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government loan (mortgage)

A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.

Government National Mortgage Association (Ginnie Mae)

A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA)

grantee

The person to whom an interest in real property is conveyed.

grantor

The person conveying an interest in real property.

Gross lease

A lease of property under which the Lessee or Tenant pays a fixed rent. Sometimes the Lessee is responsible for a C.A.M (common area maintenance charge) estimated at $.02 – $.05 per SF per month. This usually covers the Lessee’s pro-rata share of water, sewer and trash. The Lessor or Landord pays the taxes, insurance and maintenance. The Lessee is also responsible for his/hers electricity and janitorial. Please note that in a Gross Lease there is usually a base year. This means the Lessee is responsible for their pro-rata share of the difference between the base year (usually the year in which the lease is created) and any increas in taxes, insurance or maintenance over the base year. Typically, this lease is used in office or industrial space. Usually the base rent will be higher than a NNN lease for similar property because the taxes, insurance and common area maintenance are absorbed into the rent. Example:

2,500 SF commercial space

$.75 / SF / Mo (base rent)

+ $.05 / SF / Mo (CAM)

X 2,500 SF

= $2,000 / Mo + Rental tax 2.15%

= $2,043.00 total monthly payment

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.

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.”

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. Alternative spelling is “judgement.”

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.

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.”

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.

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-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.