HOAs may establish and enforce community rules.
Mortgages have interest rates that are fixed or variable.
Costs associated with buying real estate are usually 2–5% of the purchase price.
A seller may list a home for sale without making any guarantees about its condition.
Buying a home can seem like a daunting process. Here are 5 top real estate terms to know.
1. Homeowners association
A homeowners association (HOA) is an organization that may establish and oversee certain community rules and needs. Typically, elected homeowners in the community run their own HOAs. A few things that an HOA may take care of include:
Enforcing parking rules
Lawn care and landscaping
Maintaining common areas
Some home maintenance issues
Determining what kind of pets are allowed
Typically, when a person purchases a home in a community with an HOA, they'll become an HOA member. Members pay regular HOA fees that go toward maintenance and other things.
2. Fixed-rate mortgage
Banks, credit unions, and other private lenders offer fixed-rate mortgages. As the name implies, these loans have interest rates that remain the same throughout the life of the loan. The interest rate is locked in when the loan is created and is based on current market conditions, your credit score, and other factors.
Fixed-rate mortgages are repaid with fixed regular payments. Many people prefer the predictability and simplicity of these loans, which helps to simplify budgeting.
3. Adjustable-rate mortgage
Adjustable-rate mortgages (ARMs) are offered by banks, credit unions, and other private lenders. They offer fixed interest rates for an introductory period, which may be up to 10 years depending on the lender. After that, the interest rate can vary based on the market and other factors, which may cause your monthly payments to fluctuate.
ARMs are attractive options for some home buyers because the introductory interest rate may be lower than the rate for fixed-rate mortgages. It’s important to consider that the interest rate may increase when it becomes variable, though. Variation could result in the borrower paying substantially more in interest over the life of the loan.
“As-is” typically means the seller won't make warranties or guarantees about the condition of the property they’re selling. A seller may also use the term to indicate to potential buyers that they won't negotiate any repairs before closing.
5. Closing costs
When someone buys real estate, there may be costs involved in the transaction. Typically, these costs are paid at closing, and can be 2–5% of the purchase price.
Closing costs may consist of a variety of different fees. Some go to lenders, while others go to businesses or local governments. Closing costs will vary depending on your lender and other factors. Typical closing costs you may encounter can include:
Credit report fee
Mortgage origination fee
Sometimes, closing costs are negotiated before closing. Although home buyers usually pay these fees, some buyers may ask that the sellers pay part or all of the costs.
This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.