It’s an exciting time when you start the process of buying or building a new home, but all the unfamiliar lingo can leave you feeling overwhelmed. Fear not! We’ve rounded up a list of 12 terms you should know to help you feel confident along your journey.
Home Financing terms
Pre-qualification
When you pre-qualify for a home loan, you’re getting a ballpark estimate of what you might be able to borrow, based on information you provide to your lender about your finances. Pre-qualification is a great time to ask questions and learn about all the different mortgage options.
Pro Tip: Use our finance calculators to familiarize yourself with your finances, get acquainted with home financing terminology and begin exploring your purchasing power.
Use our all-in monthly payment calculator
Pre-approval
A pre-approval means a lender has verified your information, checked your credit and pre-approved you for a specific loan amount for up to 90 days. A pre-approval letter from your lender tells the seller you’re a serious buyer and have undergone a more rigorous assessment by the lender compared with pre-qualification.
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Rate Lock
A rate lock protects you from rate increases for a specified period of time during the buying process. It guarantees you are "locked in" for a specific period of time, even if interest rates rise during that period. This can be helpful when the economy fluctuates, and rates change.
Down Payment
The portion of the purchase price that you pay at closing. According to a recent report by the National Association of Realtors, the average down payment in 2021 was 7% for first-time buyers and 17% for repeat buyers, but there are loans that allow for lower down payments. When choosing the percentage, it all depends on what type of mortgage you choose and what your budget is.
Closing Costs
These costs may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, and credit report charges. They typically make up about 3% to 6% of the loan amount and are due when you sign your final loan documents. Anticipate paying these costs in addition to your down payment.
Homeowners Insurance
A form of property insurance that covers losses and damages to an individual's residence, along with furnishings and other assets in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property. If you get a mortgage, your lender will require you to have homeowners’ insurance before your closing date.
Private Mortgage Insurance (PMI)
PMI is a type of mortgage insurance that may be required by your lender if you obtain a conventional loan and make a down payment of less than 20% of the home's purchase price. PMI is what protects the lender if you stop making payments on the loan. This isn’t a permanent monthly payment, so once you've paid off 20% of your principal or mortgage balance then you can have your lender remove it.
Homebuilding Terms
Home Automation
The integration of different Wi-Fi-enabled smart devices that allow you to automate and remotely control various aspects of your home (and make everyday life a breeze!). A few popular features from the M.Connected Home™ Automation Suite include an advanced thermostat and a smart home hub to control all the smart features from one place.
Home Energy Rating System (HERS)
The Home Energy Rating System (HERS) is the industry standard by which a home’s energy efficiency is measured. The lower the HERS score, the more energy efficient the home is, and the less you’ll pay in energy bills.
Spray Foam Insulation
Spray polyurethane foam is widely used to insulate buildings and seal cracks and gaps, making a building more energy-efficient and comfortable. This type of insulation is known to resist heat transfer extremely well, and it offers a highly effective solution in reducing unwanted air infiltration through cracks, seams, and joints.
Interior Design Finishes
One of the best parts of moving into a new home is choosing the design finishes for tile, cabinets, light fixtures and more. Meritage offers beautiful, designer-curated finishes for a simplified way to create your dream home.
Homeowner Orientation
Before you take the keys and move in, you should plan to attend a homeowner orientation where you can ask any remaining questions and we finalize details.
Now that you’ve got the basics down, level up your knowledge with our extended homebuyer glossary. Or you can always reach out to our team if you have questions.