Many builders offer a one-year warranty on materials and a ten-year warranty on structural issues. New homebuyers will also have warranties provided by manufacturers such as a 20- or 30-year roof warranty or appliance warranties.
Rules established by a local or state jurisdiction that cover how a house can be built or modified. Newly built homes must meet the most recent codes but existing homes are not required to be brought up-to-date before they are sold.
A mortgage loan for which the buyers, the sellers, a third party, or even the lender pays an initial lump sum to lower the interest rate for a set period of time (usually one to five years) to reduce the initial monthly payments.
A part of the contract which states that the contract will be null and void and the deposit returned if the stated conditions are not met; for example, many contracts for existing homes are contingent on a satisfactory home inspection and on the buyer obtaining financing based on the appraisal. Most contracts for newly built homes are non-contingent.
A licensed company that provides building services. A newly built home will often have a general contractor to supervise the project along with specialty and subcontractors who handle specific elements of the home-building process, such as electrical work.
A number assigned by each of the three credit reporting agencies that reflects the credit history of the consumer and changes according to the current financial situation of the consumer; also known as a “FICO” score, a trademark of the Fair Isaac Corporation.
A sum of money due when the purchase contract is signed for a newly built home. The amount of the deposit varies from one builder to another and can range from a few hundred dollars to thousands of dollars depending on the home price and whether the buyer is working with a production or a custom builder.
A cash portion of the payment 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.
The amount of money available to a contractor at different established periods of the building process. Custom home builders typically arrange access to a draw on the construction loan taken out by the buyer.
A mortgage loan in which the interest rate remains the same for the entire length of the loan. Fixed-rate loans are generally available for 30, 20, 15, or 10 years, though some lenders will offer loans for unusual terms to meet borrower needs.
The legal process that occurs when the borrowers have become delinquent on their loan and the lender repossesses the property and sells it. The proceeds of the sale are then applied to the mortgage debt.
An estimate of the entire cost of buying a home, including the down payment, interest payments, and closing costs associated with a loan; to be provided by the lender within three days of a loan application. The estimate is divided into sections according to which fees can change at the settlement table and which cannot.
HERS stands for Home Energy Rating Standard. The index was developed by the Residential Energy Services Network (RESNET) and is used by many builders to indicate their level of energy efficiency. The lower the score, the higher a home’s energy efficiency. A new home scoring 70, for example, is 30 percent more energy-efficient than RESNET’s designated standard for a newly built home.
Homeowners can borrow money against the equity in their home to pay for things such as home improvements, college tuition, or personal expenses; the amount available will vary according to the appraised value of the home versus the outstanding mortgage debt. A line of credit can be used incrementally and repaid over time.
A program that provides insurance for repairing appliances and systems in the home for a limited time; often paid for by sellers to give buyers extra protection during their first year of ownership on existing homes.
According to state regulations, all builders offer an implied warranty on their homes regardless of whether they also offer a written warranty. The implied warranty means that builders are held responsible for repairing their work for a certain period, such as ten years. Without written documentation, homeowners must obtain a legal resolution of a dispute if the builder doesn’t live up to the implied warranty.
A small piece of land within an already developed community typically used to build just one home or a small group of homes; in some cases, an infill lot is created by the demolition of an existing home or other structure on the lot.
Any mortgage loan above the conforming loan limits set by the U.S. Congress for Fannie Mae and Freddie Mac; these loans often carry a higher interest rate and will require a higher down payment and higher credit score than smaller loans.
A legal obligation attached to a property that uses that property as collateral for a debt. The lien must be paid before a home can be sold unless the buyer is willing to pay the lien in order to buy the house. An unpaid subcontractor could ask a court to impose a lien on a newly built home to receive payment.
The amount of the mortgage loan in comparison to the value of the home; the difference between the two numbers represents the amount of equity the owner has in the home or the amount of down payment a buyer is paying.
Insurance that 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.
Your plot plan shows where your home will sit on the lot, and shows where features like property lines and easements are.
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.
A qualification for a mortgage by a lender based on proof of the buyer’s income, assets, and credit score that states the maximum loan that the buyer can qualify for; final loan approval also requires an appraisal on the property to demonstrate that the value of the property is more than the loan amount.
A payment required on some loans if the loan is paid in full before the end of the loan term by making extra payments, refinancing, or selling the property. Few loans today include this penalty, but borrowers should check to be certain this feature is not part of their loan.
A list created by the general contractor, project manager, or homebuyers of items that need to be fixed by the contractor, such as missing trim in one area or a section that needs another coat of paint.
A number identifying the level of insulation. The higher the number, the better the insulation works. The appropriate R value for a new home varies according to the climate where the home is located and the place in the home where insulation is being installed.
A consumer-protection act administered by the U.S. Department of Housing and Urban Development (HUD) that establishes rules for informing consumers about closing costs, settlement fees, and mortgage loans.
Low interest-rate loans with 100 percent financing that are administered by the U.S. Department of Agriculture (USDA) and are restricted to properties in designated rural areas. Income limits may apply.
A contract between a buyer and a seller that should explain what the purchase price includes, an estimated settlement and move-in date, what happens if the buyer cannot get financing when the sale is ready to close, what happens if the builder cannot meet the settlement date or any other contractual obligation, and what happens if the home appraises for less than the agreed-upon price.
The process during which buyers and a representative of the builder sign legally binding paperwork and loan documents that transfer the ownership of the property; also known as a “closing.” A builder may offer incentives to buyers such as closing cost assistance when buyers opt to use the builder’s preferred settlement company.
A “speculative” home that a builder builds without a purchase contract and hopes to sell at a profit. Some spec homes are complete; others can still be personalized with the buyers’ choices for finishes and fixtures.
Title insurance is an important protection.
Insurance that protects the lender against title defects, usually required by lenders. Homebuyers can also buy their own title insurance to protect themselves in case of a future problem with their title.
A statement required by the federal government to be presented to borrowers at the settlement that discloses an estimate of the annual cost of the mortgage and the total cost of the loan over the loan’s full term.
A policy provided by the builder for a certain period (often two years on appliances and systems and ten years on the structure) that provides for the repair of any covered item at the expense of the policy rather than the homeowner.