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Real Estate Glossary

Real Estate Glossary
Use this real estate glossary to research terms you might run across in a real estate transaction.

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Term	Definition
Examination of Title	The report on the title of a property from the public records or an abstract of the title.

Exchange	When ownership of like-kind properties are transferred between two or more owners; can result in postponement of part or all of the tax for one or more of the parties to the exchange.

Exclusive agency listing	A listing agreement between a seller and a broker in which either has a right to sell the property; if sold by the broker a commission will be due

Exclusive Listing	A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.

Exclusive right to sell	A listing agreement between a seller and a broker whereby the broker receives a commission, regardless of who sells the property.

Executor	A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.

Fair credit billing act	A federal law that gives a borrower the right to question credit card bills from companies other than banks. The law lays out a process for a borrower to follow if a credit-card bill is wrong, or appears to be wrong.

Fair Credit Reporting Act	A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair debt collection practices act	A federal law that protects consumers from abuse or threats from collection agencies trying to get overdue payments.

Fair Housing Act	Legislation first enacted in 1968 and expanded by amendments in 1974 and 1988, which provides the Secretary with investigation and enforcement responsibilities for fair housing practices. Prohibits discrimination in housing and lending based on race, color, religion, sex, national origin, handicap, or familial status.

Fair Housing Assistance Program (FHAP)	A Program to assist state and local agencies and community housing resources boards in processing Fair Housing Act complaints.

Fair Housing Initiatives Program (FHIP)	A Program to assist states, local agencies, fair housing groups, and community housing resource boards in bringing public and private efforts together to combat housing discrimination.

Fair Market Rents (FMR)	Rent Schedules published in the Federal Register which establish maximum eligible rent levels allowed under the Section 8 program by geographic area.

Fair Market Value	The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae	A federally chartered, stockholder owned corporation which supports the secondary market for both conventional mortgages and mortgages insured by the FHA and guaranteed by VA.

Feasibility analysis	Study of the cash flow, profitability potential and overall desirability of a project.

Federal Deposit Insurance Corporation

Federal Home Loan Bank Board (FHLBB)	Supervises Federal Home Loan Banks, which supply member banks with credit to enhance their service as savings depositories and as lenders of mortgage funds.

Federal Home Loan Bank System	Through its 12 District Banks, the FHLB makes advances to over 7,000 member financial institutions, which in turn lend the funds for home mortgages and community development. Also see AHP.

Federal Home Loan Mortgage Corporation (	A federally chartered stockholder owned corporation which supports the secondary market for conventional mortgages.

Federal Housing Finance Board (FHFB)	The FHFB regulates the Federal Home Loan Bank System.

Federal National Mortgage Association (F	A federally chartered, stockholder owned corporation which supports the secondary market for both conventional mortgages and mortgages insured by the FHA and guaranteed by VA.

Federal Reserve System	The System's duties fall into four general areas: conducting the nation's monetary policy; supervising and regulating banking institutions; maintaining the stability of the financial system; and providing certain financial services to the U.S. government, the public, financial institutions, and foreign official institutions.

Fee Simple	The greatest possible interest a person can have in real estate. Fee simple ownership provides the owner with unrestricted powers to dispose of the owned property as the owner sees fit. Of all types of ownership a person can have in real estate, fee simple provides the greatest amount of personal control.

Fee simple absolute	Entire bundle of rights to use and control real property.

Fee Simple Estate	An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA (Federal Housing Administration)	A division of the U.S. Department of Housing and Urban Development that insures mortgage loans.

FHA Coinsured Mortgage	A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor's default.

FHA Fund	This fund is comprised of four separate funds to finance specific FHA mortgage insurance programs: Mutual Mortgage Insurance Fund (MMI), Cooperative Management Housing Insurance Fund (CMHI), General Insurance Fund (GI), and Special Risk Insurance Fund (SRI).

FHA loan	A mortgage that is insured by the Federal Housing Administration.

FHA Loans	With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower. FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a conventional mortgage through a lender.

FHA Mortgage	A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage. With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower.FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a mortgage through a lender.

FHLMC (Federal Home Loan Mortgage Corpor	Referred to as "Freddie Mac" and supervised by the Federal Home Loan Bank Board. FHLMC creates a secondary market for conventional mortgage loans.

Final Walk-Through Inspection	Your sales contract should include a clause that allows you to examine the property you want to purchase within the 24 hours before closing.This walk-through, during which you will be accompanied by the real estate sales professional, is your chance to ensure that the seller has vacated the house and left behind whatever property was agreed upon.Make sure to check that all lights, appliances, and plumbing fixtures are in working order.You will also want to make sure that all conditions of the sales contract have been met. If they aren't, or you observe major problems, you have the right to delay the closing until the problems are corrected.One other option is to make sure money to correct the problems is placed in an escrow account at closing to cover the cost of repairs.

Finance	To supply money for a purchase. A lender can finance home ownership with a mortgage loan.

Financial Index	An index is a number to which the interest rate on an adjustable rate mortgage (ARM) is tied. It is generally a published number expressed as a percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on ARMs. This interest rate is subject to any caps associated with the mortgage. The interest rate changes on an ARM are tied to some type of financial index. Some of the most common type of indexed ARMs are: Treasury-Indexed ARMs CD-Indexed ARMs (Certificate of Deposit) Cost of Funds-Indexed ARMs (COFI) LIBOR-Based ARMs When comparing ARMs, look at how the index to which it is tied has performed recently. Your lender can provide information on how to track the index and a history of the index they use.

Financial leverage	The use of borrowed funds to acquire an investment.

Financial risk	The possible change in an investment's ability to return principal and income.

Financing	Those functions necessary to provide the financial resources to fund government operations and federal assistance including the functions of taxation, fee and revenue generation, public debt, deposit funds, and intra governmental collections. (JFMIP Framework) HUDCAPS Core Financial System Standard Accounting Interface, dated 9/30/97

Finder's Fee	A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

Firm Commitment	A lender's agreement to make a loan to a specific borrower on a specific property.

First and Second Mortgages	A first mortgage is the primary lien against a property. The term is usually coined "first mortgage" only when a "second mortgage" is obtained on a property. A "second mortgage" is a lien that is subordinate to the first mortgage. Usually, the interest rates on second mortgages are slightly higher than the interest rates on a first mortgage. The amount of a second mortgage you can take out will depend on the equity you have built up in your home, the appraised value of your property, your credit history, and any other liens you may have against your property, such as a home equity line of credit.Borrowers will typically get a second mortgage to tap into the equity they've built in their home -- and use that for home improvements, debt consolidation, medical bills, or other purposes. You apply for a second mortgage with the same process you follow for a first mortgage. However, some of your closing costs may be less.When you have a first and second mortgage, you theoretically have two loans, both requiring interest and principal payments.

First Mortgage	A mortgage that is the primary lien against a property. A "first mortgage" is the primary lien against a property. The term is usually coined "first mortgage" only when a "second mortgage" is obtained on a property. A "second mortgage" is a lien that is subordinate to the first mortgage. Usually, the interest rates on second mortgages are slightly higher than the interest rates on a first mortgage. The amount of a second mortgage you can take out will depend on the equity you have built up in your home, the appraised value of your property, your credit history, and any other liens you may have against your property, such as a home equity line of credit.Borrowers will typically get a second mortgage to tap into the equity they've built in their home -- and use that for home improvements, debt consolidation, medical bills, or other purposes. You apply for a second mortgage with the same process you follow for a first mortgage. However, some of your closing costs may be less.When you have a first and second mortgage, you theoretically have two loans, both requiring interest and principal payments.

Fiscal Year	Any yearly accounting period, regardless of its relationship to a calendar year. (GAO) HUDCAPS Core Financial System Standard Accounting Interface, dated 9/30/97

Fixed expenses	Costs that do not change with a building's occupancy rate. They include property taxes, insurance, and some forms of building maintenance.

Fixed expenses or fixed payments	Expenses or payments that usually stay the same from month to month, such as rent, a car loan, a student loan, insurance, child support.

Fixed Installment	The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.

Fixed Lease	A lease in which the lessee pays a fixed amount for the durration of the lease. May also be referred to as a Gross Lease.

Fixed Rate Mortgage	A mortgage in which the interest rate does not change during the entire term of the loan. Fixed-rate mortgages, the most popular type of mortgage, offer the peace of mind that your interest rate will remain the same for as long as you have your loan. If you expect to live in your home for many years, having the same interest rate may be your key concern. If you decide that you like the stable, predictable payments of a fixed-rate loan, you have the option of choosing from a variety of repayment terms: 15, 20, and 30 years are the most common. Typically, the longer the term of the mortgage, the more interest you pay over the life of your loan. However, stretching out your repayment term means your monthly mortgage payments will be less than they would be with a comparable shorter-term mortgage. Lenders offer a wide array of fixed-rate mortgages, including Balloon Mortgages and Biweekly Mortgages.

