New Home 101: Glossary of Terms

New to the world of new home buying? All the vocabulary can be confusing.

Why it matters: You'll need to speak the language!

What's ahead: Here’s a quick-hit guide to the key terms – short, sharp, and simplified.

Mortgage Must-Knows

ARM (Adjustable-Rate Mortgage): Interest rate changes over time, based on the market.

APR (Annual Percentage Rate): The real yearly cost of your loan, including fees.

Amortize: Paying your loan down in equal installments over time.

Buy-Down Mortgage: Pay upfront to lower your interest rate for a few years.

Closing (Settlement): Signing the legally binding paperwork and documents to transfer ownership.

Conforming Loan: A mortgage that fits Fannie Mae/Freddie Mac guidelines.

Construction Loan: Short-term loan to finance building your home.

Conventional Mortgage: Standard mortgage — usually requires decent credit and a down payment.

Credit Score (FICO): Your financial trust score. Higher = better loan options.

Down Payment: Your upfront cash — typically 3.5%–20%.

Escrow: Account holding funds for taxes and insurance.

FHA Loan: Government-backed loan with lower down payment options.

Fixed-Rate Mortgage: Stable interest rate for the life of the loan.

Jumbo Loan: Big loan, bigger rules. Over the conforming limit.

Loan Origination Fee: What lenders charge to process your loan.

Loan-to-Value: How much of the home is yours vs. the bank's.

Mortgage Insurance: Covers the lender if you default. Required with low down payments.

Preapproval: Official lender OK based on income and credit.

Prequalification: Early estimate of what you might afford.

Principal: The actual loan amount you owe (not including interest).

Property Survey: Survey to determine the boundaries of a person’s land.

VA Loan: Low- or no-down payment loan for veterans and military families.

Building & Construction Terms

Blueprint: Drawings of the floor plan that are used for designing and building the home.

BOYL (Build On Your Lot): You bring the land; the builder brings the home.

Builder Warranty: Typical: 1-year materials, 10-year structure. Often includes appliance warranties.

Builder’s Risk Insurance: Protects the builder (and possibly you) during construction.

Building Codes: Local safety and construction rules. New homes must comply.

Certificate of Occupancy: “CO,” is issued after all local jurisdiction inspections. No CO, no move-in.

Change Order: Mid-build changes to plans or finishes. Can cost you.

Contractor: The builder. May include subs for plumbing, electrical, etc.

Custom Home: Designed from scratch to your specs.

Draw: Scheduled payment to your builder during construction.

Extras: Upgrades you add mid-project (not included in original contract).

Infill Lot: Open lot in an already developed neighborhood.

Manufacturer’s Specs: Rules you must follow to keep product warranties valid.

Payment Schedule: When and how you pay during construction.

Penalty Clause: You pay less if your builder is late or off-spec.

Performance Bond: Builder’s insurance that guarantees project completion.

Permit: Approval from your local gov to build or remodel.

Plot Plan: Shows where your house sits on your lot, with property lines and easements.

Production Builder: Builder who constructs multiple homes from set floor plans with limited customization options.

Punch List: Final fixes before move-in (e.g., paint touch-ups).

R-Value: How well your insulation works. Higher = better.

Redline Prints: Blueprints marked up with changes.

Retention: Money held back until the job’s 100% done.

Real Estate & Finance

Appraisal: Pro estimate of your home’s value.

Binder: Proof you put down a deposit.

Commission: Agent’s pay — usually from seller’s side.

Comparable Sales (Comps): Prices of similar homes used to value yours.

Contingency: “Deal breaker” clauses (e.g., financing, inspection).

Deposit: What you pay to secure the contract. Amount varies.

Equity: What you own: Home value – what you owe.

Fannie Mae: Government-backed entity that buys mortgages from lenders to keep home loans available and affordable.

Foreclosure: When the lender takes your home if you stop paying.

Freddie Mac: Government-backed entity that buys mortgages from lenders to keep home loans available and affordable.

Good Faith Estimate: Breakdown of your loan and closing costs (now part of the Loan Estimate).

Home Equity Loan: Borrow a lump sum from the value you’ve built in your home.

HELOC (Home Equity Line of Credit): Flexible loan option using your home’s value as a credit line.

Lien: A debt tied to your property. Must be paid before selling.

Mortgagee: The lender who provides financing.

Points: A fee equal to 1% of the loan amount, paid at closing to reduce your interest rate.

Prepayment Penalty: Payment required by some loans if paid in full before the end of loan term.

Ratified Contract: Signed and accepted contract by both buyers and sellers and their agents.

RESPA: Consumer protection law that clarifies closing costs.

Recording Fees: Fees paid to the county or state for recording property ownership in land records.

Rural Development Loans: USDA-backed loans with low interest rates for eligible buyers in designated rural areas, often with income limits.

Sales Contract: Legal doc laying out the who, what, and when of the sale.

Settlement (aka Closing): Ownership officially transfers to you.

Stamp Tax / Transfer Tax: Gov fee on property sales. Paid at closing.

Title: Legal proof you own the home.

Title Insurance: Protects you from past ownership issues or disputes.

Truth-in-lending: Statement at closing disclosing estimate of annual mortgage and the total cost of the loan.

Valuation: Another word for appraisal. Lender needs it.

Homeownership Essentials

Builder Warranty: Detailed, time-based repair guarantee from the builder.

Conditions, Covenants, and Restrictions (CC&Rs): Rules for your property in a planned community.

Deed: The paper that makes your ownership official.

Hazard Insurance / Homeowners Insurance: Protects your home from fire, storms, theft, etc.

HERS Index: Energy efficiency score. Lower is better.

Home Warranty Program: Covers repairs on appliances/systems, usually for 1 year.

HOA (Homeowners Association): Neighborhood rule-setters. Dues and regulations apply.

Implied Warranty: Even without a written warranty, builders are still responsible (per local law).

Semi-Custom Home: You pick finishes or tweak the layout, but start from a base plan.

Spec Home: Builder builds it without a buyer — may be move-in ready.

Walk-Through: Final inspection before closing. Make sure everything’s right.

Bottom Line

Learn these terms and you’ll walk into your new home smarter, more confident — and less likely to be surprised at the closing table.