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Fair market value
The price that would normally be agreed upon by a buyer and seller in a fair market
The fair market value is usually determined by comparable sales in the same area.
See: Comparable sale (comp)
Federal Home Loan Mortgage Corporation (Freddie Mac)
A somewhat government sponsored agency that buys mortgages in the secondary market
Freddie Mac buys loans from lenders and then sells them to other lenders and investors in the secondary market. This process has proven to be very successful.
See: Secondary market, Conventional mortgage
Federal Housing Administration (FHA)
A federal agency that insures first mortgages
The FHA offers a type of mortgage insurance on first mortgages (provided that the buyer meets certain criteria) allowing the lender to loan a higher percentage of the sale price than is standard.
See: FHA mortgage
Federal National Mortgage Association (Fannie Mae)
A private corporation that purchases first mortgages at a discounted price
Fannie Mae buys loans from lenders and sells them to investors and other lenders in the secondary market. Fannie Mae only buys loans that conform to their borrowing guidelines.
See: Secondary market, Conforming loan
A synonym for ownership
Fee simple allows the owner to have unlimited control over a property. This term can be found on the deed to the home.
A loan meeting certain guidelines that is guaranteed by the Federal Housing Administration
FHA mortgages require a low down payment, usually about 3% of the loan amount, which may make approval easier to obtain. FHA mortgages may also offer low interest rates. However, you can only borrow up to a certain amount, and you have to pay both an up-front fee and monthly premium for insurance. To be eligible, the buyer must plan to live in the home that is purchased.
See: Government mortgage
Compare: Conventional mortgage, VA loan
Fixed rate mortgage
A loan with an interest rate and payment that do not change for the life of the loan
The main benefit of a fixed rate mortgage is that the payments are set, so there are no surprises. However, the interest rates on fixed rate mortgages are normally higher than the initial interest rate on an adjustable rate mortgage.
Compare: Adjustable rate mortgage
Personal property that is attached to real property that becomes a permanent part of the real property
Custom-made drapes or appliances made to fit a home, like a built-in microwave and a stove, are fixtures. When selling a home, fixtures must remain in the home unless notification is made in writing that the fixture will be removed.
When a lender takes legal possession of a home in order to sell it to repay a loan in default
This process varies from state to state, but in general, a foreclosure is an auction either with or without court action. The highest bidder wins the home.
See: Trustee's sale, Default, Judicial foreclosure
A calculation of your total monthly housing expenses divided by your gross monthly income
Lenders use a front ratio as a guideline to see if you qualify for a loan. Acceptable front ratios vary from lender to lender. You can calculate the total monthly housing costs for a single family home by adding up the loan's principal, interest, property taxes, property insurance and if applicable mortgage insurance. For condominiums, cooperatives and PUDs, also add the cost of Home Owners' Association dues. Then, divide the total of the monthly housing costs by your gross monthly income.
Compare: Back end ratio, Loan to value ratio (LTV)
Revealing all the known facts which may assist the buyer/seller in making a decision
The broker, seller, lender and builder are required by law to make any information that may affect the buyer’s decision readily available to the buyer. The buyer must know if there are any defects in the property and (if it is a new development) the facts of the development, such as surrounding facilities. Before a broker can charge a commission, the buyer/seller must know the charge and agree to the terms.
See: Good Faith Estimate
The decrease in a property’s value due to outdated design or materials
The market value on a home that does not have enough electrical power to run a television, dishwasher and washing machine at the same time will decrease.