If you are building or buying a new home for the first time, you might feel like you are learning a foreign language. Even if your realtor or builder is helping to translate the process, it’s good to have a working knowledge of some terms you will see in your paperwork or when researching things online. Here are some basics to get started:
Adjustable Rate Mortgage – When borrowing money to pay for a house, this type of loan has an interest rate that goes up or down, depending on the overall market or interest rates set by the U.S. Treasury.
Amortize – What happens as your pay off your mortgage and interest. It simply refers to the act of paying off a loan.
Change Order – Usually a written document authorizing a builder to modify building or renovation plans that you’ve already approved. Change orders can affect the final timeline and budget of your project.
Closing – This is the “big day” for new homeowners, the day when you sign final papers of ownership, money is transferred, and you get the keys to your new house. Closing is also referred to as the “settlement.”
Draw – If you are building a custom home, this is a predetermined amount of money that the builder will withdraw at established steps along the way.
Equity – Once you own a home, equity is the value of the property that you possess after you subtract what you owe on your loan from the home’s market value.
Loan Origination Fee – Also referred to as “points”, this fee is charged by your lender for the administration and processing of your loan. Typically, the fee is 1 percent of the total amount of the loan.
Plot Plan – A surveyor or the builder will provide this plan if you are building a home to show the placement of the house on the lot. It will also show the property lines and required easements, or buffers.
Punch List – A list of items to be finished, fixed or changed. The builder or project manager might provide this list to other craftsmen working on the home project, or it can come through the home buyer as part of a walk through if they notice anything missing not done as it was spelled out in their signed contract.
Transfer Tax – Any transfer of property is recorded by the county or state government for tax purposes. This one-time tax is typically paid at the closing and varies by location.