Debt Ratio: One of several financial calculations performed by your lender to determine if you can afford a particular monthly payment. The debt ratio (also known as the obligations ratio) is the sum of all your monthly debt payments including your total monthly mortgage payment divided by your total monthly income. Typically acceptable debt ratios for Conventional Loan are 36 - 38%, FHA Loans are 41 - 43%, and VA Loans Are 41%.

Discount Rate: Many lenders may offer you a lower "teaser" rate on an adjustable rate mortgage for the first adjustment period. After this period is over, the lender will adjust your loan according to the normal lenders margin rate.

Down - Payment: The amount of money you put down, normally anywhere from 5 - 25%.

Due Diligence: The legal definition: a measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. In CMBS: due diligence is the foundation of the process because of the reliance securities investors must place on the specific expertise of the professionals involved in the transaction.

Engineering Report: Report generated by an architect or engineer describing the current physical condition of the property and its major building systems, i.e., HVAC, parking lot, roof, etc. The report also determines an amount for calculating replacement reserves, if needed.

Environmental Report: Report generated by an qualified environmental firm to determine potential environmental hazards in a building's region or within the building itself.

Environmental Risk: Risk of loss of collateral value and of lender liability due to the presence of hazardous materials, such as asbestos, PCB's, radon or leaking underground storage tanks (LUSTS) on a property.

Equity: 1.The difference between the fair market value and current indebtedness, also referred to as "owner's interest". 2. The difference between the amount owed on the loan and the current purchase price of the home or property

Equity Capital: Capital raised from owners. In a commercial real estate case, a lender will also provide equity capital for a percentage of ownership. 

Escrow: 1. A special account set up by the lender in which money is held to pay for taxes and insurance. 2. A third party who carries out the instructions of both the buyer and seller to handle the paperwork at the settlement.

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 having a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy and sell. 

Fannie Mae: A congressionally chartered corporation which buys mortgages on the secondary market from Banks, Savings & Loans, Etc; pools them and sells them as mortgage-backed securities to investors on the open market. Monthly principal and interest payments are guaranteed by FNMA but not by the U.S. Government.

FHA: Federal Housing Administration, a government agency.

Fixed Rate Mortgage: A mortgage with an interest rate that remains constant for the life of the loan. The most common fixed-rate mortgage is repaid over a period of 30 years; 15-year fixed-rate mortgage are also available. 

Floating Rate Mortgage: See Adjustable Rate Mortgage.

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