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Glossary

Hazard Insurance

See Homeowner's Insurance.

Home Equity Line of Credit (HELOC)

A line of credit that allows you to borrow money using your home's equity as collateral. A Home Equity Line of Credit works like a credit card, but features a lower, variable interest rate. You can draw cash as you need, using convenience checks supplied by your lender, and only pay interest on the amount you use.

Home Equity Loan

A loan that allows the home owner to borrow money using their home's equity as collateral. The borrowers receive the loan as a lump sum at the time of closing. These loans are sometimes useful for families to help finance major home repairs, medical bills or college education.

Home Inspection

A thorough examination by a professional home inspector of a home's visible structure, which will make you aware of any repairs that may be needed. The inspection period is stated in your contract.

Homeowner's Insurance

Insurance for home loss caused by fire, vandalism, and other damaging events, depending upon the terms of the policy. Flood or wind insurance may require additional coverage. Homeowner's insurance is required to close on a loan. Also known as Hazard Insurance.

Housing Ratio

A calculation your lender uses to determine if you can afford a particular monthly payment: The total monthly housing payment (PITI - Principal, Interest, Taxes, and Insurance) is divided by your gross monthly income, and shown as a percentage. For example: PITI = $1,500 divided by gross monthly income = $6000, Housing ratio = 25%. This example shows an ideal housing ratio, one well below typically acceptable ratios of 28%-33% for conventional loans and 29%-31% for FHA loans. Also known as a front-end, or qualifying ratio.

HUD (U.S. Department of Housing and Urban Development)

A government agency responsible for creating and operating federal housing and community development programs. It also oversees the Federal Housing Administration.

HUD-1 Uniform Settlement Statement

See Closing Statement.