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Glossary D - H
• D • E • F • G • H
debt
An amount owed to another.
deed
The
legal document conveying title to a property.
deed-in-lieu
Short
for "deed in lieu of foreclosure," this conveys title to the lender
when the borrower is in default and wants to avoid foreclosure. The lender may
or may not cease foreclosure activities if a borrower asks to provide a
deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the
avoidance and non-repayment of debt will most likely show on a credit history.
What a deed-in-lieu may prevent is having the documents preparatory to a
foreclosure being recorded and become a matter of public record.
deed of trust
Some states, like California, do not record
mortgages. Instead, they record a deed of trust which is essentially the same
thing.
default
Failure to make the mortgage payment within
a specified period of time. For first mortgages or first trust deeds, if a
payment has still not been made within 30 days of the due date, the loan is
considered to be in default.
delinquency
Failure to make
mortgage payments when mortgage payments are due. For most mortgages, payments
are due on the first day of the month. Even though they may not charge a "late
fee" for a number of days, the payment is still considered to be late and
the loan delinquent. When a loan payment is more than 30 days late, most lenders
report the late payment to one or more credit bureaus.
deposit
A
sum of money given in advance of a larger amount being expected in the future.
Often called in real estate as an "earnest money deposit."
depreciation
A
decline in the value of property; the opposite of appreciation. Depreciation is
also an accounting term which shows the declining monetary value of an asset and
is used as an expense to reduce taxable income. Since this is not a true expense
where money is actually paid, lenders will add back depreciation expense for
self-employed borrowers and count it as income.
discount points
In
the mortgage industry, this term is usually used in only in reference to
government loans, meaning FHA and VA loans. Discount points refer to any "points"
paid in addition to the one percent loan origination fee. A "point" is
one percent of the loan amount.
down payment
The part of
the purchase price of a property that the buyer pays in cash and does not
finance with a mortgage.
due-on-sale provision
A provision
in a mortgage that allows the lender to demand repayment in full if the borrower
sells the property that serves as security for the mortgage.
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earnest
money deposit
A deposit made by the potential home buyer to show that he
or she is serious about buying the house.
easement
A right
of way giving persons other than the owner access to or over a property.
eminent
domain
The right of a government to take private property for public use
upon payment of its fair market value. Homeland domain is the basis for
condemnation proceedings.
encroachment
An improvement that
intrudes illegally on anothers property.
encumbrance
Anything
that affects or limits the fee simple title to a property, such as mortgages,
leases, easements, or restrictions.
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.
equity
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 and other liens.
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 earnest money deposit is
put into escrow until delivered to the seller when the transaction is closed.
escrow
account
Once you close your purchase transaction, you may have an escrow
account or impound account with your lender. This means the amount you pay each
month includes an amount above what would be required if you were only paying
your principal and interest. The extra money is held in your impound account
(escrow account) for the payment of items like property taxes and homeowners
insurance when they come due. The lender pays them with your money instead of
you paying them yourself.
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.
exclusive listing
A written
contract that gives a licensed real estate agent the exclusive right to sell a
property for a specified time.
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.
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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
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 (FNMA)
The Federal National
Mortgage Association, which is a congressionally chartered, shareholder-owned
company that is the nation's largest supplier of home mortgage funds.
Federal
Housing Administration (FHA)
An agency of the U.S. Department of Housing
and Urban Development (HUD). Its main activity is the insuring of residential
mortgage loans made by private lenders. The FHA sets standards for construction
and underwriting but does not lend money or plan or construct housing.
fee
simple
The greatest possible interest a person can have in real estate.
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 mortgage
A
mortgage that is insured by the Federal Housing Administration (FHA). Along with
VA loans, an FHA loan will often be referred to as a government loan.
first
mortgage
The mortgage that is in first place among any loans recorded
against a property. Usually refers to the date in which loans are recorded, but
there are exceptions.
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.
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.
401(k)/403(b)
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.
401(k)/403(b) loan
Some
administrators of 401(k)/403(b) plans allow for loans against the monies you
have accumulated in these plans. Loans against 401K plans are an acceptable
source of down payment for most types of loans.
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government loan
(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). Mortgages that are not government loans are
classified as conventional loans.
Government National Mortgage
Association (Ginnie Mae)
A government-owned corporation within the U.S.
Department of Housing and Urban Development (HUD). Created by Congress on
September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in
providing funds to lenders for making home loans. The difference is that Ginnie
Mae provides funds for government loans (FHA and VA) .
grantee
The
person to whom an interest in real property is conveyed.
grantor
The
person conveying an interest in real property.
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hazard insurance
Insurance
coverage that in the event of physical damage to a property from fire, wind,
vandalism, or other hazards.
home equity line of credit
A
mortgage loan, usually in second position, that allows the borrower to obtain
cash drawn against the equity of his home, up to a predetermined amount.
home
inspection
A thorough inspection by a professional that evaluates the
structural and mechanical condition of a property. A satisfactory home
inspection is often included as a contingency by the purchaser.
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.
homeowner's insurance
An
insurance policy that combines personal liability insurance and hazard insurance
coverage for a dwelling and its contents.
homeowner's warranty
A
type of insurance often purchased by homebuyers that will cover repairs to
certain items, such as heating or air conditioning, should they break down
within the coverage period. The buyer often requests the seller to pay for this
coverage as a condition of the sale, but either party can pay.
HUD
median income
Median family income for a particular county or
metropolitan statistical area (MSA), as estimated by the Department of Housing
and Urban Development (HUD).
HUD-1 settlement statement
A
document that provides an itemized listing of the funds that were paid at
closing. Items that appear on the statement include real estate commissions,
loan fees, points, and initial escrow (impound) amounts. Each type of expense
goes on a specific numbered line on the sheet. The totals at the bottom of the
HUD-1 statement define the seller's net proceeds and the buyer's net payment at
closing. It is called a HUD1 because the form is printed by the Department of
Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing
statement" or "settlement sheet."
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MORTGAGE 101
D - H
