Real Estate Terms and Definitions

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. 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. Closing Also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller. 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. Lease purchase Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment. Homeowner's insurance An insurance policy that .combines protection against damage to a dwelling and Is contents with protection against claims of negligence or inappropriate action that result in someone's injury or property damage. 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. 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. HUD1 Statement Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing. Balloon Mortgage A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.

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	Did You Know?
	Equity skimming is a type of scam In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose.