Like anything you do for the first time, you’re about to encounter a whole new vocabulary when you purchase a home.

Sure, you’ve likely heard some of these terms, but whether or not you know what they mean is an entirely different matter. We’ve broken down some of the most commonly confused terms you’ll encounter when pursuing a mortgage.

Closing Costs

Closing costs are just what they sound like – the cost to close the purchase process.

These fees range from origination fees, notary fees, local taxes and others and some are negotiable.

Your lender will send you a form, known as a Loan Estimate, within three days of receiving your application. This form contains important information, including estimated closing costs. Use this form to compare this lender’s costs to other lenders when shopping for a mortgage.

Down payment

Most first-time homebuyers understand that unless they’re paying cash for a home they will need a down payment. The confusion centers around who is making this requirement.

Hint: it’s not the home seller.

Indeed, this is a lender requirement and the amount you’ll need to pay varies according to the risk factor you present to the lender. USDA Rural Development and the Veterans Administration require no down payment for the loans they guarantee.

FHA offers low down payment options to certain borrowers.

You may also find that you qualify for municipal, state and federal down payment assistance programs. Work closely with your lender to find all the help you’re entitled to.

Escrow

Think of “escrow” as a special type of account administered by a disinterested third party (typically an escrow officer) in which all the documents and monies pertaining to the real estate transaction are kept until closing.

Some of the items kept in an escrow account include the buyer’s earnest money deposit and the deed. There is also commonly a second escrow account in which the lender keeps your tax and insurance payments until they are due.

P.I.T.I.

This is your monthly loan payment and it stands for what is included in your payment: principal, interest, taxes and insurance.

Points

You may hear people refer to “buying down” their mortgage rate. What they are referring to is the payment of points, or percentage points of the loan amount.

If you plan on living in the home for a long time, paying a point up front will save you money.

Security

You may hear this referred to as “collateral,” and the words mean the same thing but “security” is more often used in mortgage transactions. The home you are purchasing is the security for the loan.

In other words, if you go upside down in your mortgage payments, the lender reserves the right to take the security (your home).

Title insurance

Since the home is the security for the loan, the lender will want to ensure that nobody else has a claim on it.

A title insurance company will research the chain of title to make sure there are no liens or heirs that may pop up down the line with a claim to the title. The title insurance policy is a guarantee against this occurring.

We aren’t lenders, so if you’re confused about any mortgage terms, don’t be afraid to ask your lender for an explanation. Most are happy to help.

Probably the least fun part of buying a house are those first steps. Shopping for a lender, applying for a mortgage and waiting to find out how much you can afford to spend on that new house is tedious – especially when all you really want to do is look at houses for sale.

Unfortunately, this is a task that must be taken care of upfront, before looking at what’s on the market. If your credit is ready before taking the step, you’ll be far more successful in obtaining a mortgage with an attractive rate, saving you money on your house payment.

Take the following steps as soon as you decide you’d like to buy a home.

1. Make bill payments on time

One of the worst things you can do is pay bills late or, even more disastrous, not at all. Both will impact your credit score and thus your ability to obtain a mortgage.

“Your FICO Score considers late payments using these general criteria; how recent the late payments are, how severe the late payments are, and how frequently the late payments occur,” caution the experts at myfico.com.

Don’t allow any bills to be sent to a collection agency; “… it is considered a significant event with regard to your score and will likely have a severe negative impact.”

If an unexpected financial emergency comes up, contact the creditor. Let them know your situation and ask if there is a way you can avoid a late payment on your credit.

Your payment history accounts for 35% of your FICO score, so be diligent in paying your bills.

2. Don’t apply for new credit

Keep credit card balances low and pay all credit card bills before they’re due. If you can, make additional payments to bring down the balances.

Avoid applying for a new credit card. Why? Lenders are wary of borrowers who take on additional debt and if you apply for credit, the signal that you’re sending is that you will use it and, thus, rack up additional debt.

While FICO only considers new credit applications for the past 12 months, they account for 10% of your credit score.

New accounts also have an impact on “… your length of credit history.” FICO uses your “… oldest account and the average of all your accounts.” Opening a new account decreases the average age.

The exception to this rule is for the consumer with a spotty credit record. “If you can prove to lenders that you can pay your bills on time, this will help increase your score in the long run,” claim the experts.

