Real Estate Terms and Definitions

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. Freddie Mac Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers. Fixed-rate mortgage A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change. Foreclosure A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Cap A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease. Equity An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property. Closing costs Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application. Interest rate The amount of interest charged on a monthly loan payment; usually expressed as a percentage. Fair Housing Act 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?
	Three theories exist regarding who has legal title to a mortgaged property Under the title theory title to the security interest rests with the mortgagee. Most states, however, follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. Finally, the intermediate theory applies the lien theory until there is a default on the mortgage whereupon the title theory applies.