Building a New Home

Preparation and Planning to Build A New Home

The Southern Designer, LLC would like to provide you with some valuable resources you may find helpful when building your new home. First, we suggest visiting our website, offering over 9000 quality, professionally designed house plans at www.southerndesigner.com! Once you find the plan you like, here are some links and articles that may assist you in the building process:

Federal Housing Tax Credit For First Time Home Buyers

Home Buyer "Opportunity Knocks" Brochure

Find A Builder

Building Codes: What You Should Know From www.NAHB.org

If you are shopping for a new home, how can you be sure that it was built so that it does not cause health or safety problems for the members of your household? The answer can be given in two words: building codes.

A building code sets forth requirements to protect public health, safety and general welfare as they relate to construction and the occupancy of a building. These codes include specific requirements for building materials, fire protection, structural design, light and ventilation, heating and cooling, sanitary facilities and energy conservation.

There is no national building code enforced by the federal government. Different areas of the country have different construction methods; the techniques used to build houses in a cold climate will be different than those used in a warm climate. Most construction in the United States is regulated at the local level. Only a few municipalities (mostly major cities) write and revise their own codes. Some states have mandatory statewide building codes.

Building homes is a complicated process, so building codes are often long and complicated. To prevent each local jurisdiction from having to develop its own complicated codes from scratch, there are several major model code organizations that draft codes that local areas can adopt.

The local area has total authority for adoption and enforcement. It may adopt a model code as is, adopt only specific portions, or add some of its own changes.

Code writing is a dynamic process, involving constant interaction between the public and private sectors of the construction industry. Federal, state and local governments and individuals involved in code writing and revision represent the views of labor, management, manufacturers and trade associations, contributing much time and technical expertise to the process.

Building codes do not deal with issues such as the quality of the workmanship and materials.

Consumers are protected in these areas through their warranties. For instance, if a building code inspector is examining a home and sees a gouge in a kitchen floor or counter top, that would not be an item affecting health or safety, and as such would not be covered by a building code.

However, it would be covered in the warranty on workmanship and materials.

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How to Choose A Builder From www.NAHB.org

If you're in the market for a new home, you should shop for your builder as carefully as you shop for your home. Whether you are buying a condo, a townhouse, a house in a subdivision, or a custom built house, you want to know that you are buying a good quality home from a reputable builder. Here are a couple of tips to help you choose a builder.

Make A List of Possible Builders
Once you have thought about the type of house you want, you will need to find a builder.

• Contact your local home builders' association to obtain a list of builders who construct homes in your area. You can also look on Move.com, NAHB's official new homes listing Web site.
• Look in the real estate section of you local newspaper for builders and projects. Looking through the ads and reading the articles can help you to learn which builders are active in your area, the types of homes they are building, and the prices you can expect to pay. Make a list of builders who build the type of home you're looking for in your price range.
• Local real estate agents may also be able to help you in your search. Ask friends and relatives for recommendations. Ask about builders they have dealt with directly, or ask them for names of acquaintances who have recently had a good experience with a builder.

Do Your Homework
Once you have a list of builders, how can you find out about their reputations and the quality of their work? The best way to learn about builders is to visit homes they have built and talk with the owners.

• Ask builders on your list for the addresses of their recently built homes and subdivisions. Builders may even be able to provide names of some home owners who would be willing to talk with you.
• Drive by on a Saturday morning when home owners may be outside doing chores or errands. Introduce yourself and say you are considering buying a home from the builder who built their home. Talk to several owners, and try to get a random sample of opinions. The more people you talk with, the more accurate an impression of a builder you are likely to get. At the very least, drive by and see if the homes are visually appealing.
• When you talk to builders and home owners, take along a notebook to record the information you find and your personal impressions about specific builders and homes. Doing so will help you to make comparisons later. Some questions you can ask people include: Are you happy with your home? If you had any problems, were they fixed promptly and properly? Would you buy another home from this builder?
• Usually, people tell you if they are pleased with their homes. And if they are not, they'll probably want to tell you why.

Shop For Quality and Value
Look at new homes whenever you can. Home shows and open houses sponsored by builders are good opportunities to look at homes. Model homes and houses displayed in home shows are often furnished to give you ideas for using the space. You may also ask a builder to see unfurnished homes.

When examining a home, look at the quality of the construction features. Inspect the quality of the cabinetry, carpeting, trimwork, and paint. Ask the builder or the builder's representative a lot of questions. Get as many specifics as possible. If you receive the answers verbally rather than in writing, take notes. Never hesitate to ask a question. What seems like an insignificant question might yield an important answer.

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Home Buyer's Dictionary From www.NAHB.org

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.