Glossary

Construction-finance glossary

Plain-language definitions for the terms Nidify® uses. Nothing here is legal, tax, or lending advice.

Amortization

The schedule that pays down a loan over time through regular principal and interest payments. After construction, Nidify® estimates a fully amortized 30-year payment.

Appraisal

An independent opinion of market value. Construction loans typically use a subject-to-completion appraisal of the finished home plus lot.

Build-year draw schedule

A Nidify® planning estimate of interest you may pay while the home is being built: average monthly interest-only, peak interest-only, and total interest over 6, 12, or 18 months. Estimates only — not a quote and not a lock. Nidify® is not a lender.

Cash at closing

Funds you bring to the table at closing. In Nidify® this is the minimum down payment plus any additional down payment you choose.

Closing costs

Fees and prepaid items due when the loan closes. Nidify® uses a tiered estimate that varies by project size (higher percent on smaller bases, lower on larger). On construction, the base is construction budget + amount owed on the lot (or lot purchase if buying) + contingency. On a spec-home estimate, the base is the spec home price alone. Closing costs vary by lender. This is an estimate only. Nidify® is not a lender.

Construction-phase planning rate

A labeled educational rate for the build year. It is not a lender quote and not a rate lock. Nidify® is not a lender.

Construction-to-permanent

One loan that funds the build and then becomes a long-term mortgage when the home is finished, often without a second closing.

Contingency fee

A reserve for overruns and unforeseen work. Nidify® estimates contingency at 2% of the construction budget only (not lot payoff, lot purchase, or closing costs).

Draw

A disbursement from the construction loan to pay the builder as work is completed. Inspectors typically verify progress before each draw.

Draw schedule

The plan for when funds are released. At closing, DRAW is the lot purchase (if buying) plus 10% of the construction budget — or 10% of construction only if the lot is already owned. Closing BALANCE for a purchase is that same draw. When the lot is owned, closing balance is 10% of construction plus any amount still owed on the lot plus any financed closing costs and contingency (cash covers fees first; the rest rolls into the loan). When buying a lot, closing costs and contingency are paid in cash and do not enter the opening balance. The remaining 90% of construction is drawn evenly over the months after closing (11 months on a default 12-month build, or 17 months when the construction budget is over $1,500,000).

Equity

What the lot is worth minus what is still owed. Owned-lot value is included in future value for LTV / loan capacity; Nidify® does not subtract lot equity again from cash at closing. Still an estimate.

FHA

Federal Housing Administration insured financing. In this estimator, when FHA offers the highest loan capacity within the FHA limit, non-veteran scenarios are modeled at up to 96.5% LTV of future value (about 3.5% down), with financed upfront MIP and monthly MIP on the 30-year payment only.

Fannie Mae (FNMA)

Conventional financing associated with Fannie Mae / Freddie Mac. In this estimator, conforming conventional is preferred when the loan stays at or under $832,750 with LTV at or under 95% of future value. Monthly PMI is estimated on the 30-year payment when LTV is above 80%; at 80% LTV or below there is no PMI.

Float-down

A rate-lock feature that may let the borrower take a lower market rate before closing if rates improve, usually with conditions and a fee. Not a guarantee.

Future value

Nidify® estimate of finished project value for planning: lot value (or desired purchase price) plus the construction budget. Not an appraisal.

Interest-only payment

During construction you typically pay interest on funds already drawn, not full principal and interest. Nidify® shows estimated first-draw and fully-drawn amounts on the draw schedule, plus a separate build-year draw-schedule planning estimate (average, peak, and total). Mortgage insurance is not added to interest-only amounts. Estimates only. Nidify® is not a lender.

Jumbo

A loan amount above the conventional conforming limit used in this tool ($832,750). Nidify® models jumbo construction/purchase sizing at a hard maximum 80% LTV of future value (about 20% down) as a planning assumption, not a quote.

Loan officer

A licensed mortgage professional who originates the loan. Nidify® is not a lender and does not approve or originate loans.

Lock

An agreement that holds an interest rate for a period. Construction-to-permanent locks can be longer than purchase locks and may include extension or float-down options.

Lot equity

Owned-land value minus the amount owed on that land. In this estimator, lot value raises future value (and loan capacity); cash at closing is the program shortfall (and, when buying a lot, closing costs plus contingency). Lenders may treat equity differently.

Mortgage insurance (MI / PMI / MIP)

An educational add-on to the 30-year estimated payment when LTV is above 80% on conventional (PMI bands) or on FHA (monthly MIP). Not added to construction interest-only / draw payments. VA has no monthly MI in this model. Actual pricing varies by credit, LTV, and lender. Nidify® is not a lender.

One-time close

A construction-to-permanent structure with a single closing that covers both the build and the permanent mortgage.

PITI

Principal, interest, taxes, and insurance — the typical full housing payment after the home is complete. Nidify® currently estimates principal and interest plus mortgage insurance when applicable — not taxes, homeowners insurance, or HOA.

Pre-approval

A lender review of credit and income. Nidify® scenarios are educational estimates, not a pre-approval or a commitment to lend.

Purchase loan

A traditional mortgage that buys a finished home in one closing. Spec-home Nidify® estimates use a purchase loan (VA / FHA / FNMA / jumbo), not a construction-to-permanent loan. Regular amortized payments start after closing. No construction draws.

Rate subject to change

Market and lender rates move. Any payment shown here can change before you apply, lock, or close.

RESPA

The Real Estate Settlement Procedures Act. It governs how settlement services are disclosed. Nidify® uses estimate-only language and does not steer you to a particular lender.

Spec home

A finished home a builder already built and listed for sale. Nidify® models spec as a traditional purchase loan on the listing price: veteran status, optional extra down, tiered closing costs in the loan, and a 30-year payment (with MI/PMI/MIP when applicable). No lot, construction budget, draw schedule, or contingency fee.

Takeout / permanent loan

The long-term mortgage that remains after construction. Nidify® estimates a 30-year fully amortized payment using a near-live market rate when available.

VA loan

Financing for eligible veterans and service members. In this estimator, VA is modeled at 0% down up to a $3,000,000 loan amount; any amount above that is treated as required down payment. No monthly mortgage insurance is added.