Real Estate Terms and Definitions

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. 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. Down payment The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. 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. Certificate of title A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims. 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. After Appraisal Part of the appraisal of a property from which only a portion of that property is acquired for the planned project. This type of acquisition is often referred to as a "partial acquisition." Interest rate The amount of interest charged on a monthly loan payment; usually expressed as a percentage. Ginnie Mae Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment Good faith estimate An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

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	Did You Know?
	Proposed Construction is properties approved for mortgage insurance prior to the beginning of construction This means that the DE Statement of Appraised Value or Early Start letter has been issued by the DE Underwriter for the property prior to pouring of the footing. For high ratio loans, provide either the appraisal or Early Start letter AND at least three inspections (initial, framing and final) by a HUD fee approved panel inspector or approved local jurisdiction.