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| Glossary |
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E
| earnest money |
A deposit made by the potential homebuyer to show that he or she is serious about buying the house.
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| electro-magnetic fields (EMFs) |
Areas affected by the movement of electricity, especially through high-tension power lines.
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| electronic banking |
A financial institution that allows you to perform financial transactions over the Internet through a secure Web site.
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| endorsement |
An amendment to an insurance contract expanding the coverage provided by the contract and (in most cases) increasing the premium.
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| energy-efficient mortgage (EEM) |
A type of home loan that allows the borrower to finance the cost of energy-efficient features along with the mortgage.
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| EOUST |
The Executive Office of U.S. Trustees (EOUST) is the Department of Justice office responsible for approving agencies that provide credit counseling and debter education.
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| equity |
The difference between the fair market value of a property and the amount still owed on the mortgage.
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| equity stripping |
When a lender forecloses on a home, thereby stripping the homeowner of all the equity they have earned over the years. Usually the result of a scam aimed at homeowners who are having difficulties paying their mortgage.
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| escrow |
The holding of documents and money by a neutral third party prior to closing; also, an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
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| escrow fees |
Fees charged for the conducting of a settlement or closing in some areas of the country.
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| escrow reserves |
Monies collected by the lender from the borrower in order to pay the property taxes and homeowner insurance premiums when they become due.
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F
| 401(k)/403(b) retirement plans |
An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not-for-profit organizations. |
| Fair Credit Reporting Act |
A 1971 federal law that lets consumers find out what information credit-reporting agencies have on file about them and to dispute any inaccurate entries contained in those files.
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| Fannie Mae (Federal National Mortgage Association FNMA) |
Officially called the Federal National Mortgage Association. This is a federally-chartered corporation owned by private stockholders that purchases residential mortgages and combines the mortgages into pools of loans. Securities are then sold to investors using the mortgage pools as collateral. By purchasing mortgages, Fannie Mae helps provide a renewable source of funds that lenders may loan to potential homebuyers.
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Freddie Mac (Federal
Home Loan Mortgage
Corporation) |
Officially called the Federal Home Loan Mortgage Corporation. This is a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors. By purchasing mortgages, Freddie Mac helps provide a renewable source of funds that lenders may loan to potential new homebuyers. |
| Federal Deposit Insurance Corporation (FDIC) |
A government agency that insures bank deposits up to $100,000.
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| Federal Trade Commission (FTC) |
A federal agency responsible for investigating and eliminating unfair business practices, including false and misleading advertising.
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| FHA loan |
A mortgage that is insured by the Federal Housing Administration. Also referred to as a “government” mortgage.
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| FICO score |
A credit score developed by Fair, Isaacs and Company that is used extensively in the mortgage industry. FICO scores fall between a low of 350 and a high of 850. The higher the FICO score, the less risky a consumer is considered to be.
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| fiduciary responsibility |
A legal obligation to act for or on behalf of another person under circumstances that require total trust, good faith and honesty. Fiduciary duties in the real estate industry are generally described as care, obedience, accounting, loyalty and disclosure.
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| financial goals |
Objectives you set for yourself related to money management, saving, paying off debt and financial stability.
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| first lien (first mortgage) |
A mortgage that has first claim to the secured property in the event of default.
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| fixed period ARM |
A home loan that provides a fixed rate for three, five, seven or 10 years then adjusts annually based on a financial index for the remaining loan term.
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| fixed rate |
A loan rate that does not change during the entire term of the loan.
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| fixed-rate loan |
A mortgage in which the interest rate does not change during the entire term of the loan.
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| flood insurance |
Insurance that compensates for physical property damages resulting from flooding. It is required for properties located in federally designated flood areas.
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| flood zone |
Areas designated by FEMA (Federal Emergency Management Agency) as subject to flooding under certain specified conditions.
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| forbearance |
A specified period of time (usually three to six months) that allows borrowers to make either lower payments or no payments at all on a loan. This is sometimes offered by a lender as an option to prevent foreclosure.
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| foreclosure |
The legal process by which a borrower's interest in mortgaged property is taken because of a default on the loan. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
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| Form 1098 |
A legal tax form that reports the amount of interest and points paid during the previous year.
