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An account where money is set aside for payment of homeowner's insurance and/or real estate taxes. This money may be part of your monthly payment made to your mortgage company and is often clearly indicated on your monthly statement. The money will be set aside for safekeeping and the lender will pay the taxes and insurance when each comes due.
A mortgage that is guaranteed by the Federal Housing Administration. FHA mortgages often require lower down payments but require the borrower to pay an FHA mortgage insurance premium. FHA loans may have fixed or adjustable-rates.
The credit score developed by Fair Issac & Co. It is a scoring method widely used to determine your creditworthiness and is computed by data provided by the three credit bureaus: Experian, Trans Union, and Equifax. The credit score takes into account your payment history, of amount of your outstanding debts, and any negative credit information like charge-offs, etc. Scores range from 200-900 with the higher score representing a higher level of creditworthiness.
Fixed Rate Mortgage
A mortgage where the interest rate and monthly principal and interest payment amounts remain essentially unchanged for the life of the loan. Typically, fixed rate mortgages are available for 30-year, 20-year or 15-year fixed terms. The advantage of a fixed rate mortgage is that you can more easily plan and budget because your monthly payment will remain stable. You may want to consider a fixed rate mortgage if you plan on remaining in the home for more than a few years.
An option available on some loans that allows you to lock in an interest rate for a specific product and period of time, and then have the opportunity to float the rate down to a lower rate if rates improve. Typically, a float down option may be purchased with a fee collected when the interest rate is locked.
An investigation to determine if the house is on a flood plain. Flood insurance is required for homes located in a flood zone.
When a lender refrains from taking action on a homeowner who becomes delinquent on their mortgage loan, a forbearance agreement may be reached. The agreement may include arrangements to pay any past due amounts over a period of time.
Also known as repossession, this is the legal process by which a lender acquires possession of the property securing a mortgage loan when the borrower defaults.
Good Faith Estimate
The written itemization of costs that you will likely be required to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), it is required by law that you receive a Good Faith Estimate form from your mortgage lender within three days of applying for most loans.
Sometimes known as "fire insurance," hazard insurance provides coverage that will compensate the insured in case of property loss or damage, and is typically required by the lender.
Adapted from the U.S. Department of Housing and Urban Development.