Debt: Money owed from one person or institution to another person or institution.
Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expense, alimony, child support, car payments and other installment debts, and payments on revolving or open-ended accounts, such as credit cards.
Deed: The legal document transferring ownership or title to a property
Deed-in-Lieu of Foreclosure: The transfer of title from a borrower to the lender to satisfy the mortgage debt and avoid foreclosure. Also called a “voluntary conveyance.”
Deed of Trust: A legal document in which the borrower transfers the title to a third party (trustee) to hold as security for the lender. When the loan is paid in full, the trustee transfers title back to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.
Default: Failure to fulfill a legal obligation. A default includes failure to pay on a financial obligation, but also may be a failure to perform some action or service that is non-monetary. For example, when leasing a car, the lessee is usually required to properly maintain the car.
Delinquency: Failure to make a payment when it is due. The condition of a loan when a scheduled payment has not been received by the due date, but generally used to refer to a loan for which payment is 30 or more days past due.
Depreciation: A decline in the value of a house due to changing market conditions or lack of upkeep on a home.
Discount Point: A fee paid by the borrower at closing to reduce the interest rate. A point equals one percent of the loan amount.
Down Payment: A portion of the price of a home, usually between 3-20%, not borrowed and paid up-front in cash. Some loans are offer end with zero down payment.
Due-on-Sale Clause: A provision in a mortgage that allows the lender to demand repayment in full of the outstanding balance if the property securing the mortgage is sold.
Earnest Money Deposit: The deposit to show that you’re committed to buying the home. The deposit usually will not be refunded to you after the seller accepts your offer, unless one of the sales contract contingencies is not fulfilled.
Easement: A right to the use of, or access to, land owned by another.
Employer-Assisted Housing: A program in which companies assist their employees in purchasing homes by providing assistance with the down payment, closing costs, or monthly payments.
Encroachment: The intrusion onto another’s property without right or permission.
Encumbrance: Any claim on a property, such as a lien, mortgage or easement.
Equal Credit Opportunity Act (ECOA): A federal law that requires lenders to make credit equally available without regard to the applicant’s race, color, religion, national origin, age, sex, or marital status; the fact that all or part of the applicant’s income is derived from a public assistance program; or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. It also requires various notices to consumers.
Equity: The value in your home above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.
Escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
Escrow Account: An account that a mortgage servicer establishes on behalf of a borrower to pay taxes, insurance premiums, or other charges when they are due. Sometimes referred to as an “impound” or “reserve” account.
Escrow Analysis: The accounting that a mortgage servicer performs to determine the appropriate balances for the escrow account, compute the borrower’s monthly escrow payments, and determine whether any shortages, surpluses or deficiencies exist in the account.
Eviction: The legal act of removing someone from real property.
Exclusive Right-to-Sell Listing: The traditional kind of listing agreement under which the property owner appoints a real estate broker (known as the listing broker) as exclusive agent to sell the property on the owner’s stated terms, and agrees to pay the listing broker a commission when the property is sold, regardless of whether the buyer is found by the broker, the owner or another broker. This is the kind of listing agreement that is commonly used by a listing broker to provide the traditional full range of real estate brokerage services. If a second real estate broker (known as a selling broker) finds the buyer for the property, then some commission will be paid to the selling broker.
Exclusive Agency Listing: A listing agreement under which a real estate broker (known as the listing broker) acts as an exclusive agent to sell the property for the property owner, but may be paid a reduced or no commission when the property is sold if, for example, the property owner rather than the listing broker finds the buyer. This kind of listing agreement can be used to provide the owner a limited range of real estate brokerage services rather than the traditional full range. As with other kinds of listing agreements, if a second real estate broker (known as a selling broker) finds the buyer for the property, then some commission will be paid to the selling broker.
Executor: A person named in a will and approved by a probate court to administer the deposition of an estate in accordance with the instructions of the will.
Fair Credit Reporting Act (FCRA): A consumer protection law that imposes obligations on (1) credit bureaus (and similar agencies) that maintain consumer credit histories, (2) lenders and other businesses that buy reports from credit bureaus, and (3) parties who furnish consumer information to credit bureaus. Among other provisions, the FCRA limits the sale of credit reports by credit bureaus by requiring the purchaser to have a legitimate business need for the data, allows consumers to learn the information on them in credit bureau files (including one annual free credit report), and specifies procedure for challenging errors in that data.
