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Home Buyer’s Dictionary

ARM? GPM? PITI? You’d have to be a cryptologist to figure out some of the terms buyers encounter during the home buying process. Doing research on how to buy a house before beginning the process can greatly improve your experience and prepare you for the exciting course ahead. And with this glossary of home buying terms at your side, you can rest easy that your new home won’t get lost in translation.

  • Adjustable Rate Mortgage (ARM). A loan whose interest rate is adjusted according to movements in the 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 the 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 the marketplace.
  • Appreciation. The increase in the value of a property.
  • Assessment. A tax levied on a property or a value placed on the worth of property by a taxing authority.
  • Assumption. A transaction allowing the buyer of a home to assume responsibility for an existing loan on the home instead of getting a new loan.
  • Balloon. A loan which has a series of monthly payments (often for 5 years or less) with the remaining balance due in a large lump sum payment at the end.
  • Binder. A receipt for a deposit paid to secure the right to purchase a home at terms agreed upon by the buyer and seller.
  • Buydown. A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a mortgage loan.
  • Cap. A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan.
  • Certificate of Occupancy. A document from an official agency stating that the property meets the 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 the protections the developer has made for the benefit of all owners in a subdivision.
  • Condominium. A home in a multi-unit complex; each purchaser owns an individual unit, and all the purchasers jointly own the common areas, such as the 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; the purchasers own shares of the entire complex rather than owning individual units.
  • Credit Rating. A report ordered by a lender from a credit bureau to determine if the 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 the sales price and the mortgage amount on a home. The downpayment is usually paid at closing.
  • Due-on-Sale. A clause in a mortgage contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the property. A mortgage with a due-on-sale clause is not assumable.
  • Earnest Money. A sum paid to the seller to show that a potential purchaser is serious about buying.
  • Easement. Right-of-way granted to a person or company authorizing access to the 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 the value of a home and what is owed on it.
  • Escrow. The handling of funds or documents by a third party on behalf of the 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 the life of the loan. The payments are not necessarily level. (See Graduated Payment Mortgage and Growing Equity Mortgage).
  • Fixed Schedule Mortgage. A mortgage whose payment schedule for the life of the 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; the payments rise annually over the first 5 to 10 years and then remain constant for the remainder of the loan. GPMs involve negative amortization.
  • Growing Equity Mortgage (Rapid Payoff Mortgage). A fixed-rate, fixed-schedule loan which starts with the same payments as a level payment loan; the payments rise annually, with the entire increase being used to reduce the outstanding balance. No negative amortization occurs, and the increase in payments may enable the 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 to the mortgage.
  • Housing Finance Agency. A state agency which offers a limited amount of below-market-rate home financing for low-and moderate-income households.
  • Index. The interest rate or adjustment standard which determines the changes in monthly payments for an adjustable rate loan.
  • Infrastructure. The public facilities and services needed to support residential development, including highways, bridges, schools, and sewer and water systems
  • Interest. The cost paid to a lender for the use of borrowed money.
  • Joint Tenancy. A form of ownership by which the tenants own a property equally. If one dies, the other would automatically inherit the entire property.
  • Level Payment Mortgage. A mortgage whose payments are identical for each month over the life of the loan.
  • Mortgage Broker. A broker who represents numerous lenders and helps consumers find affordable mortgages; the broker charges a fee only if the consumer fins a loan.
  • Mortgage Commitment. A formal written communication by a lender, agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions.
  • Mortgage Company (Mortgage Banker). A company that borrows money from a bank, lends it to consumers who want to buy homes, then sells the loans to investors.
  • Mortgagee. The lender who makes a mortgage loan.
  • Mortgage Loan. A contract in which the borrower’s property is pledged a s collateral and which can be repaid in installments over a long period. The mortgagor (buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes, and to keep the property in good condition.
  • Mortgage Origination Fee. A charge by a lender for the work involved in preparing and servicing a mortgage application (usually 1 percent of the loan amount).
  • Negative Amortization. An increase in the outstanding balance of a loan when a monthly payment is not large enough to cover all of the interest due.
  • Note. A formal document showing the existence of a debt and stating the terms of repayment.
  • PITI. Principal, interest, taxes, and insurance (the 4 major components of monthly housing payments).
  • Point. A charge of 1 percent of the mortgage amount. Points are a one-time charge assessed by the lender at closing to increase the interest yield on a mortgage loan.
  • Prepayment. Payment of all or part of a debt prior to its maturity.
  • Principal. The amount borrowed in a loan, excluding interest and other charges.
  • Property Survey. A survey to determine the boundaries of your property. The cost will depend on the complexity of the survey.
  • Rapid Payoff Mortgage. (See Growing Equity Mortgage).
  • Recording Fee. A charge for recording the transfer of a property, paid to a city, county, or other appropriate branch of government.
  • Real Estate Settlement Procedures Act (RESPA). A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs. The act also regulates other aspects of settlement procedures.
  • R-Value. The resistance of insulation material (including windows) to heat passing through it. The higher the number, the greater the insulating value.
  • Sales Contract. A contract between a buyer and seller which should explain, in detail, exactly what the purchase includes, what guarantees there are, when the buyer can move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot get a mortgage commitment at the agreed-upon terms.
  • Settlement. (See Closing).
  • Shared Appreciation Mortgage. A loan in which partners agree to share specified portions of the downpayment, monthly payment, and appreciation.
  • Tenancy in Common. A form of ownership in which the tenants own separate but equal parts. To inherit the property, a surviving tenant would either have to be mentioned in the will or, in the absence of a will, be eligible through state inheritance laws.
  • Title. Evidence (usually in the form of a certificate or deed) of a person’s legal right to ownership of a property.
  • Transfer Taxes. Taxes levied on the transfer of property or on real estate loans by state and/or local jurisdictions.
  • Veterans Administration (VA). A federal agency which insures mortgage loans with very liberal downpayment requirements for honorably discharged veterans and their surviving spouses.
  • Walk-Through. A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands.
  • Warranty. A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specified level of performance over a specified period of time. Written warranties on new homes are either backed by insurance companies or by the builders themselves.
  • Zoning. Regulations established by local governments regarding the location, height, and use for any given piece of property within a specific area.
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Questions to Ask Your Home Builder

