HUD Loan Glossary

Qualifying for HUD Housing
Qualifying for HUD Housing

A HUD loan glossary provides information about the language you may encounter when applying for a loan through the Federal Housing Administration (FHA).

A HUD Loan Glossary

Since the FHA specifically aims to help first time buyers, among others, many people who are interested in applying for a HUD loan may be unaware of the meaning of some of the words used in the loan or application process. This HUD loan glossary provides a listing of some of the words used as well as a brief definition of the word.

Loan Language

  • Fixed Rate Loans: Fixed rate loans are among the most common types of loans the FHA offers. This type of loan, as the name indicates, has a fixed rate of repayment for the entire tenure of the loan. This can be a major advantage, as you will know exactly what you are paying for the entire 15-30 year duration of the loan.
  • Adjustable Rate Loan: Another loan alternative, also called an ARM. Under this type of loan, your interest rate may increase or decrease over time, depending on prevailing interest rates. The interest rate may increase or decrease by a maximum of two percentage points each year.
  • Rehab Loan: Rehab loans are available to buyers who want to purchase a house that is in need of major repair or rehabilitation. Rehab loans are available under HUD's 203K program.
  • Restricted Land Loans: A restricted land loan is available if you are purchasing a family home on an Indian Reservation or other such restricted land. HUD can offer a special loan through a bank or mortgage company for up to 97% of the total value of the home. The loan is made available through lenders to the extent of 97 percent of the total home value.

Finance Words

  • Gross Income: The HUD uses your gross income to figure out how much you can afford to borrow. Your gross income is the amount you make before any tax deductions are taken out.
  • FICO Score: Your FICO score, or credit score, also plays a role in whether you will qualify for a HUD loan. This score is determined by looking at:
    • Your payment history
    • The age of your credit accounts
    • The amount you owe
    • The number of inquiries on your report
    • New credit cards you are opening

Buying Vocabulary

  • Appraisal: A formal process in which the bank or a certified appraiser determines the projected value of the home and land you are buying.
  • Title: A legal word that means ownership of land; if you take "title" to it, then the land or home is legally in your name.
  • Deed: A written document filed with the county clerk that states who has title to a property.
  • Down payment: The amount of money you initially put down, or pay in cash, for a home. This is distinct from your mortgage, which is money you borrow to buy a home. The HUD may require a smaller down payment than traditional mortgages will.
  • Equity: The amount your house is worth over-and-above what you owe on the mortgage. If you owe $100,000 and your home is worth $150,000, then you have $50,000 of equity in your home.

Other Language

  • Fair Housing Act: This refers to legislation passed that prohibits discrimination on the basis of gender, sex, religion, national origin and other such factors.
About HUD loans
  • Good Faith Estimate: An estimate provided by your lender of the amount that you will have to pay for closing costs as well as your monthly mortgage payment. Good faith means that the lender must not hide any material information from you and must clearly explain the terms of the loan and payments.
  • RESPA: Shorthand for the Real Estate Settlement Procurement Act, which requires that you receive information about closing costs and fees associated with your mortgage.
  • Predatory Lending: Practices by unscrupulous lenders in which low income customers or customers with low credit are given loans at high rates or with otherwise negative terms. HUD aims to prevent predatory lending by providing an alternative source of funding to buy a home.

Using the Glossary

This HUD loan glossary provides you with a brief overview of some of the language you are most likely to hear when buying a home. If you have additional questions or do not understand something in the terms of your mortgage, you should speak with a real estate professional.

HUD Loan Glossary