Buying a home is a milestone for most young adults. Legal jargon and lengthy contracts can temper the excitement of new homebuyers. Finding a team of realtors, brokers, title companies, and lawyers you trust for real estate closing Austin TX can put your focus back on the excitement. In the meantime, here are a few of the most commonly confused terms to understand before you begin.
APR Versus Interest Rate
The difference between the APR and the interest rate is subtle but distinct. The APR, or annual percentage rate, is an all-encompassing percentage you will pay for your mortgage. The APR includes interest and all the fees you will pay, such as closing costs. The interest rate, however, is only the percentage you will pay in interest. The interest rate you pay depends both on the current market, and on your credit score.
FICO Versus VantageScore
Having a good credit score can mean extraordinary savings. If you’ve checked your credit report, you may have noticed a discrepancy between different reporting agencies. FICO, originating from “Fair Isaac Co.” is the reporting agency that banks typically reference. VantageScore bases its scores on six factors: payment history, derogatory remarks, length of credit, types of credit, credit usage, and the number of hard inquiries. The FICO score bases its score on all of the above except they combine payment history and derogatory remarks.
PITI Versus PMI
PMI stands for private mortgage insurance. You will be paying PMI only if your down payment is less than twenty percent of the value of the property. PITI stands for principal, interest, taxes, and insurance. By totaling the dollar amounts of PITI and PMI, if applicable, you will know your monthly payment.
Knowing the difference between these six terms can set your mind at ease as you prepare to enter the market.