Definitions E-J
earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
A right of way giving persons other than the owner access to or over a property.
eminent domain
Theright of a government to take private property for public use uponpayment of its fair market value. Eminent domain is the basis forcondemnation 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.
endorser
A person who signs ownership interest over to another party. Contrast with co-maker.
equity
Ahomeowner's financial interest in a property. Equity is the differencebetween the fair market value of the property and the amount still owedon its mortgage.
escrow
Anitem of value, money, or documents deposited with a third party to bedelivered upon the fulfillment of a condition. For example, the depositby a borrower with the lender of funds to pay taxes and insurancepremiums when they become due, or the deposit of funds or documentswith an attorney or escrow agent to be disbursed upon the closing of asale of real estate.
escrow account
The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.
escrow payment
Theportion of a mortgagor’s monthly payment that is held by the servicerto pay for taxes, hazard insurance, mortgage insurance, lease payments,and other items as they become due. Known as "impounds" or "reserves"in some states.
estate
Theownership interest of an individual in real property. The sum total ofall the real property and personal property owned by an individual attime 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
Awritten contract that gives a licensed real estate agent the exclusiveright to sell a property for a specified time, but reserving theowner’s right to sell the property alone without the payment of acommission.
executor
Aperson named in a will to administer an estate. The court will appointan administrator if no executor is named. "Executrix" is the feminineform.
fair market value
Thehighest price that a buyer, willing but not compelled to buy, wouldpay, and the lowest a seller, willing but not compelled to sell, wouldaccept.
Fannie Mae
FannieMae is a New York Stock Exchange company and the largest non-bankfinancial services company in the world. It operates pursuant to afederal charter and is the nation's largest source of financing forhome mortgages. Over the past 30 years, Fannie Mae has provided nearly$2.5 trillion of mortgage financing for over 30 million families.
Federal Housing Administration (FHA)
Anagency of the U.S. Department of Housing and Urban Development (HUD).Its main activity is the insuring of residential mortgage loans made byprivate lenders. The FHA sets standards for construction andunderwriting 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
Anunconditional, unlimited estate of inheritance that represents thegreatest estate and most extensive interest in land that can beenjoyed. It is of perpetual duration. When the real estate is in acondominium project, the unit owner is the exclusive owner only of theair space within his or her portion of the building (the unit) and isan owner in common with respect to the land and other common portionsof the property.
FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
firm commitment
A lender’s agreement to make a loan to a specific borrower on a specific property.
first mortgage
A mortgage that is the primary lien against a property.
fixed-rate mortgage (FRM)
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
Insurancethat compensates for physical property damage resulting from flooding.It is required for properties located in federally designated floodareas.
foreclosure
Thelegal process by which a borrower in default under a mortgage isdeprived of his or her interest in the mortgaged property. This usuallyinvolves a forced sale of the property at public auction with theproceeds of the sale being applied to the mrotgage debt.
grantee
The person to whom an interest in real property is conveyed.
grantor
The person conveying an interest in real property.
guarantee mortgage
A mortgage that is guaranteed by a third party.
hazard insurance
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
home equity line of credit
Amortgage loan, which is usually in a subordinate position, that allowsthe borrower to obtain multiple advances of the loan proceeds at his orher own discretion, up to an amount that represents a specifiedpercentage of the borrower's equity in a property.
home inspection
Athorough inspection that evaluates the structural and mechanicalcondition of a property. A satisfactory home inspection is oftenincluded as a contingency by the purchaser. Contrast with appraisal.
homeowners' association
Anonprofit association that manages the common areas of a planned unitdevelopment (PUD) or condominium project. In a condominium project, ithas no ownership interest in the common elements. In a PUD project, itholds 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 (HOW)
Atype of insurance that covers repairs to specified parts of a house fora specific period of time. It is provided by the builder or propertyseller as a condition of the sale.
HUD-1 statement
Adocument that provides an itemized listing of the funds that arepayable at closing. Items that appear on the statement include realestate commissions, loan fees, points, and initial escrow amounts. Eachitem on the statement is represented by a separate number within astandardized numbering system. The totals at the bottom of the HUD-1statement define the seller's net proceeds and the buyer's net paymentat closing. The blank form for the statement is published by theDepartment of Housing and Urban Development (HUD). The HUD-1 statementis also known as the "closing statement" or "settlement sheet."
Index
Ameasure of the overall level of market interest rates that the lenderuses a reference to calculate the specific interest rate on anadjustable-rate mortgage.
inflation
Anincrease in the amount of money or credit available in relation to theamount of goods or services available, which causes an increase in thegeneral price level of goods and services. Over time, inflation reducesthe purchasing power of a dollar, making it worth less.
initial interest rate
Theoriginal interest rate of the mortgage at the time of closing. Thisrate changes for an adjustable-rate mortgage (ARM). Sometimes known as"start rate" or "teaser."
installment
The regular periodic payment that a borrower agrees to make to a lender.
installment loan
Borrowedmoney that is repaid in equal payments, known as installments. Afurniture loan is often paid for as an installment loan.
insurance
Acontract that provides compensation for specific losses in exchange fora periodic payment. An individual contract is known as an insurancepolicy, and the periodic payment is known as an insurance premium.
insurance binder
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a
permanent policy must be obtained before the expiration date.
interest
The fee charged for borrowing money.
interest rate
The rate of interest in effect for the monthly payment due.
interest rate buydown plan
Anarrangement wherein the property seller (or any other party) depositsmoney to an account so that it can be released each month to reduce themortgagor's monthly payments during the early years of a mortgage.During the specified period, the mortgagor's effective interest rate is"bought down" below the actual interest rate.
interest rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
interest rate floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
investment property
A property that is not occupied by the owner.
joint tenancy
Aform of co-ownership that gives each tenant equal interest and equalrights in the property, including the right of survivorship.
judgment
Adecision made by a court of law. In judgments that require therepayment of a debt, the court may place a lien against the debtor'sreal property as collateral for the judgment's creditor.
judgment lien
A lien on the property of a debtor resulting from the decree of a court.
jumbo loan
A loan that exceeds Fannie Mae’s legislated mortgage amount limits. Also called a nonconforming loan.
