Real Estate Terms and Definitions

Freddie Mac Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers. PMI Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price. Earnest money Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. Fixed-rate mortgage A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change. Interest rate The amount of interest charged on a monthly loan payment; usually expressed as a percentage. FHA Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages. Fair market value The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation. Deed The document that transfers ownership of a property Lease A lease is an agreement between a landlord, property owner or property manager and a tenant. The agreement covers issues such as rental amount and length of time the lease is in effect. The rental amount may include or exclude property taxes, garbage pickup fees, utility costs, property maintenance and other expenses. Discount point Normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.

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	Did You Know?
	Proposed Construction is properties approved for mortgage insurance prior to the beginning of construction This means that the DE Statement of Appraised Value or Early Start letter has been issued by the DE Underwriter for the property prior to pouring of the footing. For high ratio loans, provide either the appraisal or Early Start letter AND at least three inspections (initial, framing and final) by a HUD fee approved panel inspector or approved local jurisdiction.