First time home buyer? Glance over the glossary below to better understand the home buying process.

Credit Score: Your credit score is a number ranging from 300 – 850.  The higher the number, the better your credit.   Your credit score is based on your history of taking out and paying back loans and credit cards, as well as your history of paying your obligations to service providers such as utilities, medical expenses, and other bills.  If you have missed payments or failed to pay your obligations, this could negatively affect your credit score.  A number lower than 600 may alert the lender that you may not be in the best of shape to purchase a home and can influence what interest rate you receive and if the score is too low, you may not be approved for the loan.


Credit Report:  You are entitled to one free credit report every 12 months.  In general, your lender will get the credit report for you, however if you are planning early for home buying a year from now and want to check your credit score so that you can improve upon it before applying for a loan, you can get a credit report from annualcreditreport.com or call 1-877-322-8228.

 

Earnest Money:  Money the buyer puts down with the initial offer.  It means you, the buyer, have skin in the game and intend to follow through with your purchase of the house.  Earnest money is typically put into an escrow account once the offer is accepted by the seller.  It is not paid directly to the seller.  Be aware that in most circumstances, earnest money is not refundable because if you withdraw your offer or are denied your loan, the seller has lost time and money by being denied the ability to sell to anyone else.  It is, however, usually credited toward the purchase price of the house when the sale is finalized.

 

Escrow Account:  An account held by a disinterested third party.  In a mortgage scenario, this account is maintained by the lender for the borrower.  The borrower deposits money into the account to cover the principle amount due on the mortgage, plus moneys to cover the property taxes and insurance on the home while the mortgage is active.  The lender will pay the property taxes and insurance on the home until the mortgage is paid in full, at which time the borrower will receive the title on the house and the responsibility of paying these fees on their own.

 

Pre-approval letter: Before doing serious house hunting, get a pre-approval letter from your lender.  This is a letter stating you have been pre-approved for a loan of a certain dollar amount.  The pre-approval letter is based on the information you provide to your lender, so make sure you are being honest and as accurate as possible with the information you provide.  If you have not been pre-approved for a loan and there is more than one offer, it is likely the seller will take the offer backed by the pre-approved letter if all other circumstances are equal.

 

Closing Costs: Closing costs are one-time fees that can be paid in cash or rolled into the mortgage.  Depending on the state you live in and the location and type of property you are trying to buy,  They typically include some, but not all of the following: the loan origination fee, fees for appraisals, home inspections, home owners association transfer fees, title insurance, credit checks, survey fees, recording fees, VA funding fees, title search fees, property taxes, attorney’s fees, etc.

 

Appraisal:  An assessment of the value of your home based on the recent sales of comparable properties/homes in the area.  Factors that can contribute to the appraised value are the home’s square footage, condition of the home, and upgrades.  The appraisal is typically ordered by the buyer’s lender to protect themselves against loaning more than the house is worth.

 

Home Inspection:  A limited report describing the general condition of a home with an analysis of needed repairs.  Typically it is the buyer who orders and pays for the home inspection, wishing to uncover any hidden repairs or problems with the home before closing.

 

Title Insurance: Protects lenders and home owners from disputes that may arise questioning legal ownership of the property.  The title insurance pays legal fees to resolve the issue.

 

Recording Fees:  Fees paid to the county recorder’s office.  The duties of the county recorders office generally include recording documents related to real estate transactions and voter registration documents, but can vary by county.

 

Property Taxes:  Taxes paid to the county you live in.  Typically property taxes are paid by the lender from your escrow account.  However once your mortgage is paid in full, you will be responsible to pay the property taxes.

Where do I pay my property taxes if they are not paid through an escrow account?

That depends on the county your property is in.

Cochise County Treasurer’s Office:  https://www.cochise.az.gov/treasurer/home

Graham County Treasurer’s Office:  https://www.graham.az.gov/300/Treasurer

Greenlee County Treasurer’s Office:  https://www.co.greenlee.az.us/elected-officials/treasurer/

Pima County Treasurer’s Office:  https://www.to.pima.gov/

 

 

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