We hope this Glossary of Mortgage and Real Estate Terms helps you understand the home buying and financing process. Should you have any further questions, please do not hesitate to contact your Loan Officer for answers.

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F Terms

Facade: The outside front wall of a building.

 

Face Amount: Also called face value.  The dollar amount, shown by words/numbers on the document.  Compared with market value.

 

Face Interest Rate: The interest rate that is shown on the loan document.  Compared with annual percentage rate or effective rate.

 

Face Value: Also called face amount. The dollar amount, shown by words/numbers on the document.  Compared with market value.

 

Fair Credit Reporting Act (FCRA): A federal law that allows individuals to examine and dispute information used by credit reporting agencies.

 

Fair Market Rent: The amount that a property would command if it were now available for lease. Contrast with contract rent, economic rent, rent control, Section 8 rent, etc.

 

Fair Market Value: The fair market value of a property if the property was placed for sale.  Generally assessed value for property taxes is is at some ration of fair market value.  If a property is condemned for public use, the owner is entitled to fair market value.

 

Fannie Mae: See Federal National Mortgage Association.

 

Farmers Home Administration (FmHA): The former name of USDA Rural Development, a federal agency that makes and insures loans for rural housing and farms.

 

Feasibility Study: A study to determine if a proposed development will fulfill the objectives of an investor/developer.

 

FDIC: See Federal Deposit Insurance Corporation.

 

Federal Fair Housing Law: A federal law that forbids discrimination on the basis of race, color, sex, religion, or national origin, in the selling or renting of homes and apartments.

 

Federal Deposit Insurance Corporation (FDIC): A federal agency that insures deposits in commercial banks up to $100,000 and, along with the Federal Reserve System, regulates banks and banking procedures.

 

Federal Home Loan Bank Board (FHLBB): A regulatory and supervisory agency for federally chartered savings institutions. It oversees the operations of the Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Home Loan Mortgage Corporation (FHLMC).

 

Federal Home Loan MortgageCorporation (FHLMC): A secondary market facility of the Federal Home Loan Bank System that is authorized to buy and sell conventional home loans and participating interests in blocks of conventional loans.  Nicknamed Freddie Mac.

 

Federal Housing Administration (FHA): A federal agency within the U.S. Department of Housing and Urban Development (HUD). Using loan insurance programs to insure mortgages for lenders, the Federal Housing Administration (FHA) makes more housing  availability for low and moderate-income families.

 

Federal National Mortgage Association (FNMA): A privately owned 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.  Nicknamed Fannie Mae.

 

Federal Savings and Loan Insurance Corporation (FSLIC): An instrument of the federal government which insured savings accounts in savings and loan institutions until 1989. It was similar to the Federal Deposit Insurance Corporation (FDIC), which insures savings deposits in commercial banks and mutual savings banks, until it became insolvent and was abolished by the federal government in 1989..

 

Federal Trade Commission (FTC): A federal agency that regulates advertising, promotion, and sales practices, of firms that engage in interstate

commerce.

 

Fee Simple, or Fee Absolute, or Fee Simple Absolute: The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to heirs without limitation.  Absolute ownership of real property.

 

Fee Simple Defeasible: A type of property ownership in which the grant of title or duration of ownership is dependent on specified conditions.

 

FHA (Federal Housing Administration): A federal agency within the U.S. Department of Housing and Urban Development (HUD). Using loan insurance programs to insure mortgages for lenders, the Federal Housing Administration (FHA) makes more housing  availability for low and moderate-income families.

 

FHA Mortgage: A mortgage insured by the Federal Housing Administration (FHA).

 

FHLBB: See Federal Home Loan Bank Board.

 

FHLMC: See Federal Home Loan Mortgage Corporation.  Nicknamed Freddie Mac.

 

FIAR: See Fully Indexed Accrual Rate.

 

Fidelity Bond: An assurance (bond), generally purchased by an employer, to cover employees who are entrusted with valuable property or funds.

Fiduciary: A person or legal entity that administers investments for the benefit of another.

Filtering Down: The process whereby, over time, a housing unit or neighborhood is occupied by progressively lower-income residents. 

Finance Charge: Interest and/or other fee charged to a creditor (borrower).

Finance Intermediary: A firm, such as a bank; savings and loan; credit union; mutual savings; which performs the function of collecting deposits from individuals and investing them in loans and other securities.

Financial Leverage: The use of borrowed money to increase the return on equity of an investment purchase

Financial Management Rate of Return (FMRR): A method of measuring investment performance that is a variation on the internal rate of return method. The user specifies 2 after-tax reinvestment rates: i L: a safe, liquid rate, obtainable for liquid deposits. i R: a run-of-the-mill rate, which can be earned from typical investments over a long-term.  Negative cash flows are discounted to the present value at the i L rate, and inflows are compounded to the investment resale date at i R.  The FMRR is the rate that equates the present value negative cash flows to the future value of inflows.

Financial Statements: Statements that show income, expenses, and profit for an accounting period (Profit and Loss, Income Statement), or assets, liabilities and equity as of a point in an accounting period (Balance Sheet)

Financing: Borrowing money to buy property. Such as a mortgage, assuming a mortgage, seller financing, or an installment loan. 

Financing Package: The total of all financial interest in a project. It may include mortgages, partnerships, joint venture capital interests, stock ownership or any financial arrangement used to complete a project.

Finder's Fee: Money paid to someone other than a real estate broker who locates suitable property or a purchaser for a property. Illegal or limited in most states.

