Real Estate Terms and Definitions

Default The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms. Down payment The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. Fair Market Value The price which a willing buyer will pay a willing seller for a piece of real estate. Delinquency Failure of a borrower to make timely mortgage payments under a loan agreement. 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. 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. Debt-to-income ratio A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income. Assumable mortgage A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage. Annual Percentage Rate (APR): Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan. 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.

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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.