Real Estate Glossary of Terms (H - M)
- hazard insurance
- Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism,
or other hazards.
- Home Equity Conversion Mortgage (HECM)
- Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that
instead of making payments to a lender, the lender makes payments to you. It enables older home owners
to convert the equity they have in their homes into cash, usually in the form of monthly payments.
Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the
value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer
occupies the property.
- home equity line of credit
- A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn
against the equity of his home, up to a predetermined amount.
- home inspection
- A thorough inspection by a professional that evaluates the structural and mechanical condition
of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
- homeowners' association
- A nonprofit association that manages the common areas of a planned unit development (PUD)
or condominium project. In a condominium project, it has no ownership interest in the common elements.
In a PUD project, it holds title to the common elements.
- homeowner's insurance
- An insurance policy that combines personal liability insurance and hazard insurance coverage for
a dwelling and its contents.
- homeowner's warranty
- A type of insurance often purchased by homebuyers that will cover repairs to certain items,
such as heating or air conditioning, should they break down within the coverage period. The buyer
often requests the seller to pay for this coverage as a condition of the sale, but either party can
pay.
- HUD median income
- Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and
Urban Development (HUD).
- HUD-1 settlement statement
- A document that provides an itemized listing of the funds that were paid at closing. Items that
appear on the statement include real estate commissions, loan fees, points, and initial escrow
(impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at
the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net
payment at closing. It is called a HUD1 because the form is printed
by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known
as the "closing statement" or "settlement sheet."
- joint tenancy
- A form of ownership or taking title to property which means each party owns the whole property
and that ownership is not separate. In the event of the death of one party, the survivor owns the
property in its entirety.
- judgment
- A decision made by a court of law. In judgments that require the repayment of a debt, the court
may place a lien against the debtor's real property as collateral for the judgment's creditor.
Alternative spelling is "judgement."
- judicial foreclosure
- A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and
conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.
- jumbo loan
- A loan that exceeds Fannie Mae's and Freddie Mac's loan limits, currently at $227,150. Also
called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
- lease
- A written agreement between the property owner and a tenant that stipulates the payment and
conditions under which the tenant may possess the real estate for a specified period of time.
- leasehold estate
- A way of holding title to a property wherein the mortgagor does not actually own the property but
rather has a recorded long-term lease on it.
- lease option
- An alternative financing option that allows home buyers to lease a home with an option to
buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be
applied toward the down payment on an already specified price.
- legal description
- A property description, recognized by law, that is sufficient to locate and identify the
property without oral testimony.
- lender
- A term which can refer to the institution making the loan or to the individual representing
the firm. For example, loan officers are often referred to as "lenders."
- liabilities
- A person's financial obligations. Liabilities include long-term and short-term debt, as well as
any other amounts that are owed to others.
- liability insurance
- Insurance coverage that offers protection against claims alleging that a property owner's
negligence or inappropriate action resulted in bodily injury or property damage to another party.
It is usually part of a homeowner's insurance policy.
- lien
- A legal claim against a property that must be paid off when the property is sold. A mortgage or
first trust deed is considered a lien.
- life cap
- For an adjustable-rate mortgage (ARM), a
limit on the amount that the interest rate can increase or decrease over the life of the mortgage.
- line of credit
- An agreement by a commercial bank or other financial institution to extend credit up to a
certain amount for a certain time to a specified borrower.
- liquid asset
- A cash asset or an asset that is easily converted into cash.
- loan
- A sum of borrowed money (principal) that is generally repaid with interest.
- loan officer
- Also referred to by a variety of other terms, such as lender, loan representative, loan
"rep," account executive, and others. The loan officer serves several functions and has various
responsibilities: they solicit loans, they are the representative of the lending institution, and
they represent the borrower to the lending institution.
- loan origination
- How a lender refers to the process of obtaining new loans.
- loan servicing
- After you obtain a loan, the company you make the payments to is "servicing" your loan. They
process payments, send statements, manage the escrow/impound account, provide collection efforts on
delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs
and assumptions, and provide a variety of other services.
- loan-to-value (LTV)
- The percentage relationship between the amount of the loan and the appraised value or sales
price (whichever is lower).
- lock-in
- An agreement in which the lender guarantees a specified interest rate for a certain amount of
time at a certain cost.
- lock-in period
- The time period during which the lender has guaranteed an interest rate to a borrower.
- margin
- The difference between the interest rate and the index on an adjustable rate mortgage. The
margin remains stable over the life of the loan. It is the index which moves up and down.
- maturity
- The date on which the principal balance of a loan, bond, or other financial instrument
becomes due and payable.
- merged credit report
- A credit report which reports the raw data pulled from two or more of the major credit
repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit
report.
- modification
- Occasionally, a lender will agree to modify the terms of your mortgage without requiring you
to refinance. If any changes are made, it is called a modification.
- mortgage
- A legal document that pledges a property to the lender as security for payment of a debt. Instead
of mortgages, some states use First Trust Deeds.
- mortgage banker
- For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is
generally assumed to originate and fund their own loans, which are then sold on the secondary market,
usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to
themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.
- mortgage broker
- A mortgage company that originates loans, then places those loans with a variety of other lending
institutions with whom they usually have pre-established relationships.
- mortgagee
- The lender in a mortgage agreement.
- mortgage insurance (MI)
- Insurance that covers the lender against some of the losses incurred as a result of a default on
a home loan. Often mistakenly referred to as PMI,
which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually
required in one form or another on all loans that have a loan-to-value higher than eighty percent.
Mortgages above 80% LTV that call themselves
"No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage
insurance premiums directly, they pay a higher interest rate to the lender, which then pays the
mortgage insurance themselves. Also, FHA
loans and certain first-time homebuyer programs require mortgage insurance regardless of the
loan-to-value.
- mortgage insurance premium (MIP)
- The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the
Federal Housing Administration (FHA) or to
a private mortgage insurance (MI) company.
- mortgage life and disability insurance
- A type of term life insurance often bought by borrowers. The amount of coverage decreases
as the principal balance declines. Some policies also cover the borrower in the event of disability.
In the event that the borrower dies while the policy is in force, the debt is automatically satisfied
by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage
payment for a specified amount of time during the disability. Be careful to read the terms of
coverage, however, because often the coverage does not start immediately upon the disability, but
after a specified period, sometime forty-five days.
- mortgagor
- The borrower in a mortgage agreement.
- multidwelling units
- Properties that provide separate housing units for more than one family, although they secure
only a single mortgage.
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