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Mortgage / Loan Terms

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F

Fair Market Value

An appraisal term for the price, which a property would bring in a competitive market given a willing seller, and willing buyer, each of whom has a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy or sell.

Fee Simple

An estate under which the owner owns a contract interest in the property and is entitled to the unrestricted enjoyment of the property, including the right to dispose property.

Federal Deposit Insurance Corporation (FDIC)

The federal corporation, which insures against loss of deposits in banks, up to a maximum amount.

Federal Home Loan Banks

Banks created under the Federal Home Loan Bank Act of 1932, in order to keep a permanent supply of money available for home financing. The banks are controlled by the Federal Home Loan Bank Board. Savings and loans, insurance companies, and other similar companies making long term mortgage loans may become members of the Federal Home Loan Bank System, and thus may borrow from one of the regional banks throughout the country.

Federal National Mortgage Association

(Fannie Mae): A tax paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA as conventional home mortgages.

Fee

(1) Modernly, and not in strict legal terms, synonymous with fee simple or "ownership." (2) A charge made by a landlord to a tenant, which is not refundable. For example: A cleaning deposit would be refunded if the tenant left the rented property reasonably clean. A cleaning fee would be a charge by the landlord for cleaning the rented property and would not be refunded regardless of the condition of the property.

FHA (Federal Housing Administration)

A federal agency, which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

FHLMC (Freddie Mac)

Federal Home Loan Mortgage Corporation - A federal agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System, and the Federal Home Loan Bank System.

Finance Charge

A total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the customer, as defined by the federal Truth-In-Lending laws.

Financial Statement

An accounting statement showing assets and liabilities of a person or company. Used generally for large loans or other instances when the credit report (history of payment of debts) in itself is not sufficient.

Finder's Fee

A fee paid to someone who finds a buyer or property for a broker, buyer, etc. The term is sometimes used to attempt to pay a commission to an unlicensed person. Generally, a finder's fee is considered a commission and may only be paid to one who holds a real estate license.

First Mortgage

A mortgage on property that is superior in position to any other mortgage.

First Refusal Right

A right, usually given by an owner to a lessee, which gives the lessee a first chance to buy the property if the owner decides to sell. The owner must have a legitimate offer, which the lessee can match, or refuse. It the lessee refuses, the property can then be sold to the Offeror.

First User

A tax term signifying the one who builds or buys property and is the first one to put the buildings to use. Certain tax (depreciation) advantages are given to a first user. The term concerns only depreciable property (improvements) and prior use of the land only (farming) would not be considered.

Fixed Rate Loan

A loan on which the same rate of interest is charged for the life of the loan.

Fixture

Personal property, which is permanently attached to the property, and, as such, becomes part of the real property.

FNMA Buy-down

FNMA (Federal National Mortgage Association) accepts loans containing a buy down provision on single-family residential, owner occupied properties. A prepayment (points) will buy a lower rate of interest during the first one to five years of the loan. Restrictions apply as to the amount of the buy-down and rise in payment amount as the loan progresses.

Forfeiture

The taking of an individual's properly by a government, because the individual has committed a crime. In the United States, private property cannot be taken, except by eminent domain upon payment of just compensation, or for nonpayment of taxes.

Franchise

(1) A statutory right, which could not be exercised in the absence of the statute, such as the statutes enabling persons to form a corporation. Since a corporation is created by the statute, it could not be formed except by the grant of the legislature. (2) A combination of individual ownership and central control. One may own a fast food restaurant, hotel, hardware store, etc., yet use the name of a national company. Each individual owner pays for the name use, advertising, and may be required to make certain purchases (napkins, buns, etc.) from the national company. The real estate brokerage business was slow to use the franchise method, but now has many companies operating in this manner.

Front Foot Cost

A determination of the value of real property based on a value per foot as measured along the frontage of a parcel. Usually used with commercial property or waterfront.

Full Disclosure

In real estate, revealing all the known facts, which may affect the decision of a buyer or tenant. A broker must disclose known defects in the property for sale or lease. A builder must give to a potential buyer the facts of his new development (are there adequate school facilities?" sewer facilities? (an airport nearby?, etc.). A broker cannot charge a commission to buyer and seller unless both know (disclosure) and agree.

Future Acquired Property

Property acquired after a loan or sale. For example: A loan agreement may state that the loan is a lien on all property presently owned or which the borrower may acquire in the future.

Future Interest

A present interest, but only a future right to possession and enjoyment of the land, such as a remainder interest, reversionary interest, etc.

 
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