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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.

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.

effective age

An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

eminent domain

The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

encroachment

An improvement that intrudes illegally on another’s 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 homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.

escrow analysis

Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the anticipated expenditures.

escrow disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

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.

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. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.

Fannie Mae’s Community Home Buyer’s Program

An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

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.

firm commitment

A lender’s agreement to make a loan to a specific borrower on a specific property.

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.

Full Service lease

A lease of property under which the lessee pays the fixed rent and the Lessor or Landlord pays the taxes, insurance and maintenance and utilities. Please note that there is usually a base year (see Gross Lease). Typically, this lease is an office lease. The base rent will usually be higher than a Gross Lease in the same area because the taxes, insurance, complete building maintenance and utilities are included. Example:

2,500 SF office space

$1.67 / SF / Mo or $20 / SF / year (base rent)

X 2,500 SF

= $4,175 / Mo + rental tax 2.15%

= $4,264.76 total monthly payment

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.