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Glossary

Fixed Rate Mortgage

A mortgage in which the interest rate does not change during the entire term of the loan. The monthly payments on the principal and the interest are fixed for the life of the loan.

Float Rate

See Rate Float.

Flood Insurance

Special hazard coverage from a reputable flood insurance provider — required for properties located in specially designated flood hazard areas, but generally recommended for all properties.

Foreclosure

A legal proceeding in which the lender takes possession of a property and sells it at public auction if the homeowner neglects to make mortgage payments.

Freddie Mac

The Federal Home Loan Mortgage Corporation (FHLMC) — a stockholder-owned corporation created by Congress that buys mortgages from lenders and resells them as securities on the secondary mortgage market. Considered a sister agency — and competitor — to Fannie Mae.

Funding of a Loan

The mortgage lender issues an agreed-upon amount of money to the seller of a property or a homeowner who is refinancing. Funding frequently takes place at closing.

Ginnie Mae

The Government National Mortgage Association (GNMA) — a governmental agency that offers special assistance in obtaining FHA-insured and VA-guaranteed mortgages.

Good Faith Estimate

A written list, required by federal law, of all the items and fees included in your estimated closing costs. The GFE includes the lender's charges, the local closing agent's charges and fees, and the estimated amounts for real estate property tax and homeowner's insurance.

Gross Monthly Rental Income

The amount of money you earn each month on a rental property — used as part of the gross monthly income you report in your loan application.

Guarantee

A pledge by a third party or government agency to repay a loan to the lender in the event that the homeowner cannot. Fannie Mae and Freddie Mac guarantee loans.

Hazard Insurance

See Homeowner's Insurance.

Home Equity Line of Credit (HELOC)

A line of credit that allows you to borrow money using your home's equity as collateral. A Home Equity Line of Credit works like a credit card, but features a lower, variable interest rate. You can draw cash as you need, using convenience checks supplied by your lender, and only pay interest on the amount you use.

Home Equity Loan

A loan that allows the home owner to borrow money using their home's equity as collateral. The borrowers receive the loan as a lump sum at the time of closing. These loans are sometimes useful for families to help finance major home repairs, medical bills or college education.

Home Inspection

A thorough examination by a professional home inspector of a home's visible structure, which will make you aware of any repairs that may be needed. The inspection period is stated in your contract.

Homeowner's Insurance

Insurance for home loss caused by fire, vandalism, and other damaging events, depending upon the terms of the policy. Flood or wind insurance may require additional coverage. Homeowner's insurance is required to close on a loan. Also known as Hazard Insurance.