Group with blueprintWhen you’re thinking about buying a new home, selecting the right home builder is a key step in creating the home of your dreams. You should feel comfortable asking a potential home builder every question that you think is important. And, a professional builder or sales representative will want to make you a happy and satisfied home owner.

Besides the questions of “How much does it cost?,” and “When can we move in?,” here are some other questions you should ask:

  • Will the builder give you references of recent buyers/occupants?
  • Does the builder have a financing plan established?
  • Are there options in the floor plan — for example, can a basement or deck be added?
  • Can a room such as the basement be left unfinished?
  • How much “customizing” can be done versus standard features?
  • Can appliances be up- or down-graded?
  • Are there any additional fees relating to the home or development?
  • Will there be a home owners’ association? If so, what will the dues cost and what do they cover?
  • Does the builder offer a warranty program?
  • Does the price include landscaping? What if the plants die within a year?
  • Are there any restrictive covenants?
  • What are the estimated taxes on the property?
  • How is the school system rated?
  • Are day care and grocery stores convenient and satisfactory?
  • What about emergency facilities — police, fire department and hospitals?
  • Are there any major development plans for the area in the next five years?
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Concrete Building Systems

From driveways and walkways to segmental retaining walls and pools, concrete has been an essential home building material for the past century. Recently, concrete construction has risen to new heights. With increasingly unpredictable weather in some areas and rising costs in heating and maintenance, concrete has quickly becoming a primary building material for many homes.

And it’s no surprise the trend is sticking. Concrete homes offer solid, disaster-resistant construction, greater comfort and security, lower energy bills, lower maintenance, as well as a home that is healthier to live in and easier on the environment.

Eco-Friendly

Concrete and masonry wall systems conserve energy using thermal mass and reduced air infiltration. The insulation barrier offered by most concrete wall systems reduces drafts and keeps a more even temperature throughout the house. These factors create a tight thermal building envelope, which can cut heating and cooling bills by more than 30%. Plus, concrete is lauded for being made with a combination of recycled and natural products, and for producing less waste.

Healthy Home Option

The inert properties of concrete provide a good alternative for those concerned about unhealthy airborne solvents and product residues from other common building materials. The concrete, insulation and steel in a concrete wall system are much more mold- and insect-resistant than traditional wood studs, joists and wall sheathing.

