Mortgage Glossary E-I

February 5, 2009
Matt Isleib

 

 Early occupancy- When the seller allows the buyer to move in before the sale is closed

Earnest money deposit- Money given by a buyer when making a formal offer to demonstrate that the buyer is serious. Also called a deposit

End loan- The final mortgage on a property, as opposed to a construction or other interim loan

Equal credit opportunity act- Also referred to as ECOA. A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act

Equifax- One of the three largest credit bureaus, along with Experian and TransUnion

Equity- The value of a homeowner’s unencumbered interest in real estate. Equity is the difference between the home’s fair market value and the unpaid principal balance of the mortgage and any liens. Equity increases as the mortgage is paid down and as the property appreciates in value

Escrow- An account in which a neutral third party holds the documents and money in a real-estate transfer until all conditions of a sale are met. Also, an account in which money for property taxes and insurance is held until paid; money is added to the account every time a mortgage payment is made

Escrow account- An account in which a neutral third party holds the documents and money in a real-estate transfer until all conditions of a sale are met. Also, an account in which money for property taxes and insurance is held until paid; money is added to the account every time a mortgage payment is made

Experian- One of the three largest credit bureaus, along with Equifax and TransUnion

Fixed- Does not change. Rate is the same for the life of the loan

Fair credit reporting act- A federal law that governs what credit bureaus can report and for how long. It outlines procedures for correcting errors in credit reports. It requires credit bureaus to furnish copies of consumers’ credit reports at their request

Fair market value- The value that your home would be worth given it is in good condition. It is also a value where similar or like properties are used to determine price

Fannie Mae- The largest mortgage investor, a government-sponsored enterprise that buys mortgages from lenders, bundles them into investments and sells them on the secondary mortgage market. Also referred to as a GSE (government sponsored entity)

Federal housing administration- Or FHA. An agency within the federal Department of Housing and Urban Development that provides mortgage insurance and sets construction and underwriting standards. The loans are backed by the Federal Government

FHA- An agency within the federal Department of Housing and Urban Development that provides mortgage insurance and sets construction and underwriting standards. The loans are backed by the Federal Government

Fee simple- Outright ownership of real estate, free of any liens or other claims against title

 

FICO scores- The most commonly used credit score. The name comes from the Fair Isaac Corporation, which developed the scoring model. They are used to predict the likelihood that a person will pay his or her debts. The scores use only information from credit reports

Firm commitment- A lender’s promise to lend money to a specific borrower on specified terms at a certain time

First lien- A loan that is recorded first on a title. If there was a second mortgage it would be recorded behind the first lien or in second position

Fixed rate mortgage- The rate remains the same for the life of the loan. It never changes

Flood insurance- A policy that pays the homeowner for damage caused by rising water. It does not reimburse the owner for falling water, such as rain falling through a hole in the roof, but pays for damage stemming from flooding.

Forbearance- An agreement entered into with your lender to allow a certain amount of payments over a certain amount of time to bring a delinquent mortgage current. It is a process that lenders will sometimes use to avoid foreclosure

Foreclosure- The legal process by which a homeowner in default on a mortgage is deprived of interest in the 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

Freddie Mac- The second largest mortgage investor, a government-sponsored enterprise that buys mortgages from lenders, bundles them into investments and sells them on the secondary mortgage market. Also referred to as a GSE (government sponsored entity)

Front end ratio- the calculation of your consumer debt, for example credit card payments, car or student loans etc. and divided by your gross monthly income

Full market value- In real estate to receive full market value is also referred to as the asking price. It is paying or receiving the full price of the home.

GFE- Good faith estimate. Provided by lender to detail closing cost and any fees associated with your transaction. It will also define the terms of your loan, payment, interest rate etc.

Good faith estimate- GFE. Provided by lender to detail closing cost and any fees associated with your transaction. It will also define the terms of your loan, payment, interest rate etc.

Hazard insurance- Also referred to as homeowners insurance. It is the insurance that you would get to protect your home from fire, theft, damage etc.

HELOC- Home equity line of credit. It is a second mortgage that is a revolving line of credit sort of like a credit card except that is secured as a lien on your property

Home equity- The part of a home’s value that the mortgage borrower owns outright; the difference between the fair market value of the home and the principal balances of all mortgage loans

Home equity line of credit- Home equity line of credit. It is a second mortgage that is a revolving line of credit sort of like a credit card except that is secured as a lien on your property

Homeowners association- An elected group that governs a subdivision or planned community. It collects fees from owners to maintain common areas and enforce covenants, conditions and restrictions set by the developer and the association itself. Typically condominiums will have these associations

HUD 1 statement- The line itemized form of your transaction. All expenses, credits and costs are itemized

Impounds- Associated with a properties taxes and insurance. It is the money collected that will be held in an escrow account.

Initial interest rate- The starting rate in an adjustable mortgage. For example a 5/1 arm is fixed for 5 years. That initial rate for the first 5 years is the initial interest rate

Insurance binder- Written statement that warrants that an insurance policy will be issued on a property when title is transferred

Interest rate- The amount charged per month for money borrowed. The monthly payment is based upon the interest rate

Interest rate cap- A limit on how much a borrower’s percentage rate can increase or decrease at rate adjustment periods and over the life of the loan.

Interest rate ceiling- Specified in the loan agreement, the highest percentage a lender can charge for an adjustable-rate mortgage

Interest only loan- No principal reduction is required in the monthly payment. You are simply paying the interest that is due each month while not reducing the original balance of money owed

Introductory rate - The low rate charged by a lender for an initial period to entice borrowers to accept the credit terms. After the introductory period is over, the rate charged increases to the indexed rate or the stated interest rate. Often called a teaser rate.

Investment property- A property purchased solely for investment purposes. No intent is to live there. The intent is to rent or fix up and sell as an investment.