Finish Out Allowance: A provision in a lease for an office or retail space that provides a certain sum or an amount per square foot to the tenant by the landlord to customize the space provided to their needs

Fireproof: Having all exposed surfaces constructed of noncombustible materials or protected by such materials.

Fire-Resistant: Able to withstand exposure to flame of fire for a specified amount of time.  Compared with fireproof. 

Firm Commitment: A lender's conditions, agreement or promise to make a loan to a specific borrower on a specific property.

First Mortgage: A loan on real estate that creates a paramount and prior lien to all other mortgages against the property.

First Refusal Right: The opportunity of a party to match the terms of a proposed contract before the contract is executed.  Also called right of first refusal.

Fiscal Year: A continuous 12-month time interval used for financial reporting; the period starts on any date after January 1 and ends one year later on the last day of the twelfth month.

Fixed Interest Rate: Mortgage terms with be no increases or decreases in the interest rate during the life of the loan.  The rate is fixed for the entire period of the loan.

Fixed Monthly Payment: A terms in a loan that prevents increases or decreases in the monthly payment amount during the life of the loan.

Fixed Payment Mortgage: A loan secured by real property which features a periodic payment of interest and principal which is constant over the term of the loan. All fixed payment mortgages are fixed rate mortgages, but some fixed rate mortgages may have variable payments, such as a graduated payment mortgage. 

Fixed-Rate Mortgage: The type of loan where the interest rate will not change as it has a fixed interest rate.

Fixture: Improvements or personal property that becomes real property upon being attached to real estate. Tests to determine whether an item is a fixture include:  intent of the parties (was it intended to remain?); " method of appropriation (how is it affixed to the property?);  relation of the parties (was it expected to be part of a tenant's business or enjoyment?);  adaptation of the article (is it essential to the building?).

Flat: 1. An apartment, generally on one level. 2. A level payment mortgage or lease.

Flat Fee Broker:  A licensed real estate broker who charges a fixed fee for brokerage services instead of a commission based on a percentage of the sales price of the property.

Flat Lease:  A rental agreement that requires periodic level (same) rent payments.

Flexible Payment Mortgage (FPM):  A mortgage loan that allows the borrower to pay interest-only for the first several years of the term.

Float:  1. The interval of time after a deposit or withdrawal is made and before the transaction is credited or deducted. 2. The difference between a variable interest rate and the index to which it is pegged. 3. To incur a debt.

Floating Rate:  A rate that has not been locked.

Flood Insurance:  An insurance policy that covers property damage due to natural flooding.  Flood insurance is offered by private insurers but is subsidized by the federal government.

Floodplain:  A level land area subject to periodic flooding from contiguous body of water. Floodplains are delineated by the expected frequency of flooding.  For example, an annual floodplain is expected to flood once each year.

Floor Area Ratio: The relationship of the total feet of a building to the square footage of the land area.

Floor Plan:  The arrangement of rooms in a building, or a diagram of the room arrangement.

FmHA: See Farmers Home Administration.

FNMA: See Federal National Mortgage Association.  Nicknamed Fannie Mae.

Force Majeure: An unavoidable cause of delay or of failure to perform a contract obligation in time.

Forbearance: An effort made by the lender to offer the borrower a method of, or alternatives to, making a loan current if it is in default.

Forbearance Agreement: A verbal or written agreement that the lending institution will delay exercising its right to foreclose on a loan as long as the borrower performs certain agreed-upon terms and conditions.

Foreclosure: A termination of all rights of a mortgagor or the grantee in the property covered by the mortgage through which the debt is recovered. Statutory foreclosure is effected without recourse to courts, but must conform to laws (statutes). Strict foreclosure forever bars equity of redemption. Also see default. 

Foreclosure by Action and Sale: See Judicial Foreclosure.

Foreclosure by Advertisement: See Power of Sale.

Forfeiture: Loss of money or anything else of value because of failure to perform under contract. 

Forward Commitment: A commitment to purchase loans or mortgage-backed securities which calls for delivery at some future date, typically beyond 90 days.

Frame House: A house constructed with a wooden frame over which is placed some form of siding or veneer such as wood siding or brick.

Franchise: An arrangement between a franchisor and franchisee through which the franchisee uses the company name of the franchisor and is provided specified business services in exchange for a franchise fee. The fee is usually an initial purchase requirement plus an ongoing percentage of gross sales of the business.

Fraud: The intentional use of deception to cause another person to suffer loss. 

Freddie Mac: See Federal Home Loan Mortgage Corporation.

Free and Clear Title: Title to a property without encumbrances. Generally used to refer to a property free of mortgage debt. See clear title, marketable title.

Freehold: An interest in real estate without a predetermined time span.

Frontage: The linear distance of a piece of land along a lake, river, street, road, or highway.

Front Money: Money necessary to start a development project.

FSBO: An abbreviation for for sale by owner. A term referring to properties on the market that are not listed with a real estate broker. Pronounced "fizz-bo." 

FSLIC: See Federal Savings and Loan Insurance Corporation.

FTC: See Federal Trade Commission.

Full Disclosure: A legal requirement to reveal all information pertinent to a transaction. 

Fully Indexed Accrual Rate: The base index value of an adjustable-rate mortgage (ARM) plus the highest gross margin during the life of the loan.

Functional Depreciation: A loss of value from all causes within the property, except those due to physical deterioration. Also see obsolescence. 

Functional Obsolescence: Same as functional depreciation. 

Future Interest: A property right or estate that may not be enjoyed until some time in the future.