Glossary of Terms from D to H

• Debt

  Money owed to repay someone.

• Debt-to-Income Ratio

  The ratio between a borrower's monthly payment obligations divided by his or her net effective income (FHA or VA loans) or gross monthly income (conventional loans).

• Deed

  The legal document that transfers the ownership of real property from one party to another.

• Deed of Trust

  A document, used in many states in place of a mortgage, held by a trustee pending repayment of the loan. The advantage of a deed of trust is that the trustee does not have to go to court to proceed with foreclosure should the borrower default on the loan.

• Department of Housing and Urban Development (HUD)

  The U.S. government agency that administers FHA, GNMA and other housing programs.

• Discount Points

  A percentage of the loan amount paid to the lender to buy down the interest rate. Each point is one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000.

• Down Payment

  The difference between the purchase price and mortgage amount. The down payment becomes the property equity. Typically it comes from cash savings, but it can also be a gift that is not to be repaid or a borrowed amount secured by assets.

• Due-on-Sale

  A clause in a mortgage or deed of trust allowing a lender to require immediate payment of the balance of the loan if the property is sold (subject to the terms of the security instrument).

• Duplex

  A dwelling divided into two units.

• Earnest Money

  A deposit in the form of cash or a note given to a seller by a buyer as good faith assurance that the buyer intends to go through with the purchase of a property.

• Easement

  The right one party has in regard to the property of another, such as the right of a public utility company to lay lines.

• Equal Credit Opportunity Act

  A federal law prohibiting lenders and other creditors from discrimination based on race, color, sex, religion, national origin, age, marital status, receipt of public assistance or because an applicant has exercised his or her rights under the Consumer Credit Protection Act.

• Equity

  The value of a property beyond any liens against it. Also referred to as owner's interest.

• Escape Clause

  A provision allowing one party or more to cancel all or part of the contract if certain events fail to happen, such as the ability of the buyer to obtain financing within a specified period.

• Escrow

  Money placed with a third party for safekeeping either for final closing on a property or for payment of taxes and insurance throughout the year.

• Fair Market Value

  The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.

• Fannie Mae

  Nickname for Federal National Mortgage Association (FNMA)

• Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)

  A quasi-governmental, federally-sponsored organization that acts as a secondary market investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.

• Federal Housing Administration (FHA)

  An agency within the Department of Housing and Urban Development that sets underwriting standards and insures residential mortgage loans made by private lenders. One of FHA's objectives is to help make affordable mortgages available to homeowners with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.

• Federal National Mortgage Association (FNMA or Fannie Mae)

  A private corporation that acts as a secondary market investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.

• Fee Simple

  The maximum form of ownership, with the right to occupy a property and sell it to a buyer at any time. Upon the death of the owner, the property goes to the owner's designated heirs. Also known as fee absolute.

• Fees Paid in Advance

  Interest from the closing date to the beginning of the 1st payment, Hazard insurance premium, Mortgage insurance premium

• Fees Paid to the Lender

  Origination fee, Discount points, Credit report fee, Appraisal fee, Assumption fee if loan is assumed

• FHA

  See: Federal Housing Administration (FHA)

• Fifteen-year Mortgage

  A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.

• Fixed-Rate Mortgage

  A mortgage whose rate remains constant throughout the life of the mortgage.

• Flood Insurance

  A form of insurance that protects the owner of the insured property against losses stemming from flood damage. The Federal Flood Disaster Protection Act of 1973 requires that federally-regulated lenders determine if real estate to be used to secure a loan is located in a Specially Flood Hazard Area (SFHA). If the property is located in a SFHA area, the borrower must obtain and maintain flood insurance on the property. Most insurance agents can assist in obtaining flood insurance.

• FNMA

  See: Federal National Mortgage Association (FNMA or Fannie Mae)

• Freddie Mac

  Nickname for Federal Home Loan Mortgage Corporation (FHLMC)

• Gift

  A sum of money, including amounts from a relative or a grant from the borrower's employer, a municipality, non-profit religious organization, or non-profit community organization that does not have to be repaid.

• Ginnie Mae

  Nickname for Government National Mortgage Association (GNMA)

• Good Faith Estimate

  The estimate on closing costs and monthly mortgage payments provided by a lender to the homebuyer within 3 days of applying for a loan

• Government National Mortgage Association (GNMA or Ginnie Mae)

  A government organization that participates in the secondary market, securitizing pools of FHA, VA, and RHS loans.

• Graduated Payment Mortgage (GPM)

  A fixed-interest loan with lower payments in the early years than in the later years. The amount of the payment gradually increases over a period of time and then levels off at a payment sufficient to pay off the loan over the remaining amortization period.

• Hazard Insurance

  A form of insurance that protects the owner of the insured property against losses from physical damage such as fire and tornadoes. Mortgage lenders often require a borrower to maintain an amount of hazard insurance on the property that is equal at least to the amount of the mortgage loan.

• Home Equity Loan

  A mortgage on the borrower's principal residence, usually for the purpose of making home improvements or debt consolidation.

• Home Inspection

  A thorough review of the physical aspects and condition of a home by a professional home inspector. This inspection should be completed prior to closing so that any repairs or changes can be completed before the transfer of the home is completed.

• Homeowners Insurance

  A form of insurance that protects the owner of the insured property against loss from theft, liability and most common disasters.

• Housing Affordability Index

  An index that indicates what proportion of homebuyers can afford to buy an average-priced home in specified areas. The most well known housing affordability index is published by the National Association of Realtors.

• Housing and Urban Development (HUD)

  The U.S. government agency that administers FHA, GNMA and other housing programs.

• Housing Expenses-to-Income Ratio

  See: Debt-to-Income Ratio

• HUD

  See: Housing and Urban Development (HUD)