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Every industry has its own unique jargon that can seem like a foreign language to someone unfamiliar with it. The construction and real estate worlds are no different, and if you’re about to embark upon building and/or purchasing a home you’ll want to brush up on the following terminology to help you better understand the processes relating to both.
Real Estate and Loan Terminology
- APR (Annual Percentage Rate)
The APR refers to the interest rate of a mortgage. - Gross/Net Income
Gross income is your total amount of income before any taxes or deductions. Likewise, net income is your total amount of income after taxes and deductions are removed. - Down Payment
A down payment is an upfront (cash) payment of a portion of the property’s overall cost. - Closing Cost
Closing costs are the fees of ownership transferal, such as lender’s fees, property taxes, etc. - Fixed and Adjustable Rate Mortgages
A fixed rate means you pay the same amount on your mortgage every month. An adjustable rate means that the payments fluctuate. - Pre-approved and Pre-qualified
The pre-approval process determines a specific amount of money a buyer can borrow, and provides formal documentation of such. Pre-qualification is an informal process that determines how much the buyer might be able to borrow, based upon credit score. - Principal
This is the amount of money your lender allows you to borrow. - Homeowner’s Warranty
This is the warranty received through the builder (on a new-build) that insures (or protects) you against systems failing within the home. Warranties vary from builder to builder. - Private Mortgage Insurance
PMI is a protective policy that lenders require of buyers who pay less than 20% for their down payment. Typically, the cost is added into your monthly mortgage payment. - Title
The title is the paper proof of property ownership. - Qualifying Ratios
This determines whether or not a buyer is able to obtain a loan on their mortgage.
Construction Terminology
- Building Codes
These are construction rules and regulations set by the governing municipality, required to be met for home and building safety. - Building Permit
This is the formal permission obtained by the builder from the governing municipality, required to begin construction. - CO (Certificate of Occupancy)
This certifies that the construction of the home has met all building codes, passed all inspections, and is safe for occupants. - Backsplash
This is tile work on kitchen, bathroom, and wet bar walls, typically in back of the sink area and sometimes referred to simply as “splash.” - Acre
An acre is a unit of measure: 43,650 square feet. - Elevation
The elevation is the way the building looks from the outside. Typically, one house plan will have two or three different front elevations. - Framing
This is the structured support of the building, and the skeletal outline of the rooms within. - Fixtures
This refers to permanent goods, such as lighting and plumbing. - Fenestration
This is the design for openings in the home, such as windows and doors. - Floor Plan
The floor plan is the design or layout of how the home will be set up (rooms, hallways, etc.). - Insulation
Insulation prevents loss of heat/AC as well as protects the building from exterior elements. - Slab
This is the concrete base of the home placed directly on the dirt/ground. - Flatwork
Concrete flatwork refers to poured concrete patios, sidewalks, garages, basements, etc. - Siding
Siding is the exposed, decorative (painted) exterior walls on a house. - Truss
The truss is the support for the roof of the house.
