Letters E-H

Mortgage Glossary

We have assembled these terms to help you to have a better understanding of mortgage financing terminology. Click on a first letter of the word you want to look up.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

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Earnest Money: The deposit money given to seller or his agent by the potential buyer at the time of the purchase offer. If the offer is accepted, the money will become part of the down payment.
Easement: A right to the limited use of land owned by another. An electric company, for example, could have an easement to put up electric power lines over someone's property.
Encumbrance: Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid back taxes.
Equity: The value in which the owner has in real estate over and above the mortgages against it. When the mortgage and all other debts against the property are paid in full, the owner has 100% equity in his property.
Escrow: Funds and/or deed left in trust to a third party. Generally, a portion of the monthly mortgage payment is held in escrow by the lender to pay for taxes, hazard insurance and yearly mortgage insurance premiums.

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Fannie Mae: Fannie Mae (FNMA: Federal National Mortgage Association) is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers and multifamily investors. See Freddie Mac for further information.
First Mortgage: A mortgage that has a primary lien against a property.
Fixed-Rate Mortgage: A mortgage with an interest rate and monthly payments that remain constant over the life of the loan. See Our Fixed Rates Loan Type page.
Fixture: Property, such as a hot water heater or plumbing fixture, that has become permanently attached to piece of real estate and goes with the property when it is sold.
Flood Certification: An independent agency report required by the lender to determine whether a property is located in a flood hazard zone, which would then require a federally mandated flood insurance policy.
Forbearance: A lender's act of refraining from taking legal action despite the fact a mortgage is in arrears (past due). It's usually granted when a mortgagor makes a satisfactory arrangement by which the arrears will be paid at a future date.
Foreclosure: A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Freddie Mac: Freddie Mac (FHLMC: Federal Home Loan Mortgage Corporation) is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers and multifamily investors. See Fannie Mae for further information.

Freddie Mac and Fannie Mae have the same charters, Congressional mandates and regulatory structure. The two companies, however, have different business strategies. Competition between Freddie Mac and Fannie Mae ensures that the benefits of the secondary market are passed on to homebuyers and renters in the form of lower housing costs. Both Freddie Mac and Fannie Mae operate as publicly traded corporations. See The Cost Of Money for more information.
Fully Documented Loan: Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs. See Income Reporting Options for further information.

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Gift of Equity: Often used in conjunction with family members helping out with first-time home purchasing. A 'gift of equity' is a gift of all or part of the equity in a property you currently own to the buyer so that the cash requirement for a down payment is smaller or eliminated. May have income tax implications.
Good Faith Estimate: A report that shows the estimated costs involved with obtaining a mortgage or refinancing. Line-by-line explanation. Compare with HUD-1.
Government National Mortgage Association (GNMA): Also known as "Ginnie Mae," provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA. Compare with Conventional Loan.
Graduated Payment Mortgage: A fixed rate loan with monthly payments that start low, increasing by a fixed amount for a specific number of years. After that period, the payments typically remain constant for the duration of the loan.
Gross Income: Normal income, including overtime, prior to any payroll deductions, that is regular and dependable. This income may come from more than one source.

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Hazard Insurance: Insurance protection against damage to a property from fire, windstorms, and other common hazards. Often called Homeowner's Insurance.
Holding Title: The legal way that you wish to own your property. Also known as vesting. See The Six Most Common Ways of Holding Title page.
Home Equity Line Of Credit (HELOC): Gives you the ability to utilize the equity in your home to pay off high interest credit card debt, finance college education costs or make improvements to your home. See Our HELOC Loan Type page.
Homeowner's Insurance: An insurance policy that covers the dwelling and its contents in case of fire or wind damage, theft, liability for property damage and personal liability.
HUD-1 Form: See Real Estate Settlement Statement. A line-by-line explanation.

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