Fixed-Period Adjustable-Rate Mortgages	This type of adjustable-rate mortgage (ARM) maintains the same initial interest rate for the first three, five, seven, or 10 years of your loan, depending on the term you choose. Your interest rate then adjusts annually, and can move up or down as market conditions change. Be sure to ask your lender about the interest rate caps for both the annual adjustments and for the life of the loan. Advantages: (1)Your initial interest rate will be lower than a fixed-rate mortgage, so you may be able to afford more home.(2)You are protected against interest rate increases for the first three, five, seven, or 10 years of the loan, depending on which type of fixed-period ARM you choose.(3)You may have the option to convert your ARM to a fixed-rate mortgage at the first, second, or third interest rate adjustment dates.(4)You have time to improve your financial position (i.e., salary increases) or accumulate additional assets before the interest rate adjusts at the end of the fixed period.

Fixed-rate mortgage	A mortgage in which the interest rate does not change during the entire term of the loan.

Fixture	Personal property that becomes real property when attached in a permanent manner to real estate.

Flood Insurance	Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

FNMA (Federal National Mortgage Associat	Referred to "Fannie Mae", FNMA is a privately owned, government sponsored agency that buys and sells FHA-insured, VA-guaranteed and conventional mortgage loans.

Forbearance	The lender's postponement of foreclosure to give the borrower time to catch up on overdue payments.

Foreclose	The process of the lender taking a property when the borrower has defaulted on the loan. The lender then sells the property to recoup its loss on the unpaid loan.

Foreclosure	The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt. If you repeatedly do not make your mortgage payments on time, your lender could sell your home and evict you from it in a legal procedure called foreclosure. A foreclosure on your property can result in the loss of your home and your good credit rating. Foreclosure is most often a last resort effort that lenders will take if you repeatedly don't make your mortgage payments. Before going to foreclosure, lenders will work with you if you are facing financial hardships to come up with repayment plans that will let you get back on track and remain in your home.

Forfeiture	The loss of money, property, rights, or privileges due to a breach of legal obligation.

Front foot	A measure of property by which the distance is measured along the street, highway, stream, or other body of water.

Fully Amortized ARM	An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

Fully amortized mortgage	A method of loan amortization in which equal periodic payments completely loan repay the loan.

Functional obsolescence	Decline in value of property caused by changes in technology or by defects in design, layout, or size of building; loss of a building's ability to perform its function.

Future value	The amount to which money grows over a designated period of time at a specified rate of interest.

General Contractor	A general contractor is someone whom you may work closely with during your home improvement project. The general contractor is the person who oversees the construction project and handles various aspects such as scheduling workers and ordering supplies. If you are borrowing mortgage funds to renovate a home, your lender may need to review whether your contractor meets all federal, state, and local registration, licensing and certification standards.

General partnership	Form of co-ownership wherein all partners have a voice in the management of a business and unlimited liability for its debts.

General warranty deed	A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Good faith deposit	See Earnest Money.

Good Faith Estimate	The good-faith estimate is a report from your lender that outlines the costs you will incur to get your mortgage. It is based on the lender's typical loan origination costs for the area where your home is located. The estimate usually changes between application and closing, so you'll want to review your settlement form before the closing meeting. The settlement form will list the actual amount of money you'll need to bring to closing. You'll need to pay your closing costs in the form of a certified or cashier's check because personal checks usually are not accepted.

Gound Lease	A lease of the land only. Usually the land is leased for a relatively long period of time to a tenant that constructs a building on the property. Gross Area The entire floor area of a building.

Government Mortgage	A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortage.

Government National Mortgage Association	A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.

Grade	The level of the ground at the structure foundation.

Graduated lease	A lease providing for a variable rate of rent depending upon some future event.

Graduated payment	A mortgage loan with monthly payments that start at a lower amount and then increase slowly over the next several years. The monthly payments then stay the same at the higher amount.

Grantee	The person to whom an interest in real property is conveyed.

Grantor	The person conveying an interest in real property.

Gross income	The total amount of money that a person receives, before taxes and other deductions. This income may include funds from a job or jobs; interest or dividends; alimo-ny; disability payments; or public assistance.

