When the buyer is allowed to take possession of the property before the sale is completed.
Earnest Money
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.
Easement
A right, such as a right of way, afforded a person or entity to make limited use of another's real property.
Easement of Necessity
An easement granted by a court that states an easement is absolutely necessary for the use and enjoyment of the land. Commonly given to landlocked parcels.
Effective Age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective Gross Income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
Egress
A term concerning a right to come and go across the land of another. The term is usually “ingress and egress.”
Eighty-Ten-Ten Loan (80/10/10)
See 'combination loan'.
Eleemosynary Corporation
Created for charitable purposes that allow tax advantages although they operate the same as a profit-making corporation. They are called nonprofit corporations.
Eminent Domain
The right of the government to appropriate private property for public use, usually with compensation to the owner.
Employer-Assisted Housing
A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.
Encroachment
Any improvement such as a building, wall, fence, or other fixture which overlaps onto an adjoining property.
Encumbrance
A legal right or interest in land that affects a good or clear title, and diminishes the land's value.
Endorsement
Any change or addition to a title insurance policy that affects coverage of the policy as per specific requirements of the insured.
Endorser
A person who signs ownership interest over to another party. Contrast with co-maker.
Engineering Report
A report created by an architect or engineer describing the current physical condition of the property and its major building systems. Also known as a "structural report."
Entitlements
A right to certain benefits specified by contract or law.
Environmental Site Assessment
A detailed study of the environmental condition of the property and surroundings conducted in accordance with ASTM standard E 1527 or E1528 (Phase I or Transaction Screen Process) Also known as 'ESA'
Environmental Transaction Screen Report
The report prepared in compliance with the American Society for Testing Materials (ASTM) standards to identify recognized environmental conditions of a property (i.e., the presence, or likely presence, of any hazardous substances on the property).
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Equitable Conversion
A legal term regarding a land contract which treats the buyer’s interest as a real property interest, even though the seller holds legal title.
Equitable Mortgage
A lien against real property, which is enforceable in a court of equity but does not legally constitute a mortgage. Also, a deed given as security for a debt will be considered a mortgage rather than a transfer of title. Also known as a constructive mortgage.
Equity
1. A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage 2. The actual cash value of property after all claims against the property have been paid.
Equity Capital
Money invested by owners who receive a portion of the profits.
Equity Line of Credit
A deed of trust is recorded against the borrower’s property for a predetermined maximum loan amount and the borrower can borrow up to the amount of the loan amount as needed. Usually interest only for a period of 5 to 10 years and then the loan becomes a fixed mortgage and no more equity can be borrowed. Payments are then principal and interest until payoff.
Equity Loan
A loan based on the borrower's equity in his or her home. Also, an account held by the lender into which a homeowner pays money for taxes and insurance.
Escape Clause
A provision in a contract that allows for the cancellation of all or part of the contract.
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
The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.
Escrow Analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
Escrow Collections
Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance.
Escrow Disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Escrow Payment
The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as 'impounds' or 'reserves' in some states.
Estate
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Eviction
The lawful expulsion of an occupant from real property.
Examination of Title
The report on the title of a property from the public records or an abstract of the title.
Exception
In a title insurance policy, a provision that excludes liability for a specified title defect or outstanding encumbrance.
Exclusive Listing
A contract that gives a licensed real estate agent the exclusive right to sell a property for a set period of time.
Executor
An individual appointed in a will to administer an estate.
Exit Fees
On some transactions, a lender will charge fees upon the repayment of the loan. They can be a penalty for early loan repayment or may be additional compensation for the lender over and above the interest cost.
Expert Testimony
The testimony that is given by a person with special training or knowledge in a particular subject and is therefore considered an “expert.”
Exposure
When a property is for sale or lease, the amount of notice or exposure the property gets through advertising, multiple listing groups, or other means.
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 Market Value
1. The value of a property as determined by a licensed, professional appraiser, primarily based on the sales prices of comparable properties recently sold nearby 2.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's Community Home Buyer's Program
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
Farmers Home Administration (FmHA)
Financing provided to farmers and other qualified borrowers who are unable to acquire loans elsewhere.
FDIC
(Federal Deposit Insurance Corporation). Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).
Federal Home Loan Mortgage Corporation, Freddie Mac (FHLMC)
A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. The FHA's main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA neither lends money, nor plans, nor constructs housing.
Federal Housing Finance Board (FHFB)
It oversees the credit functions of the twelve regional Federal Home Loan Banks.
Federal National Mortgage Association (FNMA)
A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.
Fee Simple
Private ownership of real estate in which the owner has the right to control, use, and transfer the property at will.
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 Loan
Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
FHLBB
(Federal Home Loan Bank Board)
FICO
FICO scores were developed by Fair Isaac & Company, Inc. for each of the three major credit reporting agencies: Equifax, Experian, and TransUnion. These scores only consider the information in an individual's credit file, not income or savings.
Finance Charge
The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee, and any other charges paid to the lender and/or broker. Appraisal, credit report, and title search fees are not included in the finance charge calculation.
Financial Statement
A financial report that includes a balance sheet, income statement, and statement of cash flows.
Finder's Fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
FIRREA
(Financial Institutions Reform, Recovery and Enforcement Act of 1989). An act signed into law in August 1989, by President Bush that restructured the thrift regulatory an insurance system.
First Mortgage
The mortgage that is the primary lien against a property and has first claim in the event of default.
