Mortgage Glossary

Good Faith Estimate (GFE)

This document tells borrowers the approximate costs they'll pay at or before closing, based on common local real estate practices. Under RESPA, your mortgage lender or mortgage broker must deliver the GFE to you within three days after accepting your mortgage loan application.

Graduated-Payment Mortgage

A type of flexible payment mortgage where the payments increase for a specified period of time, then level off. This usually results in negative amortization.

Gross Income

This is your total income before any deductions such as taxes, 401(k) contributions, Medicare, or Social Security contributions.

Hazard Insurance

Insurance coverage that provides compensation to the insured in case of property loss or damage.

Home-Equity Line of Credit

A home-equity line of credit is a revolving loan where your home is used as collateral. You are given a credit limit and can borrow as much or as little as you want against the limit. This type of loan acts much like a checking account. Your lender provides you with checks and you can draw on the account any time you like as long as you don't exceed your credit limit.

Home-Equity Loan

A home-equity loan, also known as a second mortgage, is a closed-ended, secured loan with your home used as collateral. It can have fixed or adjustable (ones that fluctuate based on a key index) terms, interest rates, and payments. You usually borrow a prearranged amount from your lender and pay it back in installments (usually monthly).

Home Inspection

A close physical examination of a home to evaluate its plumbing, electrical, and heating and cooling systems, as well as its appliances, roof, foundation, and structural stability. The inspection should be completed before you purchase a home and your offer contract should state that purchase would be contingent on the home inspection results.

Home or Condominium Owners' Association (HOA)

A HOA is a nonprofit corporation or association that manages the common areas and services of a planned unit development or condominium project. In a condominium project, it has no ownership interest in the common areas; in a planned unit development, it holds title to common areas.

Homeowner's Warranty (HOW) Program

The HOW program is an insurance program through which participating builders provide homebuyers with a warranty on the workmanship and materials of a home, and warrant against major structural defects.

Inspection Certificate

An inspection certificate is a document that verifies that a property is as described. The inspection is usually performed by a designated agent and may be accepted in place of a survey.

Interest

1) Interest is the cost of money. It is usually stated as an annual percentage (e.g. 7.5 percent). You either pay interest when you borrow money, or are paid interest when you save and invest money. 2) Interest is a right, share, or title in property.

Interest Rate

An interest rate is the percentage of the outstanding balance of a loan that you are charged for borrowing money, usually expressed as an annual percentage rate.