NJ Mortgage, NY Mortgage, PA Mortgage: Mortgage Terminology

Any encumbrance in a title that is not apparent in public records. Examples of hidden defects are unknown heirs, secret marriages, forged instruments, mental incompetency, or infancy of a grantor.

Highest and Best Use

The use of land which will bring the greatest return.

Highest and Best Use Study

A comparative analysis of two or more alternative projects already judged economically feasible, to identify the most profitable use.

Home Equity Line of Credit

Type of a home equity loan or mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.

Home Inspection

A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal. The home inspection reviews the structural and mechanical condition of the property. This is not an evaluation of the market value of the home or a determination of whether the home complies with applicable building and safety codes. The inspection does not include a recommendation on whether you should or should not buy the house. The inspector bases the findings on observable structural elements of the home. Potential home buyers are urged to be present during the inspection -- this will allow you to ask questions and be in a better position to learn more about any problems that arise. You should view the home inspection report as a way to identify problems before you buy the home, to help negotiate adjustments in the purchase price if problems exist, and to help get the buyer to make any needed improvements before you buy the home. Lastly, the home inspection report is a way to make you feel confident that the home you are buying includes systems that are in good working condition.

Homeowner's Insurance

Homeowner's insurance (also called "hazard insurance") should be equal to at least the replacement cost of the property you want to purchase. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss. Most home buyers purchase a homeowner's insurance policy that includes personal liability insurance in case someone is injured on their property; personal property coverage for loss and damage to personal property due to theft or other events; and dwelling coverage to protect the house against fire, theft, weather damage, and other hazards. If the home you want to buy is located near water, you may be able to get flood insurance as part of your homeowner's protection. In fact, it may be required in some areas, so check with your real estate professional or an approved lender for further information. Seek out and compare rates from several insurance companies before making your final decision. Lenders often want the first year's premium to be paid at or before closing. Your lender may add the insurance cost to your monthly mortgage payments and keep this portion of your payments in an escrow account. The lender then pays your insurance bill out of escrow when it receives premium notices from your insurance company.

Homeowners' Association

A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Homeowner's Warranty (HOW)

A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

Homestead Estate

In some states, a statutory exemption which prohibits the attachment or sale of owner-occupied properties to pay the claims of creditors.

Housing Affordability Index

Indicates what proportion of homebuyers can afford to buy an average-priced home in specified areas. The most well known housing affordability index is published by the National Association of Realtors.

Housing Code

Standards to ensure that housing maintenance and improvements are adequate for occupancy.

Housing Expense Ratio

The percentage of gross monthly income that goes toward paying housing expenses.

Housing Finance Agency (HFA)

A state or local agency responsible for the financing of housing and the administration of subsidized housing programs.

Housing Starts

The number of residential units actually under construction, as distinguished from the number of construction permits issued. The number of housing starts is a key economic indicator and is used in analyzing real estate and mortgage trends.

Housing and Urban Development (HUD)

The U.S. government agency that administers FHA, GNMA and other housing programs.

HUD-1 statement

A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet." The form is filled out by your closing agent and must be signed by the buyer and the seller. The buyer should be allowed to review the HUD-1 Settlement Statement on the business day before the closing meeting to know the closing costs in advance.

HUD median income

Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

Hypothecate

To pledge property as security for a debt without giving up possession of title.