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Mortgage and Real Estate Glossary ~ F

Fair market value

The price for a property in a fair and competitive market. The sale price of your home is a true value if it is freely available on the open market. This means that all potential buyers know that a home is up for sale and have an equal opportunity to bid for it. Even if you sell your home for less than you would have liked, this price is still fair and square. The price of a home sold in court actions, such as a foreclosure or bankruptcy is not the fair market value.

Federal National Mortgage Association (Fannie Mae)

A government-sponsored corporation that buys and sells loans in the secondary market. Fannie Mae buys loans from lenders and sells them to investors, the government and other lenders. This allows lenders to have a steady flow of money so that they can offer more loans to customers who want to buy homes. Fannie Mae only buys loans that conform to their strict borrowing guidelines. Fannie Mae also offers a special first time buyer program, which only requires a 3% down payment, to encourage people who don't make a lot of money to buy homes.
See: Secondary market, Conforming loans, California

Federal Housing Administration (FHA)

A federal agency that insures loans offered by certain commercial lenders. FHA was created by the Department of Housing and Urban Development (HUD) and offers a variety of financing options to help families qualify for a mortgage. How it works is that FHA insures loans, so if you do not repay (default on), FHA covers the amount owed to the lender.
See: FHA mortgage

Fee simple

A term used to describe the most complete ownership that a person can have over a property. Fee simple is the most common type of ownership that allows you to have unlimited control over a property-most homes are held in fee simple. You can find this term written on the deed to your home. A property held in fee simple, unlike other types of ownership, can be included in a will for someone to inherit. Fee simple is also called an estate of inheritance or estate in fee.
See: Estate

FHA mortgage

A loan with certain restrictions that is guaranteed by the Federal Housing Administration. FHA mortgages are easier to qualify for since they require a very low down payment, usually about 3% of the loan amount, and offer low interest rates. The catch is you can only borrow up to a certain amount, and you have to pay both an up-front and monthly premium for insurance. The insurance safeguards the lender in case you don't repay the loan. The up-front cost, usually 2-3% of the loan amount, can be lumped onto the loan and paid off over time. To be eligible you must plan to live in the home that you purchase.
See: Government mortgage

Fixed rate mortgage

A loan with the same interest rate and payment for the life of the loan. When you lock in the interest rate for a fixed rate loan, you'll have the same rate and monthly payment for the loan's full term. The main benefit is that you always know what your housing costs are, which takes out the guesswork when planning ahead.
Compare: Adjustable rate mortgage

Fixture

Personal property that becomes a permanent part of a property. Custom-made drapes or appliances made to fit a home, like a built-in microwave, are fixtures. Free standing appliances, like laundry machines, dryers and refrigerators are not fixtures. Stoves, though, are considered fixtures. Even when you sell your home, a fixture must remain in the home unless you inform the buyer in writing that you plan to take it with you. Otherwise, the new owners automatically get to keep items like your heirloom chandelier.

Foreclosure

When a lender takes possession of a home and sells it in order to repay a loan in default. When a homeowner can not repay (defaults on) the mortgage and negotiations for an alternative payment plan fail, the lender has no choice but to start the foreclosure process. This process varies from state to state, but in general, a foreclosure is an auction either with or without court action. The sale must be advertised in local newspapers and the highest bidder wins the home. Since the lender only bids on what is owed, a buyer can often find a good deal, especially on an older home.

You still get one final chance to keep your home by paying off all delinquent costs either before the sale or in a judicial foreclosure, before the court approves the foreclosure. Having a foreclosure on your credit is very serious business, often worse than bankruptcy.
See: Trustee's sale, Default, Judicial foreclosure

Forfeiture

When home buyers lose the money that they paid to a seller to secure a purchase. Home buyers normally give the seller a sum of money, called a deposit, to convey how serious they are about buying the property. If the deal works out, their deposit is applied to the buyer's closing costs. But, if the deal breaks down, who finally pockets the deposit money will depend on specific clauses and contingencies written in the sale/purchase contract.
See: Deposit

Full disclosure

When all the facts are revealed about a property's condition, sale or financing. There are both federal and state laws that require that the broker, seller and lender make certain information readily available to the buyer-anything that can affect the buying decision. For example, (1) a seller should tell a home buyer if there are any problems with a property and (2) before a broker can charge a commission, the buyer/seller must be informed and agree to the terms.
See: Truth-in-lending act, Good Faith Estimate

Functional obsolescence

When a property's value decreases due to its poor design, style or lack of modern facilities. Functional obsolescence is one reason why a home might drop in value. For example, the market value of a home that doesn't have enough electrical power to run a dishwasher, microwave and hair dryer at the same time will steadily fall. Other than functional obsolescence, a property can also lose value due to poor maintenance or a slump in the economy.
See: Depreciation, Appraisal

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