Real Estate 101
Glossary of Real Estate Terms — Page 2

Fannie Mae: See Federal National Mortgage Association.

Farmer’s Home Administration (FmHA): An agency of the U.S. Department of Agriculture that provides financing for purchasers of homes and farms in small towns and rural areas.

FDIC: See Federal Deposit Insurance Corporation.

Federal Deposit Insurance Corporation (FDIC): Independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation’s banking system.

Federal Home Loan Bank Board (FHLBB): Former name for the regulatory and supervisory agency of federally chartered savings institutions, now called the Office of Thrift Supervision.

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac): Quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA): Government agency, division of the Department of Housing and Urban Development, which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

Federal National Mortgage Association (FNMA): Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

Federal Reserve: Central bank of the United States and major regulatory agency for many commercial banks.

Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

FHA: See Federal Housing Administration.

FHA Loan: A loan insured by the Federal Housing Administration (of the Department of Housing and Urban Development).

FHLBB: See Federal Home Loan Bank Board.

FHLMC: See Federal Home Loan Mortgage Corporation.

Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation.

First Mortgage: A mortgage that is in first lien position, taking priority over all other liens. In the case of a foreclosure, the first mortgage will be paid before any other mortgage.

Fixed Rate: An interest rate that is fixed for the term of the loan.

Fixed-Rate Mortgage: A mortgage whose interest rate does not change for the life of the loan. The payments are also fixed.

Flood Insurance: A form of hazard insurance required by lenders to cover property damage or loss in flood zones.

Floor: The minimum rate of interest payable on an adjustable-rate mortgage.

FmHA: See Farmer’s Home Administration.

FNMA: See Federal National Mortgage Association.

Forbearance: Grace period given when a lender postpones foreclosure to give the borrower time to catch up on overdue payments.

Foreclosure (Repossession): Legal process by which the lender forces the sale of a property when the borrower has not met the mortgage terms.

Freddie Mac: See Federal Home Loan Mortgage Corporation.

Ginnie Mae: See Government National Mortgage Association.

GNMA: See Government National Mortgage Association.

Good Faith Estimate: Written estimate of costs the borrower must pay at closing, provided by a lender within three days of a loan application.

Government National Mortgage Association (GNMA or Ginnie Mae): Government agency that provides funds for VA and FHA loans.

Grace Period: Period of time during which a loan payment may be made after its due date without incurring a late penalty.

Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

GRI: Graduate, Realtors Institute. A professional designation granted to a member of the National Association of Realtors® who has successfully completed courses covering Law, Finance and Principles of Real Estate.

Gross Income: Total income before taxes or expenses are deducted.

Gross Monthly Income: The total amount earned by the borrower each month.

Growing Equity Mortgage: A fixed-rate loan in which payments increase by a predetermined amount each year, reducing the outstanding balance of the loan. This accelerated payment plan allows repayment of a 30-year loan in 15 to 20 years.

Guarantee or Guaranty: A promise by one party to pay a debt or perform an obligation contracted by another in the event of that person’s death.

Hazard Insurance: A policy that protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer.

Home Equity Loan: A loan secured by the equity in a home and sought for a variety of purposes, including home improvements, major purchases or expenses, or debt consolidation. A portion or all of the interest paid may be tax deductible.

Home Inspection Report: A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

Home Warranty Plan: Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.

Housing and Urban Development (HUD): A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.

Housing Code: Local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.

Housing Expense-to-Income Ratio: The ratio, expressed as a percentage, is the result of dividing a borrower’s housing expenses by his or her gross monthly income.

HUD: See Housing and Urban Development.

HUD-I Settlement Statement: A form that itemizes the closing costs associated with purchasing a home.

Impound (Reserves): Portion of a borrower’s monthly payments held by the lender to pay for taxes, insurance and other items as they become due.

Impound Account: Savings account for accumulating that portion of a borrower’s monthly payments designated for future payments of taxes and insurance. This is required by lenders for certain types of financing.

Index: A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.

Initial Rate: The rate charged during the first interval of an ARM.

Insolvency: Condition of a person unable to pay debts as they fall due.

Interest: Charge paid for borrowing money.

Interest Rate: The periodic charge, generally expressed as a percentage per annum of the outstanding balance, for use of credit.

Interest Rate Cap: A safeguard built into ARMs to prevent drastic changes in interest rates.

Joint Liability: Liability shared among two or more people, each of whom is liable for the full debt.

Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent’s interest in the property.

Jumbo Loan: A mortgage larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (currently $240,000 for a single-family home in most areas). Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Junior Mortgage: A mortgage subordinate or secondary to another mortgage. In the case of a foreclosure, a senior mortgage will be paid first.

Please call or with any questions you may have and we will do our very best to serve you.  Thanks for visiting our site and we hope to hear from you so that we can work together to find you your dream property.