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REAL ESTATE TERMS H-M

REAL ESTATE GLOSSARY & DEFINITIONS  H-M

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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 Conversion Mortgage (HECM)
Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

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.

Home Owner’s Dues
Condos, Townhouses, or houses built in planed developments may share common areas or facilities like pools, tennis courts, recreation centers, etc. Each home in the development will pay Home Owner’s Dues which is a monthly premium to maintain the common areas and facilities. The owner’s get together and elect members to the “Home Owner’s Board” and vote on various items including the premium amount required to maintain the common areas.

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.”

I

Interest Only Loans
Lender programs designed to lower the monthly payments of your home loan. A typical home loan payment will include the principle which pays down the loan, and the interest which pays the lender for the use of the money. This program will let you make a lower payment by paying only the interest and not the principle for a period of years (usually 5 years). At the end of this time, your payment will increase to completely pay off the loan over the remaining term. This can lower your payments over the first several years by as much as 20% or $200 for every $1,000 of payment. A $2,000 payment can be lowered to $1,600 saving you $400 every month for several years. This can also get you into a much nicer home by using the $400 savings to purchase about a $66,000 more expensive home. These numbers change with the amount of loan and the interest rate of the loan. The higher the interest rate, the lower the savings will be.

J

Joint tenancy
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.

Judgment
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor’s real property as collateral for the judgment’s creditor.[Top]

Judicial foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.

Jumbo loan
A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at $227,150. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

L

Late charge
The penalty a borrower must pay when a payment is made a stated number of days. On a first trust deed or mortgage, this is usually fifteen days.

Lease
A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

Leasehold estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Lease option
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month’s rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

Legal description
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.

Lender
A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as “lenders.”

Lender Programs
For years the government has understood that unless we can bring in 1st Time Buyers to the real estate market, the entire market will fail. In fact, 1st Time Buyers have made up about 40% of all buyers throughout the country. After all, if you a are a home seller selling a moderately low priced home, most of the home buyers who will want your home will be 1st Time Buyers. If you take those buyers out of the market, who will buy the lower priced homes so that those sellers can buy their second or third homes? Not only are there Government Programs designed to help this vital part of the market, the CRA has given great incentives to banks and lenders to create their own programs. These programs include 100% Financing, Lender Rebates, easier qualifying loans, and lower interest rate programs.

Liabilities
A person’s financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability insurance
Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.

Lien
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

Life cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage.

Line of credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid asset
A cash asset or an asset that is easily converted into cash.

Listing Agent
Many real estate agents prefer to work with home sellers rather than home buyers. These agents are commonly known as Listing Agents.

Loan
A sum of borrowed money (principal) that is generally repaid with interest.

Loan officer
Also referred to by a variety of other terms, such as lender, loan representative, loan “rep,” account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.

Loan origination
How a lender refers to the process of obtaining new loans.

Loan servicing
After you obtain a loan, the company you make the payments to is “servicing” your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.

Loan-to-value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

Lock Box
A small box locked on the doorknob or other secure fixture on a seller’s house which contains the key to the seller’s home. A real estate agent will be able to access the key inside in order to show the seller’s home while they are away.

Lock-in
An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

Lock-in period
The time period during which the lender has guaranteed an interest rate to a borrower.

Low Income Borrower
A Low Income Borrower is a borrower who has a family income of less than 80% of the median income for other families in the area. There many Government Programs and Lender Programs designed to help Low Income Borrowers and Moderate Income Borrowers qualify for a home loan.

M

Margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.

Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

Merged credit report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.

Multiple Listing Service (MLS)
The Multiple Listing Service (MLS) is a service real estate agents join which maintains listings of all the homes for sale in the agent’s area (usually a county). Nationwide, there are over 800 of these services. When working with a home buyer, an agent will first check their MLS for homes for sale in the buyer’s price range. Therefore, it is the first place a home seller should advertise their home. Of course, only licensed agents who are members of that particular MLS can advertise homes on that MLS.

Modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.

Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.

Mortgage banker
For a more complete discussion of mortgage banker, see “Types of Lenders.” A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.

Mortgage broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.

Mortgagee
The lender in a mortgage agreement.

Mortgage insurance (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves “No MI” are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

Mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

Mortgage life and disability insurance
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.

Mortgagor
The borrower in a mortgage agreement.[Top]

Multidwelling units
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.