Buying your first home can be overwhelming. Sure, there are lots of decisions to make and it's a big financial commitment, but one of the things we often hear first-time homebuyers say is that they just get so confused by the unfamiliar house building terms they hear.
We get it.
Whether you're building a new home or purchasing an existing one, the home buying process is full of home terms and language that just isn't used in everyday life. Let us help make it simple. We've compiled a list of frequently used house terminology that you'll encounter in real estate, whether you're purchasing an existing home or you opt for brand-new construction.
This is a seller's consent to the offer made by a potential buyer. It becomes a binding contract once the seller agrees to the buyer's terms and conditions by signing the contract they offer.
This refers to a home that is on the market and available for purchase. While offers may have been made, none has been accepted.
A home whose owners have accepted an offer but have chosen to keep the house on the market and open to back-up offers in case the original offer falls through.
Also known as a Variable-Rate Loan, this refers to a mortgage with an interest rate that rises and falls over the term of the loan based on a predetermined index. Because the interest rate varies over time, homeowners with an ARM will see their monthly mortgage payments rise and fall over time as well.
A term used to refer to anything on the property which enhances its appeal but is not essential to the home's functionality. This term typically refers to waterfront access, a pool — either on the property or in the neighborhood — or nearby recreational facilities.
The period of time it will take to pay off your mortgage based on the purchase price of the home as well as the interest rate obtained.
A loan's rate of interest per year, this rate also accounts for closing costs. Be careful when comparing APRs between lenders — different lenders will calculate this number different ways, making it difficult to determine who has the best rate.
A report that determines the estimated value of a home-based on several factors. An appraisal is done in advance of closing by a qualified appraiser and is used to confirm that the agreed-upon sale price is fair based on the condition of the home.
An increase in a home's value due to improvements on the property or in the neighborhood, or a rise in interest in living in that particular area.
Also referred to as a home "list price," this is the set amount the seller would like to receive for the property. It is negotiable and is often reduced if a home stays on the market too long without an offer.
City or county's value placed on the home for tax purposes. Although this is good information to know when purchasing a home, the assessed value doesn't always reflect market value, and so may not be indicative of a home's true value. This value can be more accurately determined by an appraisal.
The real estate agent representing the individual or couple who intends to purchase a home. The job of the buyer's agent is to help them find a home to make an offer on and then negotiate the terms of the contract. A buyer's agent will also work with them to prepare for closing once a contract is ratified.
Often referred to as "Settlement," this is the day when all mortgage and final sale documents are signed, thereby transferring ownership from the seller to the buyer.
The individual or company who organizes the closing. This may be an attorney or other settlement agent designated to officiate over a legal transaction.
This refers to any costs not directly associated with the buyer's loan to purchase the home. These can include title insurance, attorney's fees, discount points, surveys, origination fees, and recording fees, among others. In some cases, sellers may agree in advance to help pay for some of these expenses to make their home more appealing to buyers.
A document that itemizes all fees and costs associated with the sale of the home. The closing disclosure must be provided to a buyer three days prior to closing.
More commonly referred to as "comps," these are other homes near the house being listed that are also on the market or have recently been sold. Comps are used to help real estate agents set list prices and also to help appraisers determine the fair market value of a property.
A short-term loan that is used to pay a builder's expenses to construct a new home. A construction loan is typically used when a buyer opts to have a house built rather than move into an existing home. This type of loan is designed to provide periodic disbursements to the builder throughout the construction process. Once the house has been built, a permanent loan is used to pay it off.
A clause in a contract that makes a buyer's purchase of the home dependent on something else. For example, a contract may state that a buyer's purchase is contingent on selling their previous home or obtaining the necessary financing.
Also called an "Agreement of Sale," this is the formal document that lays out the buyer's intentions to purchase a home. The seller signs this agreement to enter into a contract and begin the process to close on the loan and transfer ownership to the buyer.
A loan that does not require approval from a government agency. Also known as a "Conventional Residential Mortgage," this excludes VA Loans, FmHA loans or FHA loans by following a pre-determined set of standards.
A negotiation tool used by the seller when they do not like a potential buyer's offering price. A seller may respond back to a potential buyer with a compromise on the terms of the contract.
Also known as a home's "Title," this document proves ownership and must be transferred from seller to buyer to complete a sale.
A homeowner's failure to make their agreed-upon monthly mortgage payments over a period of time.
A decrease in a home's property value due to deteriorating conditions in and around the property, or a decrease in value within the area where the home is located.
The amount of money paid upfront for a home outside of a mortgage. Many lenders require a down payment as part of a home sale, so a buyer will put forward a certain amount of money toward the purchase price and then the rest of the amount will be mortgaged and paid overtime.
A term used to refer to features in a home that help it stay warm in the winter and cool in the summer without over-taxing the home's HVAC system and appliances. This is desirable in homes today because it is more eco-friendly and it saves homeowners money by keeping utility bills lower throughout the year. Greater energy efficiency can be achieved with careful selection of appliances, up-to-date HVAC systems, new windows, and doors, among other features.
These are appliances that have been independently certified as being energy efficient, providing homeowners with savings on their monthly utility bills and reducing their environmental footprint.
A sum of money determined by calculating the value of a home and then subtracting the amount owed on its current mortgage. This is often used to calculate what a seller can potentially make on the sale of their home. In some cases, it may be used to determine what a homeowner will receive when they refinance or if they need to apply for a home equity loan in order to make improvements on their property.
