Monticello Homes Basic Finance Terms

We understand the home buying process can be challenging to navigate, which is why our home building professionals and lending partners are here to help ensure you understand each and every step. We’ve also provided the following helpful list of generalMonticello Homes real estate finance termsto give you an overview of what you’ll need to understand when buying your new estate home.


Prequalified -This term should not be confused with preapproved.Prequalification means that based on limited knowledge of your finances, you could be prequalified for a certain loan amount that you can use to start looking for a home.


Preapproved –Home loan preapproval requires a more extensive process and you will need to be prepared to submit documents to the lender, such as pay stubs, bank statements and tax returns, etc. Once preapproved you can typically be assured you will be able to secure this amount for a home loan.


Fixed-rate mortgage- This means the interest rate you pay on your home loan will not change over time.


Adjustable-rate mortgage- Also known as an ARM, this is the opposite of a fixed-rate mortgage. You'll have a fixed rate for several years and then the interest rate adjusts according to the fully indexed interest rate, often the prime rate.


Conventional loans– This is the typical loan type that most people apply for when setting up a mortgage for a new home and requires a 5 percent or higher down payment.


Federal Housing Administration loan– These loans are designed for individuals with lower credit scores and requires a lower down payment amount of 3 percent. 


Appraisal– Lenders will require this estimate of the property’s worth in order to determine the final loan amount they are willing to offer. 


Private mortgage insurance –The monthly insurance payment you'll pay if the down payment on your house is less than 20 percent of the appraised value or sale price.


Closing costs- The fees associated with buying a house that your lender charges you and from various third parties, such as a home inspector. You can expect closing costs to be between 2 - 5 percent of the home’s purchase price.


Points- One point is a fee equal to 1 percent of the loan amount. A lender can charge 1, 2 or more points. Points are essentially prepaid interest and the more points you pay, the lower your interest rate will be.


Escrow– An escrow is money held by a third, neutral party. Typically the deposit money you pay when buying a home will be put into escrow. Money paid to the lender for home insurance is also another likely item to be put into escrow to pay the insurance company.


We invite you to contact our preferred lenders to answer any questions you may have that will help you better understand theMonticello Homes long term financing optionsavailable to you.