Durable and Secure

Concrete homes are extremely durable. Most are able to withstand fires, rains, floods and hurricane-force winds with minimal or no structural damage. Many insurance companies offer lower premiums for fire-resistant concrete constructed homes.

Homes built with insulated concrete walls effectively buffer the home’s interior from the outside. The weight and mass of the concrete can reduce the amount of external noise entering the house by as much as two-thirds.

Save Time and Money

The cost of the basic components of concrete — cement, water, sand and aggregate — are more stable than the cost of framing lumber. While lumber prices can fluctuate wildly, concrete costs have remained steady in recent years, allowing for greater planning and financial forecasting.

Concrete construction boosts profits by increasing the speed of construction and completion times, reducing workplace theft and virtually eliminating call-backs. Insurance costs for concrete builders may also be lower.

Free E-Brochures

Click here for more information about concrete homes. Once you have completed the form at the bottom of the webpage, you will have access to our library of downloadable e-brochures in PDF format. The BSC staff and our membership will send additional information to you in the future about the systems of interest to you.

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Custom Homes

 

Custom Homes

Custom homes stand out from the crowd. They are one-of-a-kind, upscale creations that come with luxury upgrades and unique architectural design.

In addition to flexibility in home design and architecture, buyers typically choose their ideal location and environment. As a result, custom home design often incorporates elements of the local landscape, whether that is a view of the ocean, a natural stream, or the distinct colors and plants of a desert landscape.

Differences between Custom & Production Homes

While production builders build communities by restricting design to a group of preselected home types on lots they have picked and purchased themselves, custom builders tend to build on land owned by the customer and start fresh with each design.

Production builders typically construct a large number of homes throughout the year; these may offer a variety of options, but production builders generally do not use construction plans other than the ones selected by the building firm. Custom builders spend more time on each project and often work on fewer than 10 homes a year.

Waterfront Hideaway custom home

Architect Joel Turkel of Turkel Design and the building team at My House Design created the Gambier Island House, using a design from Lindal Cedar Homes. Perched on a hill overlooking the waterfront in British Columbia’s Gulf Islands, the custom builders used careful planning to integrate the home with its lush forest atmosphere. The home’s sleek design, use of green building techniques and connection to nature earned the home a spot as a finalist in the 2012 Best in American Living Awards. Photo: Lindal Cedar Homes.

Trends

Green Building

Concern for the environment is growing among U.S. households—and so are energy costs. Because of this, many custom builders are embracing green building techniques. Features like solar panels, water-saving appliances, insulation to improve heating efficiency and the use of renewable or recycled building materials are all popular techniques to improve a home’s efficiency. Custom builders allow buyers to include a wide range of green products and give them the opportunity to weigh each cost and benefit to create a home that is stylish, comfortable, but also eco-friendly.

New Amenities

Today, home owners like to see features that will improve their lifestyle through health, entertainment or comfort. In this way, custom homes really set themselves apart from the competition. Yoga studios, resistance pools and fitness rooms can be added to encourage healthy living; game rooms, theaters and even a bowling alley can be added for fun; and for comfort, breezy, screened-in porches or warm hearths can make your home feel cozy and welcoming.

Custom amenities are also taking a turn to the world of tech. In a world where there’s an app for everything, buyers are beginning to expect a custom home to do more and be “smarter.” Nowadays you can control many features in your home using a phone, including energy usage, security systems, lighting and even the music playing in each room.

Multigenerational Living

Whether it’s aging parents moving in with their adult children or young adults living back with mom and dad, multigenerational households have specific needs when it comes to a home.

Custom builders are seeing an increasing need to tailor homes to this lifestyle. A recent Pew Research Center study shows that 39% of adults ages 18 to 34 have had to move in with their parents. In the same year, the U.S. Census reported that 4.3 out of 76 million households were made up of at least three generations.

Multigenerational families often build homes that include the traditional mother-in-law suite or even feature a locked-off living space within the home. These apartment-style spaces can have their own kitchenette, full bathroom and living areas to provide a sense of privacy and independence.

Universal Design

As the country grows older and many baby boomers look to retirement, Universal Design (UD) features are an ever-growing priority for many custom buyers and builders. UD is used to ensure that features like wider doors, lower countertops and fewer stairs are used to create a home that everyone can enjoy comfortably. An accessible home allows owners to age in place, prolonging their ability to stay in the house independently and can also increase value by opening the market to any future buyer, despite age, stature or ability.