And, by the way, credit inquiries remain on your credit record for two years.

3. Lower your debt-to-income ratio

When your mortgage application gets to the underwriter, he or she will examine your debt-to-income ratio (DTI).

Simply, this is a calculation of your income and debt that tells the underwriter how much money comes in and how much goes out every month. Borrowers with a high DTI (more than 43%) present a bigger risk to lenders.

Calculate yours with these tips from the Consumer Financial Protection Bureau. To lower your DTI, either decrease your debt, raise your income or do both. Find some additional tips on how to lower your DTI at credit.com.

No, I’m not going to tell you that “You’ll never be able to sell your home without a real estate agent.”

And, yes, the topic of this blog post may seem self-serving. After all, helping homeowners sell their properties is what I do for a living.

What I will explain is what goes into a home sale—especially its unique qualities that, unlike selling a car or anything else—make it entirely unsuitable for a DIY project.

The DIY process is tainted

If you’ve ever purchased a used car from the owner, instead of from an automobile dealership, you are familiar with some of the same fears many of your potential buyers will have. Especially if you refuse to pay a buyer’s agent commission, homebuyers will be reluctant to work with you.

Their fears are that because you aren’t a professional, but a complete stranger, you lack the ethics that a REALTOR is bound by.

Is the home a “lemon?” They’ll wonder if you’re disclosing everything you know about the home and the neighborhood.

Your inexperience may frighten off some of the best buyers for your home.

DIY home evaluation

There are two critical aspects of every home sale, presentation (how your home is presented to potential homebuyers) and price. Do you know how the market value of a home is determined? And, if so, where will you get the data required to figure out how much your home is worth?

Many homeowners mistakenly turn to the large online real estate portals, which is a big mistake. Sites such as Zillow and Trulia don’t have access to all MLS listings.

Instead, they rely on the use of public records fed into an algorithm that spits out results that have a median error rate of about 8 percent, according to Zillow’s CEO.

That doesn’t sound too bad, right? Consider this: March’s median sale price, nationwide, was $344,625. Suppose you list your home for that but the real estate portal is telling your potential homebuyers that your home is worth 8 percent less.

That’s more than $27,000

Imagine how many people won’t even look at your home, assuming it’s overpriced. Or, worse, the lowball offers you’ll get because of it. It happens all the time.

One economist, by the way, found the error rate of Zillow’s “Zestimates” to be much higher—as much as 20 percent too high or too low.

To determine the current market value of a home requires access to information about recently sold homes near yours. The MLS has this data and one must be a member to access it.

DIY marketing

Unless you work in advertising or marketing, how your home is presented to potential buyers is better left to a professional.

How will your description of the home and your photographs compare to the competition, being marketed by professional real estate agents with all of the tools and expertise they possess?

Since we do this for a living, we are able to analyze your property to determine who your likely buyer will be and focus our marketing to that pool of buyers. We also know which advertising and marketing platforms work best for each type of buyer.

A multitude of details

Do you know how to pick a closing date that meshes with your current financial or homebuying objectives? Especially if you are aiming to close on another home simultaneously, some days, and some parts of the month are better for the seller. This is yet another of the many details to be aware of.

As real estate agents, we juggle what seems like a million and one details for every transaction. Everything from keeping track to when contingencies are supposed to be removed, to scheduling the home inspection and ensuring the appraiser gets his or her work done in a timely manner, we make sure nothing falls through the cracks.

Doing it by yourself means you don’t have anyone in your corner

If the homeowner who goes it alone decides to pay a small commission to the buyer’s agent, the playing field is lopsided.

The buyer has professional representation and the seller doesn’t. And, no, the buyers’ agent will not help the seller with the paperwork or anything else.

How will you hold up in negotiations against someone who negotiates for a living?

We understand that it’s tempting to try to go it alone when you sell your home and we’re happy to offer you advice. But we would be remiss in our duties to not explain to you the many things that can, and often do, go wrong.

Have you noticed that there’s a study for just about anything you can think of?

In 2004, for instance, a Swedish study determined that “Chickens Prefer Beautiful Humans.” A study out of the UK let us know that yawning isn’t contagious among red-footed tortoises.

