Financial Terms

An agency, within the U.S. Department of Agriculture, that provides financing for purchasers of homes and farms in small towns and rural areas.

The FDIC is a government corporation that insures deposits in thrift institutions and commercial banks. The FDIC administers the Savings Association Insurance Fund (SAIF) providing deposit insurance to thrifts, and the Bank Insurance Fund (BIF) providing deposit insurance to commercial banks.

Former name for the regulatory and supervisory agency for federally chartered savings institutions, now called the Office of Thrift Supervision.

This is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

FHA is a government agency, a division of the Department of Housing and Urban Development, which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

Corporation created by Congress that buys and sells residential mortgages, providing funds for one in seven mortgages.

This is the central bank of the United States and major regulatory agency for many commercial banks.

Absolute ownership of real property.

A residential mortgage insured by the Federal Housing Administration. The down payment on an FHA loan usually is less than that for a conventional mortgage. The FHA does not lend money, but nominates approved lenders.

A credit evaluation score developed by Fair, Isaac, and Co., used by lenders as one factor in making a loan decision. Some methods of improving a score are to establish and maintain a payment history on credit accounts, keep public records (bankruptcies, judgments, etc.) and collection accounts to a minimum, pay down loans, keep credit cards well below their limit, avoid late payments, and limit applying for new credit.

These reports summarize a firm’s accounting data and indicate its financial condition. The four basic financial statements are the balance sheet, income statement, statement of retained earnings, and statement of changes in financial position.

This mortgage creates a lien against real property with the lien having first priority against other claims in the event of foreclosure.

A fixed-rate mortgage features the interest rate and the amount of each payment to remain constant throughout the life of the loan.

Flood insurance is a form of hazard insurance required by lenders to cover properties in flood zones.

This is the minimum rate of interest payable on an adjustable-rate mortgage.

This is a grace period given when a lender postpones foreclosure to give the borrower time to catch up on overdue payments.

Foreclosure is a legal process by which the lender forces the sale of a property because the borrower has not met the mortgage terms.

A loan in which the principal and interest will be repaid fully through regular installments by the time the loan’s term ends.

A notice to an employer or other asset holder requiring that monies, wages or property due to a debtor be withheld and given to a creditor to be applied to a specific debt in arrears.

Often called a GFE, this is a written estimate of expected closing costs that a lender must provide a prospective homebuyer within three days of the homeowner submitting a mortgage loan application. Brokers and lenders are required by law to make as accurate an estimate as they can.

This is a government agency that provides funds for VA and FHA loans.

Period of time during which a loan payment may be made after its due date without incurring a late penalty.

Mortgage in which initial low payments – with potential negative amortization – increase regularly for several years and then level off.

The total income before taxes and other expenses are deducted.

A growing equity mortgage is a fixed-rate loan in which payments increase by some predetermined amount each year, which reduces the outstanding balance of the loan. This accelerated payment plan allows repayment of a 30-year loan in 15 to 20 years.

This is to assume liability for another’s debts in the event of his default.

This is a promise by one party to pay a debt or perform an obligation contracted by another in case of that person’s default.

An account established at a financial institution in the name of a guardian who acts on behalf of and administers the funds for the benefit of the ward.

A revolving, open-end loan extended under a line of credit and secured by the borrower’s residential property – also known as a second mortgage.

This is a closed-end loan secured by the borrower’s residential property – also known as a second mortgage.

A homeowners warranty is a type of insurance that covers repairs to specified parts of a house for a specific period.

A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.

The housing code is a local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.

The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his/her gross monthly income.

This is a document with an itemized listing of closing costs payable at the closing or settlement meeting when buying property. The closing costs can include a commission, loan fees and points, and sums set aside for escrow payments, taxes and insurance. It is signed by both the buyer and the seller, who may be paying some of the closing costs. The statement form is published by the Department of Housing and Urban Development (HUD).