Real Estate Terms and Definitions

Down payment The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. Deed-in-lieu To avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure. Appraisal A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate. Escrow account A separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc. Amortization Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years) Good faith estimate An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application. Cap A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease. HUD The U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws. PMI Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price. FHA Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

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	Did You Know?
	A Reverse mortgage is also known as HECM Section 255: Home Equity Conversion Mortgages (Reverse Mortgages, a.k.a. HECM) allows a borrower aged 62 and older to borrow against the equity in a property that has limited outstanding debt. A subject property under this program must be an existing one-to four-unit dwelling in which the mortgagor occupies one of the units. It may be a condo if in a FHA approved project. Manufactured homes are eligible if the home complies with outstanding FHA guidance.