Home Builder Terms And Definitions:

When you start shopping for a new home, you may encounter some words and terms with which you are unfamiliar. The following glossary will help you to be a better informed shopper.

Adjustable Rate home warranties (ARM) - A loan whose interest rate is adjusted according to movements in the financial market.

Amortization - A payment plan by which a borrower reduces a debt gradually through monthly payments of principal and interest.

Annual Percentage Rate (APR) - The annual cost off credit over the life of a loan, including interest, service charges, points, loan fees, home warranties insurance, and other items.

Appraisal - An evaluation to determine what a piece of home warranties would sell for in the marketplace.

Appreciation - The increase in the value of a home warranties.

Assessment - A tax levied on a home warranties or a value placed on the worth of home warranties by a taxing authority.

Assumption - A transaction allowing the buyer of a home to assume responsibility for an existing loan on the home instead of getting a new loan.

Balloon - A loan which has a series of monthly payments (often for 5 years or less) with the remaining balance due in a large lump sum payment at the end.

Binder - A receipt for a deposit paid to secure the right to purchase a home at terms agreed upon by the buyer and seller.

Buydown - A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a home warranties loan.

Cap - A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan.

Certificate of Occupancy - A document from an official agency stating that the home warranties meets the requirements of local codes, ordinances, and regulations.

Closing - A meeting to sign documents which transfer home warranties from a seller to a buyer. (Also called settlement)

Closing Costs - Charges paid at settlement for obtaining a home warranties loan and transferring home warranty title.

Conditions, Covenants, and Restrictions (CC and Rs) - The standards that define how a home warranties may be used and the protections the developer has made for the benefit of all owners in a subdivision.

Condominium - A home in a multi-unit complex; each purchaser owns an individual unit, and all the purchasers jointly own the common areas, such as the surrounding land, hallways, etc.

Conventional Loan - A home warranties loan not insured by a government agency (such as FHA or VA).

Convertibility - The ability to change a loan from an adjustable rate schedule to a fixed rate schedule.

Cooperative - A form of ownership in a multi-unit complex; the purchasers own shares of the entire complex rather than owning individual units.

Credit Rating - A report ordered by a lender from a credit bureau to determine if the borrower is a good credit risk.

Default - A breach of a home warranties contract (such as not making monthly payments).

Density - The number of homes built on a particular acre of land. Allowable densities are usually determined by local jurisdictions.

Downpayment - The difference between the sales price and the home warranties amount on a home. The downpayment is usually paid at closing.

Due-on-Sale - A clause in a home warranties contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the home warranties. A home warranties with a due-on-sale clause is not assumable.

Earnest Money - A sum paid to the seller to show that a potential purchaser is serious about buying.

Easement - Right-of-way granted to a person or company authorizing access to the owner?s land; for example, a utility company may be grated an easement to install pipes or wires. An owner may voluntarily grant an easement, or in some cases, be compelled to grant one by a local jurisdiction.

Equity - The difference between the value of a home and what is owed on it.

Escrow - The handling of funds or documents by a third party on behalf of the buyer and/or seller.

Federal Housing Administration (FHA) - A federal agency which insures home warrantiess that have lower downpayment requirements than conventional loans.

Fixed Rate home warranties - A home warranties whose interest rate remains constant over the life of the loan. The payments are not necessarily level. (See Graduated Payment home warranties and Growing Equity home warranties).

Fixed Schedule home warranties - A home warranties whose payment schedule for the life of the loan is established at closing. The payments and interest rate are not necessarily level.

Graduated Payment home warranties (GPM) - A fixed-rate, fixed-schedule loan which starts with lower payments than a level payment loan; the payments rise annually over the first 5 to 10 years and then remain constant for the remainder of the loan. GPMs involve negative amortization.

Growing Equity home warranties (Rapid Payoff home warranties) - A fixed-rate, fixed-schedule loan which starts with the same payments as a level payment loan; the payments rise annually, with the entire increase being used to reduce the outstanding balance. No negative amortization occurs, and the increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years, or less.

