Glossary

A sum of money set aside in the construction contract for items which have not been selected and specified in the construction contract. For example, selection of tile as a flooring may require an allowance for an underlayment material, or an electrical allowance which sets aside an amount of money to be spent on electrical fixtures.

Insurance coverage on a construction project during construction, including extended coverage that may be added for the contract for the customer's protections.

This certificate is issued by the local municipality and is required before anyone can occupy and live within the home. It is issued only after the local municipality has made all inspections and all monies and fees have been paid.

The standards that define how a property may be used and the protections the developer makes for the benefit of all owners in a subdivision.

The amount of progress billings on a contract that is currently available to a contractor under a contract with a fixed payment schedule.

A sum paid to the seller to show that a potential purchaser is serious about buying.

A formal contract which allows a party to use another party's property for a specific purpose. e.g. A sewer easement might allow one party to run a sewer line through a neighbor’s property.

Additional work requested of a contractor, not included in the original plan, which will be billed separately and will not alter the original contract amount, but increase the cost of building the home.

A contract with a set price for the work. See Time and Materials Contract.

A loan where the initial payments are based on a certain interest rate for a stated period.  The rate payable will not change during this period regardless of changes in the lender's standard variable rate.

A fixed-rate, fixed-schedule loan. It starts with lower payments than a level payment loan; payments rise annually, with the entire increase being used to reduce the outstanding balance. The increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years, or less.

Protection against damage caused by fire, windstorms, or other common hazards. Many lenders require borrowers to carry it in an amount at least equal to the mortgage.

The interest rate or adjustment standard that determines the changes in monthly payments for an adjustable rate loan.

A mortgage with identical monthly payments over the life of the loan.

The ratio of the loan amount to the property valuation and expressed as a percentage. E.g. if a borrower is seeking a loan of $200,000 on a property worth $400,000 it has a 50% loan to value rate. If the loan were $300,000, the LTV would be 75%. The higher the loan to value, the greater the lender's perceived risk. Loans above normal lending LTV ratios may require additional security.

A lien on real property, created by statue in many years, in favor of persons supplying labor or materials for a building or structure, for the value of labor or materials supplied by them. In some jurisdictions, a mechanics lien also exists for the value of professional services. Clear title to the property cannot be obtained until the claim for the labor, materials, or professional services is settled. Timely filing is essential to support the encumbrance, and prescribed filing dates vary by jurisdiction.

A charge for work involved in preparing and servicing a mortgage application (usually one percent of the loan amount).

A set of rules governing safe wiring methods. Local codes—which are backed by law—may differ from the NEC in some ways.

The measurement of spacing for studs, rafters, and joists in a building from the center of one member to the center of the next.

A wall that subdivides spaces within any story of a building or room.

A pre-agreed upon schedule of payments to a contractor usually based upon the amount of work completed. Such a schedule may include a deposit prior to the start of work. There may also be a temporary 'retainer' (5-10% of the total cost of the job) at the end of the contract for correcting any small items which have not been completed or repaired.

A provision in a contract that provides for a reduction in the amount otherwise payable under a contract to a contractor as a penalty for failure to meet deadlines or for failure of the project to meet contract specifications.

A governmental municipal authorization to perform a building process as in:

·          Zoning\Use permit - Authorization to use a property for a specific use e.g. a garage, a single family residence etc.

·          Demolition permit - Authorization to tear down and remove an existing structure.

·          Grading permit - Authorization to change the contour of the land.

·          Septic permit - A health department authorization to build or modify a septic system.

·          Building permit - Authorization to build or modify a structure.

·          Electrical permit - A separate permit required for most electrical work.

·          Plumbing permit - A separate permit required for new plumbing and larger modifications of existing plumbing systems.

A measure of insulation. A measure of a materials resistance to the passage of heat. The higher the R value, the more insulating "power" it has. For example, typical new home's walls are usually insulated with 4" of batt insulation with an R value of R-13, and a ceiling insulation of R-30.

A contract between a buyer and seller which should explain: (1) What the purchase includes, (2) What guarantees there are, (3) When the buyer can move in, (4) What the closing costs are, and (5) What recourse the parties have if the contract is not fulfilled or if the buyer cannot get a mortgage commitment at the agreed upon time.

A narrative list of materials, methods, model numbers, colors, allowances, and other details which supplement the information contained in the blue prints. Written elaboration in specific detail about construction materials and methods. Written to supplement working drawings.

A term used when the subcontractor provides all materials (and labor) for a job.

The area of the earth that has electric, gas, or telephone lines. These areas may be owned by the homeowner, but the utility company has the legal right to enter the area as necessary to repair or service the lines.

The fee paid by the prospective borrower for the lender's inspection of the property. Normally paid upon loan application.

A final inspection of a home before "Closing" to look for and document problems that need to be corrected.

In construction there are two general types of warranties. One is provided by the manufacturer of a product such as roofing material or an appliance. The second is a warranty for the labor. For example, a roofing contract may include a 20 year material warranty and a 5 year labor warranty. Many new homebuilders provide a one year warranty. Any major issue found during the first year should be communicated to the builder immediately. Small items can be saved up and presented to the builder for correction periodically through the first year after closing.

A governmental process and specification which limits the use of a property e.g. single family use, high rise residential use, industrial use, etc. Zoning laws may limit where you can locate a structure. Also see building codes