And, an online real estate portal swears that the best months to list a home for sale are from the middle of March to the middle of April.

But they dug deeper into the data and added a caveat: in regions where it remains chilly into early spring, “waiting until mid- to late-April is your best bet.”

Then, along came a super-hot sellers’ market and upended that study’s findings. The truth is, at least right now, there should be plenty of buyers for your home in this spring and summer real estate market.

That’s not all

According to a Wall Street Journal study, the day of the week you list your home can have an impact on not only the eventual selling price, but the time your home spends on the market as well.

The best day? Friday. Not surprising when one considers that homes that hit the market on Friday show up as fresh MLS listings for eager weekend homebuyers to view.

Friday listings sell for more than 99 percent of the original list price, while those listed on Sunday garner only 98.4 percent, on average, at least according to that study.

In other words, if you listed your home at $375,000 on Friday instead of Sunday, the statistics say you’ll have a good chance of walking away with an additional $2,625.

People must be in a hurry on Fridays as well, because homes listed then sold faster than homes listed on other days.

Coming in right behind Friday, however, is Tuesday – a head scratcher for sure. Why Tuesday?

According to the report, Tuesday-listed homes are the most attractive for home tours, getting almost 2.5 requests for a tour, on average, on that day.

Remember, all real estate is local and this was a nationwide study, so our mileage may vary.

That’s not to say that if you decide on a Thursday that you want to list your home, we shouldn’t wait until Friday to put the listing in the MLS. It might be a tactic to try, especially if you need to sell your home quickly.

What to expect when you list your home in this market

As mentioned earlier, the market is red-hot for sellers right now. With schools expected to reopen nationwide in the fall, folks are trying to get settled into their new homes before then, so there are lots of buyers in the market.

In fact, now may be the only time in the foreseeable future when you may have a chance to receive multiple offers on your home.

Homes are selling quickly as well. According to the National Association of REALTORS®, the nationwide average amount of time that a home is on the market (from listing to accepting an offer) is currently 20 days.

Furthermore, the median home price has increased more than 14% over this time last year. Homeowners are sitting on an amazing amount of equity right now.

Now, all of this good news for sellers will vanish if mortgage rates rise significantly or if there is a sudden downturn in the housing market, as we unfortunately learned during the housing crisis.

These are all good reasons to consider selling your home this spring or summer. Questions? Reach out to us. Advice is always free.

Buying real estate, while once touted as a wise investment toward your future wealth, has become somewhat of a scary prospect to first-time buyers. The market, right now, is moving at warp speed.

Home buying is a process and, like any other, there are steps you should take to get you to your goal. While it’s natural to be anxious about becoming a homeowner, take the time to follow the steps and, before you know it, you’ll be in your own home.

Finances

One of the unpleasant tasks in the home buying process is figuring out how much money you can spend on a house and then locating a lender to give you that money at an attractive rate and good terms.

You’ll need cash for the down payment and, unless you find a seller that is willing to help with them, you’ll also need some cash for the closing costs.

If you’re on a tight budget, consider some of the government programs. The United States Department of Housing and Urban Development (HUD) backs low-cost, first-time buyer loans through the Federal Housing Administration (FHA). Learn more at hud.gov.

No matter which route you decide to take you’ll need to shop for a loan. Take your time when looking for a loan, as rates and terms may vary widely between lenders.

Shopping for Your First Home

Real estate buyer’s agents will tell you that making a wish list is one of the most important steps to take before looking at houses. You’ll actually make the list and then edit it several times. If you’re half of a couple, you should both make your own lists.

Your original list should be an exercise in dreaming. Write down everything your ideal home would have – even if you think these items may be too expensive.

Let your imagination run wild. After it’s complete, go back over it with a more realistic eye. If you’re on a tight budget you may wish to cross off the stables and tennis courts.

Once you’ve whittled the list down so that it fits your real world, choose one or two items on which you will not compromise. Then, compare your list with your partner’s.

Anything that shows up on both lists is a “must have.” That, along with your top must have and your partner’s can’t-live-without, gives your agent a clear idea on which types of homes to show you and which to exclude.

Next, you’ll need to decide on a neighborhood. If you have children, proximity to your chosen schools may be the deciding factor.