Gross Lease	A lease in which the lessee pays a fixed rental amount for the durration of the lease and the lessor pays the expenses associated with owning the property such as taxes and insurance.

Gross operating income	The total amount of cash generated by the operations of a property. Hedging Protecting oneself against negative outcomes.

Ground lease	An agreement for rental of land only.

Ground Rent	The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.

Group Home	A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.

Growing-Equity Mortgage	A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.

Guarantee Mortgage	A mortgage that is guaranteed by a third party.

Guaranteed Loan	see Government mortgage.

Hazard Insurance	Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

Highest and best use	The use of a property that will yield the greatest return on the property.

Home Equity Conversion Mortgage	A special type of mortgage 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. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage. A Home Equity Conversion Mortgage (HECM) is a type of home loan that lets homeowners aged 62 or over with little or no remaining balance on their mortgage convert their equity into cash. The equity can be paid to the homeowner in a lump sum, in a stream of payments, draws from a line of credit, or a combination of monthly payments and line of credit. Whatever payment plan you select, you do not have to repay any part of this reverse mortgage until you sell the home or vacate it for another reason. At that time, you pay the loan balance, plus any accrued interest. Any proceeds above that amount go to you or to your estate. Developed by the Federal Housing Administration (FHA), the HECM mortgage provides a cash growth feature not found with some other reverse mortgages.

Home Equity Line of Credit	A mortgage loan, which is usually in a subordinate position, that allows the borrower 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 a property.

Home Equity Loan

Home Inspection	A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal. The home inspection reviews the structural and mechanical condition of the property. This is not an evaluation of the market value of the home or a determination of whether the home complies with applicable building and safety codes. The inspection does not include a recommendation on whether you should or should not buy the house.The inspector bases the findings on observable structural elements of the home. Potential home buyers are urged to be present during the inspection. This will allow you to ask questions and be in a better position to learn more about any problems that arise.

Home inspector	A licensed professional who looks at all parts of a house and evaluates its condition.

Home Mortgage Disclosure Act (HMDA)	The Home Mortgage Disclosure Act of 1975, as amended in 1989, requires most financial institutions and mortgage lenders that make mortgage loans, home improvement loans, or home refinance loans to collect and disclose information about their lending practices. Office Of The Assistant Secretary For Housing-Federal Housing Commissioner Mortgagee Letter 94-22, May 4, 1994

Homebuyer Protection Plan	A HUD package of home appraisal reforms that will increase the level of consumer confidence in the homebuying process and benefit 800,000 families who get Federal Housing Administration mortgages each year. HUD web site at www.hud.gov/pressrel/pr98-206.html

Homeowner's Insurance	Homeowners insurance (also called "hazard insurance") should be equal to at least the replacement cost of the property you want to purchase. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss. Most home buyers purchase a homeowner's insurance policy that includes personal liability insurance in case someone is injured on their property; personal property coverage for loss and damage to personal property due to theft or other events; and dwelling coverage to protect the house against fire, theft, weather damage, and other hazards. If the home you want to buy is located near water, you may be able to get flood insurance as part of your homeowner's protection. In fact, it may be required in some areas, so check with your real estate professional or an approved lender for further information.Seek out and compare rates from several insurance companies before making your final decision.Lenders often want the first year's premium to be paid at or before closing. Your lender may add the insurance cost to your monthly mortgage payments and keep this portion of your payments in an escrow account. The lender then pays your insurance bill out of escrow when it receives premium notices from your insurance company.

Homeowner's Insurance for Reverse Mortga	Homeowner's insurance (also called hazard insurance) is required and should be equal to at least the replacement cost of the home you want to purchase. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss.Most home buyers purchase a homeowner's insurance policy that includes personal liability insurance (though this personal liability insurance is not required) in case someone is injured on their property; personal property coverage for loss and damage to property due to theft or other events; and dwelling coverage to protect the house against fire, theft, weather damage, and other hazards.If the home is near water, you may be able to get flood insurance as part of your homeowner's protection. In fact, it may be required in some areas, so check with your real estate professional or an approved lender for further information.Seek out and compare rates from several insurance companies before making your final decision.

Homeowner's warranty	A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

Homeowners Association	A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Homestead	Primary residence as declared by the head of a household and filed with the county clerk in order to exempt the homestead from claims of creditors.

Housing Expense Ratio	The percentage of gross monthly income that goes toward paying housing expenses.

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