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Mortgage Dictionary
By Robert Irwin, Global Home Loans & Finance

Select the first letter of the term you wish to find:
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Earnest Money
A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow company.

The right to use the land of another for a specific purpose. Easements may be temporary or permanent. 
Example : The utility company may need an easement to run electric lines. 

Eminent Domain
The right of the government or a public utility to acquire property for necessary public use by condemnation, with proper compensation to the owner.

A building, a part of a building, or an obstruction (e.g.. a fence or a wall) that physically intrudes upon or overlaps into the property of another.

A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

Equity=Property Value - Loans/Liens Against the property.
Equity is typically expressed as a percentage of the property value. 

Equity Sharing 
Joint ownership of a property between the owner/occupant and the owner/investor, that results in tax advantages for both parties. Upon sale of the property the joint owners split profits based on the percentage they own,

1. Neutral third party that handles all funds in a real estate transaction. The buyer puts his deposit into escrow, the lender funds the loan into escrow. Escrow pays the real estate brokers commission, pays off any loans/liens against the property, pays real estate taxes and any other fees associated with the transaction and sends the balance of the money to the seller.
2. Escrow payment - see impound account. 

The reversion of property to the state in the event that the owner dies without leaving a will and has no legal heirs. 

Executor (Executrix - feminine for Executor)
A person named in a will to carry out its provisions for the disposition of the estate. 

Federal National Mortgage Association (FNMA, Fannie Mae)
Purchases loans from lenders, securitizes them and sells FNMA mortgage backed securities on wall street. 

Federal Home Loan Bank Board (FHLBB)
Provides financing to farmers. 

Farmer's Home Administration (FmHA)
An agency, within the U.S. Department of Agriculture, that administers assistance programs for purchasers of homes and farms in small towns and rural areas.

Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
Purchase loans from members of the Federal Reserve and the Federal Home Loan Bank Systems, securitizes them and sells FHLMC mortgage backed securities on wall street.

Federal Housing Administration (FHA)
An agency within the U.S. Department of Housing and Urban Development (HUD) that administers loan programs, issues loan guarantees to make more housing available. 

Federal Reserve System
The central federal banking system that regulates and provides services to member commercial banks. Also has the responsibility for conducting federal monetary policy.

Fee Simple (Fee Absolute or Fee Simple Absolute)
Absolute ownership of real property; owner is entitled to the entire property with unconditional power of disposition during the owners life and upon his death the property descends to the owner's designated heirs.

Fidelity Bond
An assurance, generally purchased by an employer, to cover employees who are entrusted with valuable property or funds. 
Example : A landlord employs a clerk who collects rents. To safeguard these funds during the collection process, the landlord purchases a fidelity bond the clerk.

A person in a position of trust or responsibility with specific duties to act in the best interest of a client. A real estate broker is a fiduciary for his/her clients.

Finance Charge 
Interest charged by a lender. 

First Mortgage
A mortgage that has priority as a lien over all other mortgages. In the case of a foreclosure the first mortgage will be satisfied before other mortgages. See also second mortgage. 

Improvements or personal property attached to the land so as to become a part of the real estate. Fixtures are transferred to the buyer upon sale of the property. To determine whether an item is a fixture include : 

* Intent (was it intended to be part of the property) 
* How is it fixed?
* Is the fixture essential to the property? 
* Relationship - was the fixture intended to be a part of the tenant's business? 

Example : John sells his house to Mary. John wants to take the chandelier because he states it is personal property. Mary wants the chandelier to stay because she believes it is a fixture. 

Flood Insurance
An insurance policy that covers property damage due to natural flooding. Flood insurance may be required on properties in a flood zone. 

Foreclosure (Repossession)
A legal process by which the lender forces a sale of a property because the borrower has not met the terms of the mortgage. 

Free and clear 
A property that has no liens. 

For sale by owner. A property for sale that is not listed with a real estate broker. 

Fully indexed rate
The fully indexed rate=value of the index + margin. See adjustable loans. 

General Warranty Deed
A deed in which the grantor (seller) agrees to the protect the grantee (buyer) against any other claim to title of the property. See also warranty deed.

Government National Mortgage Association (GNMA, Ginnie Mae) 
A government agency part of HUD that buys VA and FHA loans from lenders, securitizes them and sells Ginnie Mae securities to investors.

That party in the deed who is the buyer or recipient. 

That party who is the seller or the giver. 

Graduated Payment Mortgage (GPM)
A mortgage that has lower payments initially (with potential negative amortization) which increase each year until the loan is fully amortized. 

Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which was permissible but because of a change in the law is now no longer permissible.

Hazard Insurance (Fire Insurance, Homeowner's insurance)
Insurance on a property against fire and other risks. A homeowner's policy may have additional coverage for theft, liability, etc. that a fire insurance policy may not cover.

Homeowners Association
An association of homeowners in a particular subdivision, planned unit development (PUD), or condominium organized to manage the common area of the development and to enforce the association rules and regulations.

Status provided to a homeowner's principal residence in some states that protects the home against judgements up to specified amounts. 

Homestead Exemption
Available in some states - this causes the assessed value of a principal residence to be reduced by the amount of the exemption for the purposes of calculating property tax.
Example : John's principal residence is assessed at $100,000 and the homestead exemption is $7,000. His property taxes will be based on $93,000. 

Home Warranty Plan 
Insurance that covers appliances, heating systems, etc. Typically purchased at the time of closing. 

Housing and Urban Development
A U.S. government agency established to implement certain federal housing and community development programs. 

Housing Code
A local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings. 

A closing document required by HUD that outlines the settlement cost of a loan. The closing agent prepares this document and sends it to the buyer upon closing. 

To pledge a property as security without having to give up possession of it. 

Additions to raw land such as buildings, streets, etc. that add value to the land. 

Impound Account
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Income Approach
A method used by an appraiser to estimate the value of a property based on the income it generates. 

Income Property 
Real estate that generates rental income.
Examples : apartment buildings, office buildings and shopping centers. 

A statistic that indicates some current economic of financial condition. Indexes are used to make adjustments in variable rate loans. 

Ingress and Egress
The right to go in and out over a piece of property but not the right to park on it. See also Easements. 

Installment Sale
See land contract. 

Select the first letter of the term you wish to find:
[ A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z ]

Robert Irwin