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Buying lingo.
DOWN PAYMENT:
Your initial equity stake in the property. This is the capital you commit upfront, separate from the loan. While 20% is the standard to avoid mortgage insurance, strategic loan products can allow for lower entry points depending on your liquidity goals.
LOAN AMOUNT:
The debt portion of the acquisition. This is the purchase price minus your down payment. We work with lenders to optimize this ratio, balancing your monthly cash flow against your long-term equity growth.
TOTAL CASH REQUIRED:
The liquidity needed on Closing Day. This is not just the down payment; it includes your closing costs and prepaids.
POINTS:
Prepaid interest paid at closing to lower your interest rate.
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The Strategy: One point equals 1% of the loan amount. We analyze whether paying points makes sense based on how long you intend to hold the property.
PITI:
The true monthly cost of ownership. It stands for Principal, Interest, Taxes, and Insurance.
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Note: When viewing online mortgage calculators, ensure they are including Taxes and Insurance, otherwise you are seeing an artificially low number.
PMI (PRIVATE MORTGAGE INSURANCE):
A safeguard for the lender, typically required if your down payment is less than 20%.
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The Strategy: In some markets, it can be smarter to pay PMI temporarily to secure a home sooner, rather than waiting years to save the full 20% down payment while home prices continue to rise.
PREPAID INTEREST:
The gap interest due at closing. It covers the loan interest accrued between closing date and the first mortgage payment.
ESCROW FEE:
The fee paid to the neutral third party (Escrow) who manages the exchange of funds and documents. They act as the transaction’s referee, ensuring money isn't released until the title is successfully transferred to you.
TITLE INSURANCE:
Protection for your ownership rights. This one-time premium insures you against past errors in the public record (like hidden liens or long-lost heirs claiming the property).
APPRAISAL FEE:
The cost for the bank’s independent valuation. The lender requires a third-party appraiser to verify that the home is worth the loan amount.
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The Strategy: If the appraisal comes in low, we utilize the “Appraisal Gap” negotiation strategies discussed in our strategy session.
FAQs.
How do I win in a bidding war without overpaying?
Structure beats price. The highest price doesn‘t always win. Sellers care about certainty. We win by tightening the terms—shortening timelines, increasing the earnest money, or offering a Rent Back to the seller. We make it easy for them to say yes to you.
Do I really need 20% down?
Cash is king, but leverage is powerful. You do not need 20%, but your capital strategy affects your offer strength. If you are putting less down, we need to over-communicate your financial strength to the listing agent. My job is to sell you as the buyer just as much as we sell the offer price.
What if the inspection reveals major issues?
We re-trade. The inspection is our second negotiation. If we find a material defect (like a failing roof), we have three options: request a repair, request a credit to lower the price, or walk away.
Why shouldn‘t I just trust an online or AI-generated estimate?
Because algorithms can‘t smell mold or see marble. Online values are blind averages. They don‘t know that the house backs up to a busy road (decreasing value) or that it has custom millwork (increasing value). We run our own manual valuation to ensure you are paying for the quality of the home, not just the zip code.
