Buying a home can be intimidating if you are not familiar with the terms used during the buying and selling process. If you want to venture into real estate, the terms you come across may fascinate and confuse you at the same time. Here are a few basic terms you need to familiarize yourself with to set you off on the right path.
Mortgage
In layman’s language, a mortgage is a loan that enables you to cover the cost of a home. Since you don’t have millions of shillings lying around, a mortgage loan makes it possible to purchase real estate by availing to you the money. The easiest place to get a mortgage is through a bank or an insurance firm.
From there, you pay back the loan via monthly payments that last between 1 -30 years. Many realtors advise you to shop for a mortgage before looking for a house because this will let you know the maximum purchase price of the home you can afford. Secondly, this will show the home sellers that you are serious about making a purchase thus, increasing your chances of getting a good deal.
See more; Questions to ask your realtor before making a purchase.
Appraisal
A real estate appraisal is also referred to as a property valuation or land valuation. This is usually a professional analysis used to estimate the value of the home. This is a necessary measure because it helps the buyer to secure financing.
If the location of the home is considered prime, the property is likely to be priced highly. For instance, a property in Nairobi’s CBD is more valuable than a property in the outskirts of Nairobi. However, since you cannot move the location of a home, the upgrades and improvements you add to it can significantly increase its value.
Closing costs
Closing costs are fees associated with your home purchase that are paid at the closing of a real estate transaction. This is the point in time when the title of the property is transferred from the seller to the buyer. These costs are incurred by either the buyer or seller. They vary widely based on where you live, the property you buy, and the type of loan you choose. The home inspection fee, homeowner’s insurance and the survey fee are part of the closing costs.
In Kenya, home buyers pay between 2-5 % of the purchase price of their home in closing fees. If we are to do some quick math, a house that costs Kes 2Million might cost Kes 100,000 in closing costs. However, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, especially things such as high administrative or mailing charged by your bank or insurance firm. Having a realtor such as Kenya Homes helps you research extensively to find other lenders who are willing to offer you a loan with lower fees at closing.
See also; Oak Park Estate Along Kenyatta Road
Credit score
A credit score is primarily a numerical figure that banks and financial institutions use to evaluate whether you’ll be able to repay your future debts. It is often based on your credit history to ascertain the probability of defaulting on your mortgage. A good credit score is built on good spending habits and a pattern of responsible borrowing established over a long period of time.
A home buyer must never under estimate the importance of a good credit score because it is directly proportional to getting better deals from banks. A bad credit report often creates financial barriers that make home ownership almost impossible.