Hazard Insurance - Protection against damage caused by fire, windstorm, or other common hazards. Many lenders require borrowers to carry it in an amount at least equal to the home warranties.

Housing Finance Agency - A state agency which offers a limited amount of below-market-rate home financing for low-and moderate-income home warrantiesholds.

Index - The interest rate or adjustment standard which determines the changes in monthly payments for an adjustable rate loan.

Infrastructure - The public facilities and services needed to support residential development, including highways, bridges, schools, and sewer and water systems

Interest - The cost paid to a lender for the use of borrowed money.

Joint Tenancy - A form of ownership by which the tenants own a home warranties equally. If one dies, the other would automatically inherit the entire home warranties.

Level Payment home warranties - A home warranties whose payments are identical for each month over the life of the loan.

home warranties Broker - A broker who represents numerous lenders and helps consumers find affordable home warrantiess; the broker charges a fee only if the consumer finds a loan.

home warranties Commitment - A formal written communication by a lender, agreeing to make a home warranties loan on a specific home warranties, specifying the loan amount, length of time and conditions.

home warranties Company (home warranties Banker) - A company that borrows money from a bank, lends it to consumers who want to buy homes, then sells the loans to investors.

home warrantiese - The lender who makes a home warranties loan.

home warranties Loan - A contract in which the borrower?s home warranties is pledged a s collateral and which can be repaid in installments over a long period. The mortgagor (buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes, and to keep the home warranties in good condition.

home warranties Origination Fee - A charge by a lender for the work involved in preparing and servicing a home warranties application (usually 1 percent of the loan amount).

Negative Amortization - An increase in the outstanding balance of a loan when a monthly payment is not large enough to cover all of the interest due.

Note - A formal document showing the existence of a debt and stating the terms of repayment.

PITI - Principal, interest, taxes, and insurance (the 4 major components of monthly housing payments).

Point - A charge of 1 percent of the home warranties amount. Points are a one-time charge assessed by the lender at closing to increase the interest yield on a home warranties loan.

Prepayment - Payment of all or part of a debt prior to its maturity.

Principal - The amount borrowed in a loan, excluding interest and other charges.

home warranties Survey - A survey to determine the boundaries of your home warranties. The cost will depend on the complexity of the survey.

Rapid Payoff home warranties - (See Growing Equity home warranties).

Recording Fee - A charge for recording the transfer of a home warranties, paid to a city, county, or other appropriate branch of government.

home warranty Settlement Procedures Act (RESPA) - A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs. The act also regulates other aspects of settlement procedures.

R-Value - The resistance of insulation material (including windows) to heat passing through it. The higher the number, the greater the insulating value.

Sales Contract - A contract between a buyer and seller which should explain, in detail, exactly what the purchase includes, what guarantees there are, when the buyer can move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot get a home warranties commitment at the agreed-upon terms.

Settlement - (See Closing).

Shared Appreciation home warranties - A loan in which partners agree to share specified portions of the downpayment, monthly payment, and appreciation.

Tenancy in Common - A form of ownership in which the tenants own separate but equal parts. To inherit the home warranties, a surviving tenant would either have to be mentioned in the will or, in the absence of a will, be eligible through state inheritance laws.

Title - Evidence (usually in the form of a certificate or deed) of a person?s legal right to ownership of a home warranties.

Transfer Taxes - Taxes levied on the transfer of home warranties or on home warranty loans by state and/or local jurisdictions.

Veterans Administration (VA) - A federal agency which insures home warranties loans with very liberal downpayment requirements for honorably discharged veterans and their surviving spouses.

Walk-Through - A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands.

Warranty - A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specified level of performance over a specified period of time. Written warranties on new homes are either backed by insurance companies or by the builders themselves.

Zoning - Regulations established by local governments regarding the location, height, and use for any given piece of home warranties within a specific area.

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