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Which Home Buying Terms Confuse People The Most?

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There are often a lot of different terms and jargon used when buying a home, so it can feel confusing and overwhelming to people when they’re ready to buy. So, what are the biggest misunderstandings about home buying? Here is a list of 5 terms that are often used that should have no bearing on your ability to purchase a home. They are: home inspection, credit score, loaning up or stacking, mortgage, and affordability. These home buying terms may seem like the basics of home buying, but they can be confusing at best.

A home inspection is a very vague term. It is used to describe an examination of the home structure after a licensed inspector has inspected it. This examination aims to discover problems such as structural damage or the presence of hidden asbestos. This examination is also used to ensure the home is safe to live in and ensures that the home complies with local and federal building codes.


Many people are not even aware of their credit scores until they try to apply for a loan. A credit score is an estimate of how likely you are to repay a loan. Your credit score is based not only on payment history, but also on all the credit cards and loans you have taken out in the past: the higher your credit score, the lower your interest rates will be, and the more likely you are to be approved for a loan.


Another misnomer is a mortgage. This term is often used by people looking to borrow a more significant amount than the home buyer is looking to invest. While the mortgage can be beneficial to the home buyer, the interest rates are typically based on the prime rate. The prime rate is the rate set by the federal government plus a certain amount of interest. In other words, the mortgage is a loan to the home buyer with some benefits added on.

A balloon loan is a misnomer for a second mortgage. A second mortgage is a loan that is subordinate to the first mortgage. In other words, a home buyer would take out a second mortgage for the overall price of the home and then use its proceeds to pay off the first mortgage.

Are you unsure how to navigate buying a house? Contact a Plentii agent today to get more information. Contact us here.


Another misnomer is the first mortgage versus a second mortgage. If the buyer goes with the first mortgage and its defaults, the first mortgage is paid off by the bank. When the borrower pays the first mortgage off, they are free from that debt. However, the buyer must also repay their second mortgage. Most second mortgages are equal in value to the first mortgage.

One of the most common home buying terms is "stacking" or "loaning up." "Stacking" or "loaning up" is where people buy more property than they can afford to buy at the current market price. Stacking is like taking out a second mortgage on the same house. This can be a big mistake as borrowers can get into financial trouble when they run into difficult circumstances and may have to sell their homes. Homebuyers should never stack loans on top of one another.


Borrowers should only buy a home if they can afford to purchase the property now. Borrowers need to have a budget in place and keep their financing locked down until they know exactly how much they can spend on a new home. Making an honest price comparison among homes is the best way to ensure you are getting the best deal. Never borrow more money than you can reasonably afford to repay. It is worthwhile to educate yourself on home buying and your options.

Another confusing term is "affordability." This word is used so often that it has somewhat lost its meaning. If a home seems to be affordable, there may be hidden costs (like closing costs) and it may not be for the actual amount you can afford to pay. People often try to convince themselves they can afford the home they are going to buy. But they end up paying more for it in the long run. Be wary of a house that seems too affordable to be true and don’t be afraid to ask as many questions as you need to.

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No matter what the home buying terms are, it is essential to learn as much as possible before signing on the dotted line. Many people make significant assumptions about buying a home without seeing it or checking it out thoroughly. When shopping, it is essential to use all the tools available to ensure you get what you want. Take your time, compare different homes, look at photos and get ideas from people who have already bought homes close to where you are interested in moving.

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