Buying a home can be intimidating with words and acronyms you’ve never heard before such as escalation clause, PMI and EMD. News4’s Erika Gonzalez breaks down what it all means.
House hunting? Don't let paperwork filled with confusing language keep you from the home of your dreams.
In the latest edition of our 4 Your Home real estate coverage, Ashleigh Wehmeyer, a realtor with Compass, helps break down the fine print with four key phrases that every prospective homebuyer needs to know.
Pre-Offer Walk and Talk
If you're in a competitive situation, up against multiple offers and contemplating waiving a home inspection, a pre-offer walk and talk can help. This process is basically a modified inspection with you acting as the notetaker.
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You can look at the roof, foundation and appliances and check out major systems in about an hour. It can cost between $250 and $350 and can give you a bit of assurance.
PMI: Private Mortage Insurance
PMI is what you're going to pay on a conventional loan if you don't put 20% down.
Even when you're going to be paying PMI in your monthly payment, pay attention to when you get up to 20% of that loan value. Then you can call your lender and have them drop it for you.
EMD: Earnest Money Deposit
An EMD is the money that you put down when you put your offer in. Bigger is better here. In traditional markets, it's about 1 to 1.5% of the sales price, but in competitive markets, it can go up to 5%, 6% or even 10%.
Escalation Clause
An escalation clause works a bit like an eBay auction. Set the max limit for your bid and you will beat any other buyer by that amount. Wehmeyer's tip: Have the number end in a zero.
If there's something you don't understand, stop and ask. Buying a home will likely be the biggest investment of your life.