Fixed Assets
Assets that will not be turned into cash within a year, such as manufacturing equipment, real estate, or furniture. Also called "long-term assets."
Fixed Installment
The monthly payment due on a mortgage loan.
Fixed Second Mortgage
See home equity loan.
Fixed-Rate Mortgage (FRM)
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.
Floating Rate Mortgage
See Adjustable Rate Mortgage (ARM)
Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
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.
Foreclosure Bailout
These are loans designed to take the equity of your home or to refinance your home in order to pay off existing loan payment lates that have gone into default.
Forfeiture
The loss of money, property, rights, or privileges due to a breach of legal obligation.
Foundation
The concrete slab beneath the property that holds the property in place.
Front Ratio
The proportion of a purchaser's income that lenders will allow for principal, interest, taxes, and insurance on a property. Used in the evaluation of a loan application.
Full Disclosure
A requirement that sellers fully disclose all known defects in a property when selling it.
Full Recasting
Setting the principal and interest payments to the level that will fully amortize the loan's outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.
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 Indexed Accrual Rate
The interest (accrual) rate resulting from the index at closing (or at another point in the loan) plus the lender's full spread, rounded as prescribed in the loan documents (often to the nearest 1/8th of 1%).
Future Acquired Property
A loan agreement may state that the loan is a lien on all property presently owned or which the borrower may acquire in the future.
Future Interest
A current interest in the land, but only a future right to possession and enjoyment of the land, such as a remainder interest, reversionary interest, etc.
A legal proceeding under which a person’s money in control of another, such as salary, is taken for payment of a debt. The amount taken is set by stature, and in most states, a judgment is necessary before garnishment.
General Membership
A partnership made up of general partners, without special (limited) partners.
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.
Georgian Architecture
A colonial style of architecture dating back to the eighteenth century. Characterized by first floor windows extending to the ground, its exterior placements (windows, doors, etc.) are simple and well balanced, yet formal in appearance.
Gerrymander
To divide an area into districts, against the obvious natural divisions, in order to accomplish an unlawful purpose.
Gift Letter
A Gift Letter is a gift of funds given to the borrower in order for them to purchase a home. The letter must indicate that no repayment of the gift is expected. The amount of the gift and the date the funds were transferred should be indicated in the letter. The donor, with the proper identification, can be from relatives, friends, an employer, church, municipality, or non-profit organization. The letter must include the donor's name, address, telephone number, and relation to the borrower.
Gifts
Money received from a relative or close friend to assist in the purchase of a home.
Good Faith Deposit
A deposit made by a purchaser of property to show they are serious about the purchase.
Good Faith Estimate (GFE)
A document that tells borrowers an estimate of the settlement charges the mortgagor incurs at closing. Under the requirements of the Real Estate Settlement Procedures Act (RESPA), a borrower must receive a GFE within three business days after the loan application is received.
Government Loans FHA / VA
Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
Government National Mortgage Association (GNMA)
A goverment-owned agency, also known as "Ginnie Mae," that provides sources of funds for residential mortgages. Guaranteed or insured by the Federal Housing Administration (FHA) or the Veterans Administration (VA).
Grace Period
A specified time (typically 15 days) after a mortgage payment is due, in which the lender will not charge a late penalty.
Graduated Payment Mortgage
(GPM) A mortgage where the payments are scheduled to increase, usually annually, for a set number of years, and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30-year term.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
The party in the deed who is the seller or giver.
Gross Income
Total personal income, before the deduction of taxes and expenses.
Growing Equity Mortgage
(GEM) A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.
Guarantee Mortgage
A mortgage that is guaranteed by a third party if the original party fails to pay.
Guaranty
To accept responsibility for an obligation if the original party fails to pay or perform according to a contract.
A Lender that customarily funds loans by private money sources and investors but not banks. Interest rates and points can be higher.
Hard Money Lenders
Lenders that customarily fund loans by private money sources and investors but not banks. Interest rates and points can be higher.
Hard Money Loan
An equity based loan with high interest rates and with flexible guidelines.
Hazard Insurance
Insurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism, or other hazards.
Hedging
The sale or purchase of future mortgage contracts by a mortgage banker or lender for the purpose of protecting cash transactions made at a future date.
Heir
The person who by law receives the estate of a deceased person.
Hereditaments
Anything that may be inherited or anything considered real property.
Hidden Defect
An encumbrance on a title that is not apparent in the public records.
Holdback
A portion of a loan commitment withheld until a specified event occurs, such as a rental or construction.
Home Equity Line of Credit (heloc)
A credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for a pre-determined term, usually 5 years, with interest payments only. After this term, the loan becomes a fixed second and no more equity can be taken.
Homeowner's Insurance
An insurance policy that combines liability coverage and hazard insurance.
Homeowner's Warranty
A type of insurance that covers repairs to specified parts of a house for a specific period of time.
Homestead
The home and property of the head of the household. Some states allow statutory exemptions that protect homestead property against the rights of creditors.
Housing Ratio
The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.
Housing Starts
The number of homes that construction has began on. These figures are used to determine the availability of housing, need for mortgage loans, and labor and materials, etc.
HUD
(Department of Housing and Urban Development). A cabinet department responsible for the implementation and administration of government housing and urban development programs.
Hybrid Investment
An investment that is a combination of both debt and equity.
Hypothecate
Having pledged or mortgaged a security without delivery to the lender.