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| front-end ratio |
A ratio that indicates what portion of an individual's income is used to make mortgage payments. It is calculated as an individual's monthly housing expenses divided by his or her monthly gross income and is expressed as a percentage.
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| FSBO |
A home that is For Sale By Owner, pronounced fizbo.
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| fully amortized loan |
A mortgage loan where the borrower makes equal payments that are applied first to interest and then to principal, and that gradually reduce the principal balance to zero.
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G
| general warranty deed |
A type of deed where the seller guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to you. |
| good faith estimate (GFE) |
A written estimate, provided by the lender, of all of the costs that are involved in both securing the home loan and settling on the property.
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| government loan |
A loan 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 loan.
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H
| harvesting |
A form of identity theft where your email address and other personal information is collected (harvested) when you visit a Web site, then illegally used or sold to others who may use it maliciously. |
| home equity |
The difference between the fair market value of a property and the amount the borrower still owes on the mortgage.
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home equity line of credit
(HELOC) |
A mortgage loan, which is usually a "second lien" loan, that allows the borrower to obtain multiple advances of money at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
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| home equity loan |
A "second lien" loan that allows you to borrow money using your equity as security for the loan. Your home guarantees the loan.
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| 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.
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| homeowners insurance |
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards. The policy typically combines personal liability insurance and property hazard insurance coverage for a dwelling and its contents.
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| home warranty |
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It may be provided by the builder or property seller as a condition of the sale but homeowners can also purchase it.
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| HUD |
Department of Housing and Urban Development
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| HUD Housing Choice Voucher Program |
Formerly known as Section 8, these vouchers allow very low-income families to choose and lease or purchase safe, decent, and affordable privately-owned rental housing.
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HUD-1 settlement
statement |
A document that provides an itemized listing of the funds that are payable at closing. The HUD-1 statement is also known as the "closing statement" or "settlement sheet."
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| hybrid ARM |
A type of home loan that provides the stability of a fixed payment for the initial adjustment period (one, three, five, seven or 10 years) and then converts into an ARM that adjusts.
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I
| identity theft |
When an unscrupulous person or group gathers enough information about you to successfully impersonate you online, by mail, telephone, or in person. |
| impound account |
The account in which a loan servicer holds the borrower's escrow payments prior to paying property expenses, such as property taxes or homeowners insurance.
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| impounding |
The collection and placement of monies by a lender into a fund in order to pay the borrower’s property taxes and insurance premiums when they become due. See also “escrow reserves.”
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| income |
Regular income from earnings, commissions, investments, rental payments, or other sources.
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| index |
The number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills.
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| individual development account (IDA) |
A dedicated savings account that can only be used for specific purposes such as purchasing a first home, education or job training expenses, or capitalizing a small business. IDA programs are implemented by community-based organizations in partnership with a financial institution that holds the deposits, and are funded by public and private sources.
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| individual retirement account (IRA) |
A retirement plan you open on your own, to which you may be able to make tax-deductive contributions if you qualify. Depending on the type of IRA, your earnings are tax free or tax deferred.
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| inflation protection |
An addition to an insurance policy that offers protection against future inflation and will help to ensure that you have adequate coverage even if costs increase.
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| initial interest rate |
The starting interest rate for an adjustable-rate mortgage (ARM) loan or variable-rate home equity line of credit. Sometimes known as "start rate," "intro rate" or "teaser rate."
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| inquiry |
A request for your credit report, made by you or a company considering you for an offer of credit.
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| installment credit |
A credit account with fixed or predetermined payment amounts and number of payments.
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| interest |
The fee charged for borrowing money. Also, money that a financial institution pays you for keeping your money in an account there.
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| interest-only loan |
A type of home loan where the entire payment made goes toward interest, and the principal balance is reamortized after a set period of time.
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| interest rate |
The percentage rate of return charged for use of a sum of money. This percentage rate is specified in the mortgage.
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| interest rate buydown |
A temporary buydown that gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower.
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J
| jumbo loan |
A loan that exceeds Fannie Mae's legislated maximum mortgage amount limits. Also called a “nonconforming loan.” The maximum amount is set annually. |
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