Real Estate Definitions

Glossary of Mortgage Terms D-G

Default: The failure to perform an obligation as agreed in a contract.
Delinquency: A loan payment that is overdue but within the period allowed before actual default is declared.
DeMinimus PUD: A PUD in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units. Also see PUD.
Deposit: A sum of money given to bind a sale of real estate. Also known as earnest money.
Depreciation: A loss of value in real property brought about by age, physical deterioration, functional or economic obsolescence.
Discount Point: Amount payable to the lender institution by the borrower or seller to increase the lender's effective yield. One point is equal to one percent on the loan amount.
Discounted Loan: When the note rate on a loan is less than the market rate, the lender requires additional points to raise the yield on the loan to the market rate.
Earnest Money: A portion of the downpayment delivered with a purchase offer by the purchaser of real estate to the seller or an escrow agency by the purchaser of real estate with a purchase offer as evidence of good faith. Also known as a deposit.
Equal Credit Opportunity Act (ECOA): A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act.
Equity: The ownership interest; i.e. portion of a property's value over and above the leins against it.
Escrow: A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer.
Fair Credit Reporting Act (FCRA): A federal law which requires a lender who is rejecting information. This law also requires consumer reporting agencies to exercise fairness, confidentiality and accuracy in preparing and disclosing credit information.
Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC): A quasigovernmental agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association bonds to raise funds to finance the purchase of mortgages. Popularly know as Freddie Mac.
Federal National Mortgage Association - FNMA (FANNIE MAE): A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.
First Mortgage: A real estate loan that has priority over any subsequently recorded mortgages which does not change during the loan term.
Foreclosure: A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Gift Letter: A written explanation signed by the individual giving the gift stating, "This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time.
Gross Monthly Income: Total monthly income earned before tax and other deductions.