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February 1, 2019

Homebuilding-Keeping You “In the Know…”

When it comes to new custom homes, you may hear new terminology. Here are a few new words or phrases that may be used in a conversation with your homebuilder or lender.

Certificate of Occupancy: Also referred to as a “CO,” this document is issued after the local jurisdiction has made all inspections. Without the CO, no one can move into a new home.

Change Order: A written document that modifies the original plans for the home’s features, floor plan, or finishes. Change orders can add to the price of the house and the length of time it takes to build it.

Closing: Also called the “settlement,” when all papers are signed and the ownership of the property transfers from one owner to the next.

Comparable Sales (comps): Sales prices of similar properties used to estimate the market value of the property by appraisers.

Conditions, Covenants, and Restrictions (CC and R’s): The standards that define how a property may be used and the protection made by the developer or a homeowners’ association that must be followed by all residents in the master-planned community. Homebuilders should be able to provide a copy for new home communities.

Construction Loan: A mortgage used to buy land and build a custom home.

Custom: A home built entirely to the buyers’ specifications.

Deposit: A sum of money due when the purchase contract is signed for a newly built home.

Down Payment: A cash portion of the amount for a property that is due at the settlement; many conventional loans require a down payment of 5 percent, 10 percent, or 20 percent, while FHA loans require 3.5 percent; some VA loans are available with zero down payment as well as USDA loans.

Draw: The amount of money available to a contractor at different established periods of the building process.

Escrow: An account held by the lender that includes homeowner payments for taxes and homeowners’ insurance until those bills are due.

Mortgagee: The lender who provides mortgage financing.

Mortgage Insurance: Insurance (PMI) protects the lender against loss if the borrower defaults on the loan. FHA loans require both upfront and annual mortgage insurance; conventional loans require private mortgage insurance for borrowers with less than 20 percent in home equity.

Permit: A required authorization from a government authority to build a house or proceed with particular phases of the building process. Homebuilders must have a copy onsite for inspections.

Plot Plan: A plan provided by a surveyor that shows the location of the home on the lot and also includes easements, property lines, required setbacks, and legal descriptions.

Preapproval: A qualification for a mortgage by a lender based on proof of the buyer’s income, assets, and credit score. It states the maximum loan that the buyer can qualify for. The final loan approval also requires an appraisal of the property to demonstrate that the value of the property is more than the loan amount.

Prequalification: An estimate of the amount of money a person can borrow based on his or her stated income, assets, and creditworthiness without complete verification.

Redline or Redlined Prints: A set of plans showing changes that need to be made on the original blueprint, typically identified with red pen or pencil.

Semi-Custom: A home built by a production builder that buyers can modify some of their preferences, including making some floor plan changes.

Settlement: When buyers and a representative of the builder sign paperwork that transfers ownership of the property; also known as a “closing.”

Settlement/Closing Fees: Fees charged by the settlement company for the processing of papers, an examination of the title, and review of loan documents.

Walk-Through (or walk-thru): A final inspection of the home by the buyers and their agent to check for any last-minute problems that must be addressed. This walk-through takes place shortly before settlement.

For more tips on buying a home in the Mississippi Gulf Coast, check out Sue’s Homebuyer’s Guide.

Web Resource: “New Home 101 Glossary Of Terms – Newhomesource.com.” www.newhomesource.com. N.p., n.d. Web. 02 Jun. 2019 https://www.newhomesource.com/guide/articles/new-home-101-glossary-of-terms.
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This post was written by Acadian Homes