Mortgage Glossary
D
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.
Deed: the document that transfers ownership of a property.
Deed-in-lieu: to avoid foreclosure ("in lieu" of foreclosure),
a deed is given to the lender to fulfill the obligation to repay
the debt; this process doesn't allow the borrower to remain in
the house but helps avoid the costs, time, and effort associated
with foreclosure.
Default: the inability to pay monthly mortgage payments in a timely
manner or to otherwise meet the mortgage terms.
Delinquency: failure of a borrower to make timely mortgage payments
under a loan agreement.
Discount point: normally paid at closing and generally calculated
to be equivalent to 1% of the total loan amount, discount points
are paid to reduce the interest rate on a loan.
Down payment: the portion of a home's purchase price that is paid
in cash and is not part of the mortgage loan.
E
Earnest money: money put down by a potential buyer to show that
he or she is serious about purchasing the home; it becomes part
of the down payment if the offer is accepted, is returned if the
offer is rejected, or is forfeited if the buyer pulls out of the
deal.
Energy Efficient Mortgage (EEM): an FHA program
that helps homebuyers save money on utility bills by enabling them
to finance the cost of adding energy efficiency features to a new
or existing home as part of the home purchase
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.
Escrow account:
a separate account into which the lender puts a portion of each
monthly mortgage payment; an escrow account provides the funds
needed for such expenses as property taxes, homeowners insurance,
mortgage insurance, etc. For more information, see our guide explaining
escrow account
protections and limits.
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