Mortgage 101: What You Need to Know

For most of us, buying a new home means getting a mortgage. If you’ve never applied for a mortgage before, the whole process can seem a little intimidating. To help you out here is some basic mortgage terminology that will be helpful to know.

Adjustable-Rate Mortgage (ARM)

This is a mortgage that starts at one, lower rate for the first few years and then shifts based on an index. Those first years will be cheaper than a fixed-rate mortgage, but you may be paying a higher rate than you hoped down the road. Annual Percentage Rate (APR) The full cost of your loan as a yearly percentage, with interest and fees included.

Buying Points

This means you pay a percentage of the loan upfront for a lower interest rate. If you stay in the home for the duration of the loan, this can save you money in the long run.

Closing Costs

These are the costs the buyer must pay at the closing of the sale to cover various expenses such as realtor and title company fees.

Earnest Money

Sort of like a deposit for a home, earnest money is a portion of the purchase price the buyer gives to the seller to lock down the deal. Once the transaction is complete, this money counts toward the down payment for the home.

Escrow

This is an account the lender holds that the home buyer pays into to provide money for insurance payments or taxes. Earnest money also goes into an escrow account prior to closing — once the sale is finalized, the earnest money can be released from escrow and applied to the down payment.

Private Mortgage Insurance (PMI)

This is an option people use when they cannot afford 20 percent of the home price as a down payment on the mortgage. It insures the lender against default. Since this requires you to pay a monthly premium for insurance that covers your lender, not you, it is best to avoid this when you can. While these are only a few of the terms you may encounter during the mortgage process, knowing them can help you feel a little more comfortable with the mortgage process. Your real estate agent can help you with any other terms you are not clear about.

Build Your New Home in South Carolina With SK Builders

Once you have your mortgage knowledge down, you’re ready to buy a home. If you’re looking for a home in upstate South Carolina, why not build a semi-custom home to your own desires? Rather than move into a home that someone else picked out, choose from one of our beautiful floor plans and customize it to your own specifications. We can build on your lot or one of our exciting communities. To find out more, contact SK Builders online today.