It’s the next round of the ABCs of Real Estate! This blog series takes common (although not always understood) terms used in Real Estate and provides easy definitions to help you understand the process.
This week we look at letters F through J:
F: Federal Housing Administration (FHA): A government agency that is a part of the Department of Housing and Urban Development (HUD), FHA provides mortgage insurance to single, multi-family, and manufactured homes along with hospitals on loans made by FHA-approved lenders. It is the largest insurer of mortgages in the world, and insures banks that provide loans to borrowers with low down payments (usually around 3.5 – 5%) and competitive interest rates.
G: Good faith estimate: An estimate of the fees due at closing that a mortgage borrower is required to pay. This estimate must (by Federal law) be provided by the lender within three business days of the initial loan application. The form of the estimate is standardized to make it easier for borrowers to compare costs between different lenders.
H: Home Equity Line of Credit (HELOC): A HELOC acts as a second mortgage, allowing homeowners to borrow cash to spend as they like, using their home equity as collateral. The interest rate on a HELOC varies month to month with the prime rate. Borrowers may withdraw and repay funds on a flexible schedule, and get a tax deduction on their interest payments.
I: Inspection: A thorough examination by a licensed inspector to evaluate the condition of a property and determine any issues or repairs needed before a home may be sold. An inspection covers things like plumbing, electrical systems, and structural integrity. Inspections are considered a contingency, so once it is completed, the buyer and seller must come to an agreement as to what repairs will be done before closing.
J: Judgement lien: A decision made by a court of law that gives a creditor the right to take possession of a debtor’s property as collateral if the debtor fails to fulfill their contractual obligations. A judgment lien must be addressed for a real estate transaction to be completed, as it is considered a problem with the title.