Established by the lender upon purchase of the home, this account is built up through monthly contributions the owner makes as part of their mortgage payment. The lender then withdraws money to pay property taxes and insurance payments on a home.
A law that prohibits discrimination based on a variety of factors, including race, nationality, gender/sex, disability and other factors at any point during the home buying process.
With this type of mortgage, the interest rate is established when the loan is approved and then does not change during the term of the loan. Initially, a fixed-rate mortgage may appear higher than a variable interest rate mortgage, but many people like the fixed-rate option because it won't change over time.
A term that refers to any item which is attached to the home, including tubs, plumbing, HVAC and electrical appliances.
Standard homeowners' insurance usually does not cover flooding. Homes that are in close proximity to a body of water and classified to be in a flood zone require additional flood insurance to protect their homeowner in case of disaster. Homeowners of homes that are not in an immediate flood zone can still purchase flood insurance, especially if they live in a coastal region or an area in close proximity to a river or other body of water.
A home that is for sale and is being offered without the assistance of a real estate agent.
A home that is being sold by the lender in order to satisfy the terms of the outstanding loan on the property. This is typically done when a homeowner has gone into default and is no longer making payments on the home.
An examination that is required once a contract is placed on the home to evaluate the home's structural soundness, quality, and safety. Its purpose is to make sure the buyer knows what they are purchasing, and it gives them a chance to request that the seller make certain repairs prior to closing. In some cases, an inspection can reveal a problem that wasn't apparent during the buyer's tour of the home.
An organization of individuals who own property in a certain neighborhood. Typically, an HOA is established to govern and protect neighborhood common spaces and enforce neighborhood rules and covenants. Most HOAs require homeowners to pay monthly or annual fees that go toward neighborhood maintenance and beautification projects.
This type of insurance is required of any homeowner and protects against unexpected disasters or damage, including fire and storms. Typically, homeowners' insurance payments are rolled into monthly mortgage payments rather than being billed separately.
A fee charged by a lender for borrowing money. An interest rate will depend on your credit score, the amount of money you need to borrow, the lender you choose and the type of loan you qualify for. It may also depend on whether you select a fixed- or variable-rate mortgage.
The bank or company who agrees to loan you the money to purchase a home.
A term used to refer to a home that is being offered for sale on the market under the guidance of a real estate agent.
The individual who works for the lender to process the request for the loan, approve the request and prepare all of the financial paperwork for closing.
The company that manages your mortgage once you've closed on the home and are making monthly payments. In some cases, this may be the lender providing the mortgage. In other cases, it may be another company that has been selected to oversee the loan once it's been approved.
An agreement to guarantee a certain interest rate if a loan closes within a certain period of time. This allows buyers to select an interest rate in advance and take advantage of good rates when they are available.
The value of a home-based on the value of property in the neighborhood and the town where it is located.
A loan given to a buyer to obtain a new home, it creates a lien on the property until the terms of the loan have been met.
Local or regional listings of homes that are currently for sale. Generated through real estate agents as an up-to-date accounting for homes that are on the market and available for purchase. The MLS does not include homes that are For Sale By Owner.
A home that is being built, either at the request of a buyer or "on spec" — that is, by a builder who plans to sell the home during or after completion. These homes have never been lived in, which means they contain brand-new fixtures and appliances. In many cases, new construction can be customized to a buyer's preferences without the hassle of repairs and renovations that existing homes require.
A fixed amount of money that a lender agrees to give to a borrower based on their loan application, credit history, savings, and debt. Contingent on inspection results, appraisal and other lender guidelines, this step confirms that a lender is willing to work with a buyer to purchase a specific home at a specific price.
A process that determines how much money a buyer is eligible to borrow. This is often done in advance of putting a contract on a home and is helpful to buyers in determining a budget at the beginning of their home search.
The amount of money owed on a mortgage minus the interest rate and other charges not included in the purchase price of the house.
The annual sum of money charged by the city or county where a home is located in order to fund community services like schools, road maintenance and police. These are determined by a home's value and vary by location. Typically, these payments also come from the homeowner's escrow account and are paid for as part of their monthly mortgage payments, along with homeowners' insurance payments.
A process in which a homeowner pays off their mortgage loan with another mortgage loan. This is often done to obtain a better interest rate and lower monthly mortgage payments or to obtain money that was built up in equity over time.
The real estate agent who lists the home for sale and represents the seller throughout the negotiation and purchasing process.
A home that was entirely constructed at the home site, without any prior construction in other locations.
This is insurance which protects the lender and buyer from any problems that arise with the title, or deed, of the property.
These are the initial costs of purchasing a home, including closing costs, earnest money, and downpayment. Mortgage and home improvement costs — those you pay over time — are not up-front costs.
An inspection of the home completed prior to closing. The walkthrough is designed to make sure that all requested repairs were made after the inspection, all of the home's systems are still in good working order and all terms of the sale have been satisfied.
For more than 20 years, SK Builders has partnered with McAlister Realty to help upstate South Carolina residents buy and sell homes. With our extensive experience in residential construction, our team is dedicated to making the home building and buying process smooth from start to finish. We love to help first-time buyers find the home that best suits them and then watch their faces as we hand them the keys.
If you're in the market for new construction, let us help you choose the home of your dreams. Contact us today.