Whether you’re a first-time homebuyer or looking to upgrade to a new home, knowing the lingo can help you feel more confident. At Lennar, we want to make the homebuying process as smooth as possible—so that you’re prepared every step of the way.
1. Pre-Approval
Pre-approval is a lender’s preliminary assessment of how much a potential homebuyer can borrow. This process involves a review of your financial details, including your income, credit score and debt-to-income ratio. Basically, your pre-approval lets you know how much home you can afford.
Our affiliate Lennar Mortgage can get you pre-approved today, helping you better understand your finances when buying a new Lennar home.
2. Closing Costs
Closing costs are the fees and expenses involved in finalizing a home purchase. They are typically paid at the closing of the sale.
Some common closing costs include:
These are just some of the possible costs that may be included at the closing of your home.
3. Earnest Money
In the beginning of a real estate transaction, earnest money is a deposit made by the buyer to the seller to show good faith in a purchase offer. This deposit is usually held in an escrow account and demonstrates the buyer’s commitment to the purchase. It can even be applied to the down payment or closing costs.
4. Escrow
This is a term a lot of first-time homebuyers are unfamiliar with. Escrow is a neutral third party that holds and disburses funds and documents during a real estate transaction.
The escrow agent collects and holds the earnest money, ensures that all conditions of the sale are met and then disburses the funds and documents to the appropriate parties.
Basically, escrow helps protect everyone involved.
5. Down Payment
The down payment is the initial payment made by the buyer when purchasing a home and is often a percentage of the home’s purchase price.
The amount of the down payment can vary, but it is usually between 5% and 20%. A larger down payment can reduce the amount of the mortgage and potentially lower monthly payments.
6. Mortgage
A mortgage is a loan used to purchase a home, with the property itself serving as collateral. The lender holds the title to the property until the loan is fully paid off.
The most common types of mortgages include:
A trusted professional at Lennar Mortgage can help you know which type of mortgage is right for you.
7. Property Tax
As a homeowner, it’s your responsibility to pay property tax. It can be paid as a part of escrow along with your monthly mortgage expenses, or you can choose to pay separately in a lump sum at the end of the year.
Your property tax may—and often does—go up year after year, so be sure you stay on top of it, especially if you opt to pay outside of escrow.
8. Homeowner’s Insurance
Homeowner’s insurance is a policy that protects the homeowner against property damage and liability. It covers losses due to events like fire, theft and natural disasters, as well as liability for injuries that occur on the property.
Most lenders require homeowner’s insurance as a condition of the mortgage. It provides financial protection and peace of mind that you are covered in case of unexpected events.
Our affiliate Lennar Insurance Agency can help you secure financial protection and greater peace of mind when purchasing a new Lennar home.
9. Homeowners Association (HOA)
A Homeowners Association, more commonly known as an HOA, is an organization that manages and enforces rules for a residential community. It is responsible for maintaining common areas and ensuring that all properties adhere to the community’s standards.
HOA fees are regular payments made by homeowners to cover the costs of maintenance, amenities and other community services. These fees can vary widely depending on the community and the level of services provided.
10. Closing
Closing is the final step in the homebuying process where the sale is finalized.
This is what you should expect at the closing table:
Understanding these key terms is essential for navigating the homebuying process with confidence. From pre-approval to closing, Lennar is committed to ensuring you have a smooth and successful homebuying experience, with everything you need under one roof.
Our New Home Consultants will be there to ensure a smooth and successful transaction, while our affiliates can help connect you to everything you need from financing to title and insurance services. Discover what’s waiting for you by starting your search at Lennar.com today.