Fair Market Value: The price at which property would be transferred between a willing buyer and willing seller, each of whom has a reasonable knowledge of all pertinent facts and is not under any compulsion to buy or sell.
Fannie Mae: A New York stock exchange company. It is a public company that operates under a federal charter and is the nation’s largest source of financing for home mortgages. Fannie Mae does not lend money directly to consumers, but instead works to ensure that mortgage funds are available and affordable, by purchasing mortgage loans from institutions that lend directly to consumers.
Fannie Mae-Seller/Servicer: A lender that Fannie Mae has approved to sell loans to it and to service loans on Fannie Mae’s behalf.
Fannie Mae/Freddie Mac Loan Limit: The current 2006 Fannie Mae/Freddie Mac loan limit for a single-family home is $417,000 and is higher in Alaska, Guam, Hawaii, and the U.S. Virgin Islands. The Fannie Mae loan limit is $533,850 for a two-unit home; $645,300 for a three-unit home; and $801,950 for a four-unit home. Also referred to as the “conventional loan limit.”
Federal Housing Administration (FHA): An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages and loans made by private lenders.
FHA-Insured Loan: A loan that is insured by the Federal Housing Administration (FHA) of the U.S. Department of Housing and Urban Development (HUD).
First Mortgage: A mortgage that is the primary lien against a property.
First-Time Home Buyer: A person with no ownership interest in a principal residence during the three-year period preceding the purchase of the security property.
Fixed-Period Adjustable-Rate Mortgage: An adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified period, for the remainder of the term. Also known as a “hybrid loan.”
Fixed-Rate Mortgage: A mortgage with an interest rate that does not change during the entire term of the loan.
Flood Certification Fee: A fee charged by independent mapping firms to identify properties located in areas designated as flood zones.
Flood Insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood hazard zones.
Foreclosure: A legal action that ends all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
Forfeiture: The loss of money, property, rights, or privileges due to a breach of a legal obligation.
Fully Amortized Mortgage: A mortgage in which the monthly payments are designed to retire the obligation at the end of the mortgage term.
General Contractor: A person who oversees a home improvement or construction project and handles various aspects such as scheduling workers and ordering supplies.
Gift Letter: A letter that a family member writes verifying that s/he has given you a certain amount of money as a gift and that you don’t have to repay it. You can use this money towards a portion of your down payment with some mortgages.
Good-Faith Estimate: A form required by the Real Estate Settlement Procedures Act (RESPA) that discloses an estimate of the amount or range of charges, for specific settlement services the borrower is likely to incur in connection with the mortgage transaction.
Government Mortgage: A mortgage loan that is insured or guaranteed by a federal government entity such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS).
Government National Mortgage Association (Ginnie Mae): A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD) that guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Popularly known as “Ginnie Mae.”
Gross Monthly Income: The income you earn in a month before taxes and other deductions. It also may include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.
Ground Rent: Payment for the use of land when title to a property is held as a leasehold estate (that is, the borrower does not actually own the property, but has a long-term lease on it).
Growing-Equity Mortgage (GEM): A fixed-rate mortgage in which the monthly payments increase according to an agreed-upon schedule, with the extra funds applied to reduce the loan balance and loan term.
Hazard Insurance: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other covered hazards or natural disasters.
Home Equity Conversion Mortgage (HECM): A special type of mortgage developed and insured by the Federal Housing Administration (FHA) that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Sometimes called a “reverse mortgage.”
Home Equity Line of Credit (HELOC): A type of revolving loan, that enables a home owner to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in the property.
Home Inspection: A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
Homeowner’s Insurance: A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances
Homeowner’s Warranty (HOW): Insurance offered by a seller that covers certain home repairs and fixtures for a specified period of time.
Homeowners’ Association: An organization of homeowners residing within a particular area whose principal purpose is to ensure the provision and maintenance of community facilities and services for the common benefit of the residents.
Housing Expense Ratio: The percentage of your gross monthly income that goes toward paying for your housing expenses.
HUD-1 Settlement Statement: A final listing of the closing costs of the mortgage transaction. It provides the sales price and down payment, as well as the total settlement costs required from the buyer and seller.
Hybrid Loan: An adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified period, for the remainder of the term.