Perhaps a location that provides for a quicker commute to work is your ideal. Decide on several areas and do a quick check of prices in the areas ensure you can afford to live there.

Now you’re ready to choose an agent. Ask friends, family, co-workers and neighbors for recommendations.

You’ve Found a Home – Now What?

Finding a house you wish to purchase is the first step toward what may be smooth sailing or an absolute nightmare. Prepare yourself for the worst and, if all goes well, consider yourself lucky.

First you’ll make an offer. Determine what you want to offer on the house and then follow your agent’s advice as to how appropriate the offer is. When the housing market is moving fast, with multiple offers on houses, make your highest and best offer at the outset, as you don’t have time to bargain.

Once the offer is accepted it’s important to adhere to the time limits in the contract. Order your home inspection and shop for homeowner’s insurance immediately.

You hold the key to a smooth real estate transaction. By preparing adequately and choosing the right professionals to help you along the way, you guarantee your success.

Congratulations on making the decision to sell your home. You couldn’t have chosen a better real estate market in which to do so.

Now, the journey begins. There’s a lot to do, and it starts with getting your home ready for the market.

Deep cleaning is critical but before you break out the Lysol and Dust Buster, you will need to declutter and depersonalize the home.

The reasons behind decluttering

Did you know that there are actually studies on the effects of clutter on our psyches? The University of California at Los Angeles (UCLA) spent four years studying the topic and found that clutter makes us stressed.

Since a stressed-out buyer is one who won’t spend much time in your home, getting rid of clutter is critical.

And depersonalizing?

There are several reasons behind the advice to depersonalize your home before putting it on the market.

The first is that buyers want to be able to see themselves living in your home. They can’t do that while staring at strangers peering out of photographs, awards on walls given to someone else and evidence that strangers brush their teeth in the bathrooms.

Personal items can be distracting, especially the very personal items we sometimes leave on bathroom counters.

Let’s get started

Grab some boxes. Since you’ll need them for the moving process later on, they’ll do double duty.

Depending on how cluttered your home is, you may need several boxes in some rooms (hello children!). Grab some cushioning material (newspaper, bubble wrap, etc.) for fragile items.

Choose a room in which to start. Some organizing experts recommend that you choose to start to the right or left of the front door and work your way around the home.

Pack up anything of a personal nature in the boxes you’ve gathered.

Bedroom decluttering and depersonalizing

Think about your favorite hotel room; that is how you want your bedrooms to look. The master bedroom is especially important and most homebuyers say that it’s their number one priority, according to the National Association of REALTORS®.

Remove family photos and replace them with something generic. Since the bed is typically the focal point, think back, again, to that hotel room and splurge on some new bedding and extra pillows.

Clear off the nightstands, leaving a lamp, a small photo in an attractive frame and a plant or floral arrangement.

Need ideas? Check out pinterest.com.

Tips for the bathrooms

Since bathrooms are, by their very nature, personal, depersonalizing them can be a challenge.

Start by removing everything of a personal nature from the counters and storing these items out of site. This includes toothbrushes, toothpaste, mouthwash, cosmetics and other toiletries.

The rule of thumb for countertops: If it isn’t decorative, stash it.

Extra toilet paper next to the toilet? Stash that too.

Next, check out the shower/tub. Yes, homebuyers will sneak a peek behind the curtain.

Remove razors, body wash and soap, hair products, back scrubbers and whatever else you keep in there. Everything.

Living Room and Family Room

Refresh your memory on that gorgeous hotel room and get to work on the living and family rooms.

Pack up:

• Souvenirs
• CD and DVD collections
• Family photos
• Framed awards, degrees, diplomas
• Magazines, newspapers
• Anything of a religious or political nature
• Toys and other kid and pet paraphernalia

Time to tackle the kitchen

Kitchens can hold a lot of clutter, both in the cupboards and drawers and on the counters.

Remember what we said about the bathroom counters? The same holds true for those in the kitchen. When countertops are cluttered, they appear smaller and buyers love lots of counter space.

Clear them off and replace only decorative items. No toaster, food processor or waffle iron.

Get ideas on how to declutter and stage kitchen counters at:

• professionalstaging.com
• pinterest.com
• stagemyownhome.com

The spring real estate market is upon us and, although homes are selling quickly, they sell for more if they’re decluttered and depersonalized.