F - J

fair market value
The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.

Fannie Mae
Nickname for Federal Home Loan Mortgage Corporation (FHLMC).

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
A quasi-governmental, federally-sponsored organization that acts as a secondary market. investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.

Federal Housing Administration (FHA)
An agency within the Department of Housing and Urban Development that sets standards for underwriting and insures residential mortgage loans made by private lenders. One of FHA's objectives is to ensure affordable mortgages to those with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.

Federal National Mortgage Association (FNMA or Fannie Mae)
A private corporation that acts as a secondary market. investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.

fee simple
The maximum form of ownership, with the right to occupy a property and sell it to a buyer at any time. Upon the death of the owner, the property goes to the owner's designated heirs. Also known as fee absolute.

FHA
See: Federal Housing Administration.

fifteen-year mortgage
A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.

fixed-rate mortgage
A mortgage whose rate remains constant throughout the life of the mortgage.

flood insurance
The Federal Flood Disaster Protection Act of 1973 requires that federally-regulated lenders determine if real estate to be used to secure a loan is located in a Specially Flood Hazard Area (SFHA). If the property is located in a SFHA area, the borrower must obtain and maintain flood insurance on the property. Most insurance agents can assist in obtaining flood insurance.

FNMA
See: Federal National Mortgage Association

Freddie Mac
See: Federal National Mortgage Association

gift
This includes amounts from a relative or a grant from the borrower's employer, a municipality, non-profit religious organization, or non-profit community organization that does not have to be repaid.

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

good faith estimate
Estimate on closing costs and monthly mortgage payments provided by the lender to the homebuyer within 3 days of applying for a loan.

Government National Mortgage Association (GNMA or Ginnie Mae)
A government organization that participates in the secondary market, securitizing pools of FHA, VA, and RHS loans.

graduated payment mortgage (GPM)
A fixed-interest loan with lower payments in the early years than the later years. The amount of the payment gradually increases over a period of time and then levels off at a payment sufficient to pay off the loan over the remaining amortization period.

hazard insurance
A form of insurance that protects the insured property against physical damage such as fire and tornadoes. Mortgage lenders often require a borrower to maintain an amount of hazard insurance on the property that is equal at least to the amount of the mortgage loan.

home equity loan
A mortgage on the borrower's principal residence, usually for the purpose of making home improvements or debt consolidation. .

home inspection
A thorough review of the physical aspects and condition of a home by a professional home inspector. This inspection should be completed prior to closing so that any repairs or changes can be completed before the home is sold.

homeowners insurance
A form of insurance that protects the insured property against loss from theft, liability and most common disasters.

Housing and Urban Development. (HUD)
The U.S. government agency that administers FHA, GNMA and other housing programs.

housing affordability index
Indicates what proportion of homebuyers can afford to buy an average-priced home in specified areas. The most well known housing affordability index is published by the National Association of Realtors.

housing expenses-to-income ratio
See: debt-to-income ratio.

HUD
See: Housing and Urban Development.

income approach to value
A method used by real estate appraisers to predict a property's anticipated future income. Income property includes shopping centers, hotels, motels, restaurants, apartment buildings, office space and so forth.

income-to-debt ratio
See: debt-to-income ratio.

index
A published interest rate compiled from other indicators such as U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan organizations. Mortgage lenders use the index figure to establish rates on adjustable rate mortgages (ARMs).

insurance

As a part of PITI, the amount of the monthly mortgage payment that does not include the principal, interest, and taxes. Also see: homeowners insurance.

interest
The amount of the entire mortgage loan which does not include the principal. Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the principal, taxes, and insurance.

interest cap

See: cap.

interest rate
The simple interest rate, stated as a percentage, charged by a lender on the principal amount of borrowed money. See also: Annual Percentage Rate.

jumbo loan

A nonconforming loan that is larger than the limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.