Real Estate Terms and Definitions

Cap A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease. HUD1 Statement Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing. 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. Bankruptcy A federal law Whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay. 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 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. Borrower A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms. Alternate Dispute Resolution (ADR) A range of different forums and processes which can be utilized to resolve a dispute. We focus on two forms of ADR in this guide which might be used to negotiate a settlement: administrative settlements and mediation. Escrow account A separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

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	Did You Know?
	A Reverse mortgage is also known as HECM Section 255: Home Equity Conversion Mortgages (Reverse Mortgages, a.k.a. HECM) allows a borrower aged 62 and older to borrow against the equity in a property that has limited outstanding debt. A subject property under this program must be an existing one-to four-unit dwelling in which the mortgagor occupies one of the units. It may be a condo if in a FHA approved project. Manufactured homes are eligible if the home complies with outstanding FHA guidance.