Buy a Home | theSkimm

New Site: Buying a Home

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Buy a Home

Blame it on Chip and Joanna. You’ve got homebuying on the brain. Even if you aren’t signing on the dotted line any time soon, it’s never too early to get your wallet ready. Because this is probably the biggest purchase you'll ever make. We Skimm'd how much you need to save, how it all works, and how to balance homebuying with your other money goals.

Step #2: Talk the Talk

From amortization to underwriting, here are the terms that can help you actually understand the docs you'll sign.


amortizationFSL

Amortization

The breakdown of a loan payment in terms of principal vs. interest. Hint: it’s typically more interest at first. Because interest amounts get smaller as the total debt does.  

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AppraisalFSL

Appraisal

What a licensed professional says a property is worth. Based on its condition, the sale price of similar homes in the area, and whether that area is expected to get more popular.

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APRfsl

APR

Stands for annual percentage rate. It’s what you’re charged for borrowing money. Like for a credit card or mortgage. Play it like golf: aim low.

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ARMfsl

Adjustable-Rate Mortgage (ARM)

A mortgage where the interest rate (and your monthly payments) can change. Up to a limit. Typically comes with lower payments at the beginning. Also goes by variable-rate mortgage.

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assessed value fsl

Assessed Value

What a tax expert says a property is worth. It’s the number they’ll use to determine your property and real estate taxes. 

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closing costs FSL card

Closing Costs

The fees, insurance, and taxes paid to close a mortgage deal. Which usually add up to 2-5% of the home’s price. These can be paid by the buyer, seller or a combo of the two.

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ContingencyFSL

Contingency

Something that has to happen before a real estate sale becomes official. Like the inspector giving a thumbs up, the loan coming through, the appraisal lining up, or the buyer selling their current home.

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DTI fsl card

Debt-to-Income (DTI)

The percentage of your monthly gross income you use to repay debt. It’s what lenders look at to see whether they can trust you before they give you a new loan. Experts suggest staying under 36%. But like limbo, lower is usually better.

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Down Payment FSL Card

Down Payment

Cash money you pay during a home purchase. Typically between 3-20% of the sticker price. Typically, the more you pay upfront, the less you’ll owe over time. 

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foreclosure FSL card

Foreclosure

What happens when you can’t pay back your mortgage. And your lender sells your home to the next highest bidder. 

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Interest HB FSL card

Interest

How lenders make money off you. Interest is what gets added to your principal, meaning you end up paying back more money than you initially borrowed.

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LTV fsl card

Loan-to-Value (LTV)

The amount of money borrowed divided by your home’s appraised value. In human terms, the percentage of your home that you own vs owe. Helps lenders decide how much interest to charge you.

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PrincipalFSL card

Principal

The amount of money you owe without interest rate strings attached. As you make payments over time, the principal will go down. And so will your stress. Namaste.

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PMIfsl card

Private Mortgage Insurance (PMI)

A fun little ‘extra’ lenders tack on when they think you’re a risky borrower. Usually only for people who put down less than 20%. Juuust in case you ghost on your payments.

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underwriting FSL card

Underwriting

The part where all your info gets verified and your loan application gets evaluated. And you cross your fingers for approval. 

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