Real Estate Terms and Definitions

Flood insurance Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan. Default The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms. Equity An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property. Housing counseling agency Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and homebuying. 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. Debt-to-income ratio A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income. 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. Mortgage insurance A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. HUD1 Statement Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing. Judgment A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

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	Did You Know?
	Do not ignore the letters from your lender If you are having problems making your payments, call or write to your lender's Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help. Stay in your home for now. You may not qualify for assistance if you abandon your property.