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Financial jargon simplified: home buying

Doing some "homework" early on to understand important jargon can help you feel ahead of the game when you begin the process of finding a home.

Jargon Simplified: Home Buying

  • Mortgage and Interest Payments
    The amount you are paying back to your mortgage lender after you borrow money to buy a house.
    Normally this is the biggest part of your monthly cost.
  • Property Taxes
    Tax to help pay for local amenities (e.g. roads, schools, snow removal). May be paid separately or bundled into your mortgage payment.
  • Homeowners Insurance
    Insurance to protect your stuff (think fire or robbery), your house (think hail storm or lightning strike), and you (in case someone trips in your hallway, hurts themselves, and sues you!).
  • PMI
    Private Mortgage Insurance.
    It protects your mortgage lender if you can't keep up with your mortgage payments (unfortunately, you're the one who pays for the insurance). It's often required if your down payment is less than 20% of the value of the house.
  • HOA Dues
    Homeowners Association (HOA).
    If your property has "common insurance" (as is the case with condos and co-ops) or community amenities (like a neighborhood pool), a HOA may manage those items and charge owners a fee each month to pay a portion of the communal costs.

Next Door® inspired by State Farm®.

What Now?

Start thinking about what you can afford to pay for a house each month by taking a look at your current spending. Building a monthly budget, and getting a good handle on knowing where your money is going, are great places to start. If you're ready to start saving, it might be a good time to consider opening a savings account dedicated to your down payment savings. Then check out this article on ways you can start preparing today to buy a home, even if you think your purchase is a few years away.

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