The Ultimate Homeowner Dictionary (Definitions F-H)

What is an FHA Loan?
An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD). These loans are designed to help low-to-moderate-income borrowers who may not qualify for conventional loans due to lower credit scores, smaller down payments, or other financial constraints. FHA loans are particularly popular among first-time homebuyers, but they are available to all eligible borrowers.

What are Fixed Expenses?
Fixed expenses are regular, recurring costs that do not change in amount from month to month, regardless of your level of income or usage. These expenses are predictable and must be paid consistently, making them an essential part of budgeting and financial planning. Common examples of fixed expenses include rent or mortgage payments, car loans, insurance premiums, and subscription services.

What is Flood Insurance?
Flood insurance is a type of property insurance that provides coverage for damage caused by flooding, which is not typically included in standard homeowners or renters insurance policies. This insurance is specifically designed to cover losses to your home and belongings due to rising water levels from natural disasters, such as heavy rain, hurricanes, or storm surges. Flood insurance is often required for homeowners in high-risk flood zones, but it is also available to homeowners in lower-risk areas.

What is Foreclosure?
Foreclosure is a legal process in which a lender takes ownership of a property after the borrower fails to meet the repayment terms of their mortgage. This process typically occurs when the borrower has missed several mortgage payments, leading the lender to initiate proceedings to recoup the loan balance by selling the property. Foreclosure allows lenders to recover the remaining debt by seizing and selling the property at auction or through a sale.

What Is a Fixed-Rate Energy Plan?
A fixed-rate energy plan provides a set electricity rate per kilowatt-hour (kWh) that does not change throughout the contract term. This protects homeowners from market fluctuations and sudden price hikes, ensuring stable and predictable energy costs.

What is a Gift Letter?
A gift letter is a formal document provided by a donor to a homebuyer, stating that the money given to the buyer is a gift, not a loan and that the donor expects no repayment. This letter is commonly used in real estate transactions, particularly when the buyer is using gifted funds to cover a portion of the down payment or closing costs. Lenders require a gift letter to ensure that the gifted funds do not represent a hidden debt that could affect the buyer’s ability to repay the mortgage.

What is Gross Income?
Gross income is the total amount of money earned by an individual or business before any deductions, taxes, or other expenses are subtracted. For individuals, gross income typically includes wages, salaries, bonuses, and other forms of earnings before payroll taxes and other deductions like health insurance premiums or retirement contributions are taken out. For businesses, gross income is the total revenue generated from sales of goods or services before any costs related to production, operations, or taxes are deducted.

What is Green Energy?
Green energy encompasses power generated from renewable sources that minimize environmental impact. Unlike fossil fuels, green energy sources are sustainable and do not deplete finite resources. Common examples include solar energy harnessed from sunlight, wind power generated by air currents, and hydropower produced from flowing water.

Green energy is also carbon-neutral, as its production does not release harmful emissions into the atmosphere. This makes it a key component in combating climate change and promoting long-term sustainability.

A Grid-Tied System is a type of renewable energy setup, such as solar panels, that connects directly to the local power grid. This allows homeowners to use electricity from the grid when needed and send surplus energy back to the grid, often earning credits through net metering.

What are HOA Fees?
Homeowners Association (HOA) fees are regular payments made by homeowners living in a community governed by a homeowners association. These fees contribute to the maintenance and management of shared spaces, amenities, and services within the community, such as landscaping, security, swimming pools, and clubhouses. The fees are typically mandatory for all residents of the community and are used to uphold the quality and upkeep of the neighborhood.

What is Home Equity?
Home equity is the portion of your property that you truly own, representing the difference between your home’s market value and the outstanding balance on your mortgage. As you pay down your mortgage or as the value of your property increases, your home equity grows. Home equity is a significant financial asset that homeowners can leverage for various purposes, such as securing loans, funding home improvements, or investing in other financial opportunities.

What is Monthly Housing Expense?
Monthly housing expense refers to the total amount of money a homeowner or renter spends each month on housing-related costs. For homeowners, this includes mortgage payments, property taxes, homeowner's insurance, and possibly homeowner's association (HOA) fees. For renters, it typically includes rent and renters insurance. Monthly housing expense is a critical factor in personal finance, as it directly impacts your budget and financial health.

What is a Home Inspection?
A home inspection is a thorough examination of a property’s condition, typically performed by a certified home inspector before a real estate transaction is finalized. It provides potential buyers with a detailed assessment of the home's major systems, such as electrical, plumbing, roofing, heating and cooling, and structural elements. The goal is to identify any issues, safety concerns, or necessary repairs before the buyer makes a final commitment. A home inspection can help buyers make an informed decision and negotiate repairs or price reductions if significant problems are found.

What is a Home Warranty?
A home warranty is a service contract that covers the repair or replacement of major home systems and appliances due to normal wear and tear. Unlike homeowners insurance, which covers damage from unexpected events like fire or theft, a home warranty is designed to cover items that break down from regular use, such as HVAC systems, plumbing, electrical systems, and major appliances like refrigerators and ovens. It provides peace of mind to homeowners by reducing out-of-pocket expenses for these repairs.