Adjustable Rate Mortgage (ARM) - A loan whose interest rate is adjusted according to movements in 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 life of a loan, including interest, service charges, points, loan fees, mortgage insurance, and other items.

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

Appreciation - The increase in value of a property.

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

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

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

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

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

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

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

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

Closing Costs - Charges paid at settlement for obtaining a mortgage loan and transferring real estate title.

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

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

Conventional Loan - A mortgage 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; purchasers own shares of entire complex rather than owning individual units.

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

Default - A breach of a mortgage 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 sales price and mortgage amount on a home. The downpayment is usually paid at closing.

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

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

Easement - Right-of-way granted to a person or company authorizing access to 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 value of a home and what is owed on it.

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

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

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

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

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

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

The foundation is first piece of a home to be constructed and creates a base for rest of a home's components. There are three types of foundations that are commonly used in U.S.: slab, crawlspace, and basement.

Slab Foundation

Slab is a type of foundation consisting of a structural concrete slab poured directly on grade. No accessible space exists in slab construction. Slab foundations are popular in areas (i.e. Southern United States) where there is a relatively high water table. (Water table refers to depth in soil at which you find water).

Crawlspace Foundation

A crawlspace is an accessible space with limited headroom, typically between soil and bottom of first floor of a home. Crawlspace construction is predominant in areas where there is heavy clay content in soil.

Basement Foundation

A basement is an accessible space between soil and bottom of first floor of a home. It usually has more headroom than a crawlspace. Basement foundation construction is predominant in cold climates where foundation needs to be situated below frost level.

All three foundation types are usually constructed out of concrete, but can also use concrete masonry units or insulated concrete forms.

Concrete Masonry Units (CMUs) are hollow, concrete blocks. To create foundation wall, mortar is used between blocks to hold them together, forming wall.

Insulated Concrete Forms (ICFs) are made of rigid foam insulation forms (a system of support assemblies, including mold, hardware, and necessary bracing to hold concrete) into which concrete is poured. Once concrete has gained its full strength, outside forms, inside forms, or both are left in place to insulate wall. ICFs are common in regions in which local building code requires foundation to be insulated. Another benefit is that homeowner or builder is able to finish basement immediately, without adding studs.

Choosing Type of Foundation:

Homeowners and builders make decisions about which type of foundation to use by gauging cost, needs/desires, and soil and weather conditions. If you have high water tables then it may not be possible to have a basement. If your land has shallow bedrock or boulders then it may be more costly to dig a basement. If you have a sloping lot it may be difficult to use a slab foundation. If you have a cold climate then you may need to dig down at least four or more feet to put home's footings below frost level. If you have to go at least four feet deep then it may be worth spending some extra money to dig a few feet deeper and have a full basement. Also, it is easier to install and maintain mechanical systems in basements (compared to a crawlspace). Your builder can help you determine what type of foundation is best suited for your area.