners’ Insurance will cover any potential damage to the home.
The lender will often charge a loan processing fee to cover their administrative costs. In most cases, it is approximately 1% of the total loan cost.
You will be taxed from your closing date until the end of the tax year at a prorated rate. Property taxes vary by the location of your home.
In many cases, the lender will request the home buyer to cover the cost of the interest they accrue from their closing date until their first payment.
This fee covers the cost of evaluating a loan application, which determines whether or not to approve a lender for the loan.
A home inspection will help to both verify the current condition of the home and to check for any necessary home repairs before the homeowner closes on the property.
A homebuyer may be able to avoid closing costs. as it is sometimes possible to avoid upfront fees on a loan by choosing a no-closing cost mortgage. In some cases, the lender may charge you a higher interest rate on the loan as a result or they could include the closed mortgage fees on the total mortgage.
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In real estate, there are many terms and expressions exchanged between experienced industry professionals. For individuals who are unfamiliar with this industry language, these words and phrases may seem entirely foreign. With this in mind, terms such as adjustable-rate and fixed-rate mortgages may also seem confusing as well. To develop a more thorough understanding of these words as industry concepts, consider the brief overview below.
In understanding the distinction between adjustable-rate and fixed-rate mortgages, you must first understand the concept of conventional loans. If you want a conventional home loan, you can either choose between the fixed-rate and the adjustable-rate mortgage.
Fixed-rate mortgages are more popular out of the two options because the interest rate remains the same throughout the duration of the loan, which provides a homeowner peace of mind because of its predictability. Since it's the same figure each month, it is easier to budget. Conversely, in an adjustable-rate mortgage, the interest rate is applied to the outstanding balance and will vary throughout the loan in intervals of five, seven or ten.
Is a fixed-rate mortgage right for you?
Pros
-Easy to understand
-Makes it easy to manage finances
-Payments remain the same regardless of the market
Cons
-They are the same for all lenders
-May cost more in interest throughout the loan
-Have to pay the same rate even if interest rates decrease
Is an adjustable-rate mortgage right for you?
Pros
-A cheaper option for borrowers who plan to move in the foreseeable future
-Ability to take advantage of decreased rates without needing to refinance
-Low-interest rates in the early stages of the loan
Cons
-More difficult to understand than fixed-rate mortgages
-Rates are unpredictable throughout the loan
Do you plan on staying in your home for several years? If so, a fixed-rate mortgage is probably the better option for you. It will provide you with a stable bill every month, and you will not have to worry about rising rates from unfavorable market conditions. Another important consideration when trying to decide between the two is the current state of interest rates. For instance, if the rates are on the higher side, Adjustable-rate mortgages can be an excellent option for a homeowner. This is because they allow borrowers to take advantage of lower interest rates in the early stages of the loan.
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Millions of homes hit the market every single day. For this reason, real estate is a highly competitive industry in which sellers must use a variety of marketing tactics to reach target audiences. With this, sellers must utilize high-quality images to showcase the best features of a property and increase the appeal of a home to a potential buyer. In doing so, high-quality real estate photography becomes a crucial tool for buyers and sellers alike on the market.
A staged home should appear to be clean with minimal clutter throughout. Over the years, a typical homeowner may accumulate clutter throughout various rooms of their home. Whether this clutter takes the form of small belongings in the bedrooms or excessive decorative pieces in the living room, it is crucial to be mindful of visible clutter when it is time to photograph the home. In many cases, homeowners are unaware of how much clutter they have until it is time to stage their home. Try to keep surfaces like countertops, tables, and desk as clear as possible. The more items that you have in a room, the less spacious it will appear in pictures.
Many people see it as an unnecessary expense. However, an experienced professional photographer will make a difference in your ability to market your home. Today, many real estate agents rely on their smartphones to take pictures of properties. If you are looking to market your home effectively, hire a professional with the tools and experience to ensure the job is done right.
Weather is a crucial factor in real estate photography. Pictures captured on a rainy or cloudy day can cause your photos to look muddled. While you cannot control the weather, you can plan around it or hire a professional photographer who knows how to handle unfavorable weather conditions.
A splash of color can make your real estate photography pop. While it is true that neutral colors will appeal to more buyers, a few pops of color can make for more enticing pictures. Consider incorporating colorful artwork, pillows, bowls of fruit, flowers, etc.
While it can be beneficial to retouch your real estate photographs, you don’t want to go overboard. Although it can be sometimes beneficial to alter the lighting, you do not want to make too many changes that would cause a scene to look unrealistic.
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Are you one of the many who is on the fence about purchasing a home? While there are risks involved in buying a home, there are also several advantages that often go unrecognized. Continue reading and discover a few significant benefits of purchasing a home in 2019.
Many people are scared away at the thought of homeownership because it requires a lot of money upfront. Many people advise making a downpayment of the home’s value. However, it is important to keep in mind that it is significantly more expensive to rent in the long run. According to Trulia, owning your home is 38% cheaper on average than renting nationally. While you still have to come up with a sizeable downpayment, you will pay far less in the long run by choosing to buy instead of rent.
Many people are unaware that purchasing a home will provide them with significant tax deductions. By owning a home, you may be able to reduce the amount you pay each year in income taxes. Property tax payments and mortgage interest may be deducted from your federal taxes.
While home prices are often unpredictable, it is important to see homeownership as an investment. While there is no guarantee, owning your home can provide you a substantial return in the long run because your property may increase in value.
Lenders want to see that you are a trustworthy borrower. When you purchase a home and make your payments on time, you demonstrate that you a low-risk and are unlikely to default on your loan. A strong history will help you with any major purchases down the line, like buying a car.
The equity in your home can be calculated by subtracting the amount of money you still owe on it from the current market value. Every time you make a mortgage payment, you reduce the amount you owe and increase your equity.
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Real estate is one of the most competitive industries today. As such, agents are always vying for more leads through various marketing campaigns and strategies. One of the best ways to attract more buying and selling prospects is through social media marketing. Keep reading and discover a few important points that real estate agents need to know about social media marketing in 2019.
Agents need to understand the significance of Instagram in the world today. It is without a doubt one of the best platforms available for sharing content. Instagram is exceptionally user-friendly and is one of the best for generating new leads. By posting pictures and short videos, realtors can showcase listings from their mobile devices in just a matter of minutes.
When most people think about social media, Facebook is one of the first things that comes to minds. While it is the oldest of the social media giants, real estate agents should not sleep on this platform. This social media platform continues to be one of the best places to share content and generate engagement. In addition to promoting property listings, real estate agents can use Facebook to post about local news and community events.
Hashtags have been used by users for years to promote social media posts. While many people argue that hashtags make a post look spammy, if used correctly, they can be used to increase discovery on social media. This is because the right hashtags can make it easier for some buyers and homeowners to find your business online.
What better way to convince potential buyers and sellers online that they should work with you than providing them with written testimonials from your previous customers? Don’t be afraid to reach out to people who you have worked with and see if they would be willing to write a review for your company page. Testimonials are great because people like having some reassurance they are working with a reputable individual.
Social media metrics can be used to see which social media strategies are generating results and which ones need to be modified. Metrics will show the levels of engagement across the agent's social media platforms. This insightful information will steer a user in the right direction with their future social media campaigns.
