Glossary of Terms

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.

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.

A financing option for a fixed-rate mortgage that offers home buyers a 3 percent down payment loan with a term between 15 and 30 years. The mortgage features a loan-to-value (LTV) percentage of 97 percent, designed to expand homeownership opportunities for people with modest incomes. Borrowers must take a pre-purchase home buyer education session to qualify for a Fannie 97 mortgage.

A congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.

Fannie Mae owns, manages, and has available for sale, single-family detached homes, two- to four-unit properties, condominiums, and townhouses in a variety of neighborhoods. The number, type, and sales price may vary substantially. Fannie Mae homes are sold through local real estate brokers whose contact information is provided in the Fannie Mae Properties for Sale search results on homepath.com.

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.

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.

The greatest possible interest a person can have in real 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.

A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor’s default.

A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.

A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

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

A mortgage that is the primary lien against a property.

The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.

A mortgage in which the interest rate does not change during the entire term of the loan.

Personal property that becomes real property when attached in a permanent manner to real estate.

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

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.

An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.