Hazard Insurance: A policy that protects the insured against loss due to fire or certain natural disasters in exchange for a premium paid to the insurer. Also known as Home Owner’s Insurance or fire insurance.

Heloc 10/10: A home equity line of credit that is available to be drawn against for a period of 10 years. After the 10 year draw period expires, the remaining balance is paid off over the next 10 years.

Home Equity Loan: An additional mortgage secured by the equity in the home. All funds for this loan are disbursed at closing. (In contrast, see Home Equity Line of Credit)

Home Equity Line of Credit: A revolving line of credit secured by the equity in the home. Unlike a Home Equity Loan, these funds may be drawn and repaid like a credit card.

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.

Homeowner's insurance (hazard insurance): Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards. The policy typically combines personal liability insurance and property hazard insurance coverage for a dwelling and its contents. See also homeowner's insurance.

Homeowners Warranty: A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Housing and Urban Development (HUD): A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.

Housing Code: Local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.

Housing Expense-to-Income Ratio: The ratio, expressed as a percentage, the result of dividing a borrower's housing expenses by his/her gross monthly income. HUD - See Housing and Urban Development.

HUD-1 Settlement Statement: A form mandated by the federal government that itemizes the closing costs associated with purchasing a home. Also see Estimated Settlement Statement.

Impound (or Reserves): Portion of a borrower's monthly payments held by the lender to pay for taxes, insurance, and other items as they become due.

Impound Account: See Escrow Account

Index: A published rate used by lenders to calculate interest adjustments on adjustable rate mortgages (Index + Margin = Interest Rate). Common indexes include 1-Year Treasury securities, COFI (Cost Of Funds Index) and Six-Month LIBOR (London Interbank Offered Rate).

Initial Rate: The rate charged during the first interval of an adjustable rate mortgage.

Insolvency: Condition of a person unable to pay debts as they fall due.

Insurance: A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance Binder: A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured Mortgage: A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest: paid for borrowing money.

Interest Rate: The rate expressed as a percentage of the outstanding balance used to calculate interest charges.

Interest Rate Cap: A safeguard built into ARMs to prevent drastic changes in interest rates.

Joint Liability: Liability shared among two or more people, each of whom is liable for the full debt.

Joint Tenancy: The ownership of property by two or more persons with the survivor taking the share of the deceased.

Jumbo Loan: A mortgage with a principal balance that exceeds the amount eligible for purchase by Fannie Mae and Freddie Mac. Jumbo loans generally carry a higher interest rate.

Junior Mortgage: A mortgage subordinate or secondary to another mortgage. In the case of a foreclosure, a senior mortgage will be paid first.

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