Real Estate · Real estate agents · Real Estate Company

Understand the Real Estate Terminology (E-M)


This blog post is in continuation of my previous one where important vocabulary of real estate terms from A to D was given. This post is intended to describe real estate terms from E to M. The remaining terms will be shared in our upcoming blog posts. I am sure these posts are proving to be informative and worthwhile reading for you. I would love to hear about your feedback and suggestions because your opinions do matter to us!


Earnest Money: The deposit given by a buyer to a seller to show that the buyer is serious about purchasing the home. Earnest money usually is refunded or adjusted in the final transaction as per terms of the agreement between seller and buyer.

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: The difference between the actual value of a home property and the outstanding mortgage loan amount on that home.

Escrow Account: A state where consideration, benefits, legal rights, document, and a sum of money is held by one person in trust for another, for the purpose of assuring performance under an agreement.  Normally in a residential real estate sale, the attorney for the seller is the escrow agent for the deposit money securing the deal until closing.  The money is held in an escrow account.


Fair Housing Act: A law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disabilities.

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.

Fannie Mae: Fannie Mae is the nickname for the Federal National Mortgage Association (FNMA), a privately owned corporation that purchases FHA, VA, and conventional mortgages.

Federal Housing Administration (FHA): A division of the Department of Housing and Urban Development whose main activity is insuring residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

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.

Flood Insurance: Insurance that protects homeowners against losses from flood. If a home is located in a flood prone area, the lender will require flood insurance before approving the loan.

Foreclosure: A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. This is also known as repossession of property.

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.


Ginnie Mae: Ginnie Mae is the nickname for Government National Mortgage Association (GNMA), a U.S. government agency that purchases FHA and VA mortgages.

Good Faith Estimate: An estimate of all closing fees including pre-paid and escrow items as well as lender charges; that must be given to the borrower within three days after submission of a loan application.


HELP: Homebuyer Education Learning Program; an educational program from the FHA that counsels people about the home buying process. HELP covers topics such as budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price.

Home Inspection: An examination of the structure and mechanical systems to determine a home’s safety to make potential homebuyer aware of any repairs that may be needed.

Home Warranty: A policy that covers certain repairs (e.g. plumbing or heating) of a newly purchased home for a certain period of time.

Homeowner’s Insurance: An insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence or inappropriate action that results in someone’s injury or property damage.

Housing Counseling Agency: Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

HUD: The U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

HUD1 Statement: Also known as the “settlement sheet,” it itemizes all closing costs; must be given to the borrower at or before closing.

HVAC: Heating, Ventilation and Air Conditioning; a home’s heating and cooling system.


Index: A measurement used by lenders to determine changes to the interest rate being charged on an adjustable rate mortgage.

Inflation: The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar’s value.

Interest: Interest is a fee charged for the use of lender’s money.

Interest Rate: The amount of interest charged on a monthly loan payment; usually expressed as a percentage.

Insurance: Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.


Judgment: A legal decision; when requiring debt repayment. A judgment may include a property lien that secures the creditor’s claim by providing a collateral source.


Lease Purchase: Assists low to moderate income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as down payment.

Lien: A legal claim against property that must be satisfied when the property is sold.

Loan: Money borrowed that is usually repaid with interest.

Loan Fraud: Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

Loan-To-Value (LTV) Ratio: A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock-In: Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

Loss Mitigation: A process to avoid foreclosure; the lender tries to help a borrower who is unable to make loan payments and is in danger of defaulting on loan.


Margin: An amount the lender adds to an index to determine the interest rate on adjustable rate mortgage.

Mortgage: is a lien on the property that secures the promise to repay a loan.

Mortgage Banker: is a company that grants home loans and then resells the mortgages to secondary lenders like Fannie Mae or Freddie Mac

Mortgage Broker: is a firm that originates and processes loans for a number of lenders.

Mortgage Insurance: is a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home’s purchase price.

Mortgage Insurance Premium (MIP): is a monthly payment by a borrower usually paid as part of the mortgage payment for mortgage insurance.

Mortgage Modification:  is a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.


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