Home Buyer and House Plan Terms and Definitions

Written by Mark Mathis

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 Mortgage (ARM) - A loan whose interest rate is adjusted according to movements inrepparttar 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 overrepparttar 147423 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 inrepparttar 147424 marketplace.

Appreciation - The increase inrepparttar 147425 value of a property.

Assessment - A tax levied on a property or a value placed onrepparttar 147426 worth of property by a taxing authority.

Assumption - A transaction allowingrepparttar 147427 buyer of a home to assume responsibility for an existing loan onrepparttar 147428 home instead of getting a new loan.

Balloon - A loan which has a series of monthly payments (often for 5 years or less) withrepparttar 147429 remaining balance due in a large lump sum payment atrepparttar 147430 end.

Binder - A receipt for a deposit paid to securerepparttar 147431 right to purchase a home at terms agreed upon byrepparttar 147432 buyer and seller.

Buydown - A subsidy (usually paid by a builder or developer) to reducerepparttar 147433 monthly payments on a mortgage loan.

Cap - A limit torepparttar 147434 amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or overrepparttar 147435 life ofrepparttar 147436 loan.

Certificate of Occupancy - A document from an official agency stating thatrepparttar 147437 property meetsrepparttar 147438 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 andrepparttar 147439 protectionsrepparttar 147440 developer has made forrepparttar 147441 benefit of all owners in a subdivision.

Condominium - A home in a multi-unit complex; each purchaser owns an individual unit, and allrepparttar 147442 purchasers jointly ownrepparttar 147443 common areas, such asrepparttar 147444 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;repparttar 147445 purchasers own shares ofrepparttar 147446 entire complex rather than owning individual units.

Credit Rating - A report ordered by a lender from a credit bureau to determine ifrepparttar 147447 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 betweenrepparttar 147448 sales price andrepparttar 147449 mortgage amount on a home. The downpayment is usually paid at closing.

Due-on-Sale - A clause in a mortgage contract requiringrepparttar 147450 borrower to payrepparttar 147451 entire outstanding balance upon sale or transfer ofrepparttar 147452 property. A mortgage with a due-on-sale clause is not assumable.

Earnest Money - A sum paid torepparttar 147453 seller to show that a potential purchaser is serious about buying.

Easement - Right-of-way granted to a person or company authorizing access torepparttar 147454 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 betweenrepparttar 147455 value of a home and what is owed on it.

Escrow - The handling of funds or documents by a third party on behalf ofrepparttar 147456 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 overrepparttar 147457 life ofrepparttar 147458 loan. The payments are not necessarily level. (See Graduated Payment Mortgage and Growing Equity Mortgage).

Fixed Schedule Mortgage - A mortgage whose payment schedule forrepparttar 147459 life ofrepparttar 147460 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;repparttar 147461 payments rise annually overrepparttar 147462 first 5 to 10 years and then remain constant forrepparttar 147463 remainder ofrepparttar 147464 loan. GPMs involve negative amortization.

Growing Equity Mortgage (Rapid Payoff Mortgage) - A fixed-rate, fixed-schedule loan which starts withrepparttar 147465 same payments as a level payment loan;repparttar 147466 payments rise annually, withrepparttar 147467 entire increase being used to reducerepparttar 147468 outstanding balance. No negative amortization occurs, andrepparttar 147469 increase in payments may enablerepparttar 147470 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 torepparttar 147471 mortgage.

Part IV- Different Types of Home Foundations and When to Use Each

Written by Mark Mathis

The foundation isrepparttar first piece of a home to be constructed and creates a base forrepparttar 147422 rest of a home's components. There are three types of foundations that are commonly used inrepparttar 147423 U.S.: slab, crawlspace, and basement.

Slab Foundation

Slab is a type of foundation consisting of a structural concrete slab poured directly onrepparttar 147424 grade. No accessible space exists in slab construction. Slab foundations are popular in areas (i.e.repparttar 147425 Southern United States) where there is a relatively high water table. (Water table refers torepparttar 147426 depth inrepparttar 147427 soil at which you find water).

Crawlspace Foundation

A crawlspace is an accessible space with limited headroom, typically betweenrepparttar 147428 soil andrepparttar 147429 bottom ofrepparttar 147430 first floor of a home. Crawlspace construction is predominant in areas where there is heavy clay content inrepparttar 147431 soil.

Basement Foundation

A basement is an accessible space betweenrepparttar 147432 soil andrepparttar 147433 bottom ofrepparttar 147434 first floor of a home. It usually has more headroom than a crawlspace. Basement foundation construction is predominant in cold climates whererepparttar 147435 foundation needs to be situated belowrepparttar 147436 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 createrepparttar 147437 foundation wall, mortar is used between blocks to hold them together, formingrepparttar 147438 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. Oncerepparttar 147439 concrete has gained its full strength,repparttar 147440 outside forms,repparttar 147441 inside forms, or both are left in place to insulaterepparttar 147442 wall. ICFs are common in regions in whichrepparttar 147443 local building code requiresrepparttar 147444 foundation to be insulated. Another benefit is thatrepparttar 147445 homeowner or builder is able to finish basement immediately, without adding studs.

Choosingrepparttar 147446 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 putrepparttar 147447 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.

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