Many people do not understand some of the terms that come up during a real estate transaction. Whether it is contract or financing related, it is important to understand what you read, especially that which you sign. Hopefully, you may find this real estate glossary helpful in learning the "ABC's" of real estate.

Glossary Terms Defined:

0 - B | C - E | F -L | M - P | R - Z

Fair Credit Reporting Act - A consumer protection law that regulates the disclosure of consumer credit reports by credit reporting agencies and establishes procedures for correcting mistakes on a person's credit record.

Fair market value - A fair price for a home based on recent sales of properties of similar size and quality in the neighborhood.

Fannie Mae - Nickname for Federal National Mortgage Association. It is a government-chartered non-bank financial services company and the nation's largest source of financing for home mortgages. It was started to make sure mortgage money is available in all areas of the country.

Federal Housing Administration (FHA) - An agency of the U.S. Department of Housing and Urban Development (HUD) that insures residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money.

FHA mortgage - A mortgage insured by the Federal Housing Administration (FHA).

FHLMC - Federal Home Loan Mortgage Corporation, see Freddie Mac.

FICO - Fair, Isaac and Company. A company specializing in calculating credit scores.

First mortgage - A mortgage that is the primary lien against a property.

Fixed-rate mortgage - A mortgage in which the interest rate does not change during the entire term of the loan, most often 15 years or 30 years.

Flood insurance - Insurance that compensates for physical property damage resulting from rising water. It is required for properties located in federally designated flood areas.

FNMA - Federal National Mortgage Association, see Fannie Mae.

Foreclosure - The legal process by which a homeowner in default on a mortgage is deprived of interest in the 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.

Freddie Mac - Nickname for Federal Home Loan Mortgage Corp. A financial corporation chartered by the federal government to buy pools of mortgages from lenders and sell securities backed by these mortgages.

FSBO - For Sales By Owner.

Ginnie Mae - Nickname for the Government National Mortgage Association (GNMA).

Good Faith Estimate - A written estimate of closing costs that a lender must provide a prospective home buyer within three days of submitting a mortgage loan application. The best approach is to request this list before choosing a loan.

Government National Mortgage Association (GNMA) - A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress in 1968, GNMA has responsibility for the special assistance loan program known as Ginnie Mae.

Hazard insurance - Insurance coverage that compensates for physical damage to a property from natural disasters such as fire or other hazards. Depending where a piece of property is located, lenders may also require flood insurance or policies covering windstorms (hurricanes) or earthquakes.

Home inspection - An inspection by a building professional that evaluates the structural and mechanical condition of a property. The inspection may reveal the need for repairs that the seller may have to complete before the sale of the house will go through. The buyer may also make the house sale contingent on a satisfactory inspection.

Homeowners association - A nonprofit association that manages the common areas of a condominium or planned unit development (PUD). Unit owners pay to the association a fee to maintain areas owned jointly. See common area assessment.

Homeowner's insurance - An insurance policy that combines personal liability insurance and hazard insurance coverage for a residence and its contents.

Housing expense ratio - The percentage of gross monthly income that goes toward paying a mortgage or rent on a home.

HUD-1 statement - A document with an itemized listing of closing costs payable at the closing or settlement meeting when buying property. The closing costs can include a commission, loan fees and points, and sums set aside for  escrow payments, taxes and insurance. It is signed by both the buyer and the seller, who may be paying some of the closing costs. The statement form is published by the Department of Housing and Urban Development (HUD).

Hybrid mortgage - See alternative mortgage products.

Index - A published measure of the cost of money that lenders use to calculate the rate on an adjustable rate mortgage (ARM). The most common indexes are the one-year Treasury Constant Maturity Yield and the FHLB 11th District Cost of Funds.

Indexed rate - The sum of the published index plus the margin. For example, if the index were 9 percent and the margin 2.75 percent, the indexed rate would be 11.75 percent. Often, lenders charge less than the indexed rate the first year of an adjustable rate mortgage (ARM).

Initial interest rate - Starting rate of an adjustable-rate loan.

Interest tax deduction - Most mortgage holders can deduct all the interest paid on the loan in filing income tax. The deduction applies to people with just one mortgage on a primary residence, as well as those with a combination of loans. Within certain limits set by the IRS, points paid up front on a mortgage are usually deductible in the year the house was purchased.

Jumbo mortgages - Mortgages larger than the limits set by Fannie Mae and Freddie Mac ($275,000 this year; $379,050 in Alaska and Hawaii). A jumbo mortgage will carry a higher interest rate than a conventional mortgage.

Lease-purchase mortgage - A financing option that allows a potential home buyer to lease a property with the option to buy. Often constructed so the monthly rent payment covers the owner's first mortgage payment, plus an additional amount as a savings deposit to accumulate cash for a down payment. A seller may agree to a lease-purchase option if the housing market is saturated and the seller is having difficult selling the property.

Lien - A legal hold or claim from one person on the property of another. The lien placed by a first mortgage is special; it is called the first lien and takes precedence over others.

Lifetime rate cap - In an adjustable rate mortgage (ARM), it limits the amount that the interest rate can increase or decrease over the life of the loan. See also caps.

Lis pendens - A pending lawsuit; in real estate, the constructive notice filed in public records that a legal dispute exists over a piece of property.

Livery of seizin - Under common law, the process of transferring title

Loan origination - The process by which a mortgage lender obtains a mortgage secured by real property. An origination fee is charged by the lender to process all the forms involved in obtaining a mortgage.

Loan-to-value (LTV) ratio - The ratio of the mortgage loan amount to the property's appraised value or selling price, whichever is less. For example, if a home is sold for $100,000 and the mortgage amount is $80,000, the house has an 80 percent LTV.

Lock or lock-in - Lender's guarantee that the mortgage rate quoted will be good for a specific amount of time. The home buyer usually wants the lock to stay in effect until the date of the closing.

Lock-and-float - Rate programs offered by companies that allow borrowers to lock in the current interest rate on a mortgage for a specified period of time, while also letting them "float" the rate down if market conditions improve before closing.

Low-down mortgages - Mortgages with a low down payment, usually less than 10 percent. Fannie Mae and Freddie Mac design loan programs that spell out a set of standards for lenders. In recent years these government-chartered agencies have made low-down mortgages more available through programs such as Fannie Mae's Flexible 97 and Freddie Mac's Alt 97. The "97" refers to the amount of the home's value a lender will cover in a mortgage, leaving a low 3 percent down payment required.

Click Here to Find Your Dream Home! (Market Scan)

 For Directions to Our Office Click This Link

  Click Here to Find Out What My Home is Worth

Click Here for Columbia's Preferred Vendors