Glossary of Real Estate Terms

Area Median Income (AMI)

The Area Median Income is a number based on all of the New Orleans Metro Area incomes and calculated annually by Department of Housing and Urban Development (HUD). The New Orleans Metro Area includes all of Jefferson, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany Parishes. The AMI is the “middle” number of all of the incomes for the given area; 50% of the people in that area make more than that amount and 50% make less than that amount. On the chart below, the row labeled “100%” is the median income. The AMI numbers are adjusted for household size so that the median income of a family of 8 is higher than the median income of a family of 4.

Many affordable housing programs have income eligibility requirements. To be eligible to apply for one of their homes, your family’s pre-tax income must be higher than or equal to the program minimum but less than or equal to the program maximum.

New Orleans Area Median Incomes (AMI) for Fiscal Year 2015

New Orleans

1 Person

2 Person

3 Person

4 Person

5 Person

6 Person

7 Person

8 Person














































Debt to Income Ratio

The debt to income ratio (DTI) is the percentage of your gross (pre-tax) income that goes towards paying debts.  It is generally calculated in two ways.  The front-end ratio is the percentage of gross monthly income that is used to pay housing costs (generally defined as the sum of monthly mortgage, interest, property tax and insurance payments).  The back-end ratio is the percentage of gross monthly income that is used to pay all debts– housing costs, credit card payments, student and auto loans, etc.  Lenders will not lend to borrowers whose debt to income ratios exceed either or both of the approved maximums.

Enterprise Green Community

Enterprise Green Communities Criteria is the first national framework for healthy, efficient, environmentally smart affordable homes. The Criteria are a framework for comprehensive green building practices, which are applicable for all affordable housing development types, in any location in the country. We focus on the use of environmentally sustainable materials, reduction of negative environmental impacts and increased energy efficiency. We emphasize designs and materials that safeguard the health of residents and locations that provide easy access to services and public transportation. For more information, please visit


One of the main advantages of buying a home is that it allows families to build equity.  Equity is the value of a home after all debts and liens are paid off.  For example, if a homeowner sells her house for $150,000 but still had $100,000 outstanding in mortgage payments, she would walk away with $50,000 in equity.

There are two main sources of homeowner equity: (1) the forced savings resulting from a one-time down payment and the ongoing monthly principal payments and (2) appreciation of the market value of a home.

Financial Fitness

Financial fitness classes provide basic financial management training with an emphasis on credit management and budgeting.  They are usually 12-hour classes offered during the early stages of homebuyer counseling.

First-Time Homebuyer

According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is an individual who meets any of the following critera:

Greater New Orleans Housing Alliance

The Greater New Orleans Housing Alliance (GNOHA) was formed in the spring of 2007.  It is a collaborative formed by the non-profit housing builders and community development corporations who are working diligently to rebuild the City of New Orleans.

Green Building Standards

Green Building Standards integrate materials and methods that promote environmental quality, economic vitality, and social benefits through design, construction, and operation of the built environment

Homebuyer Education

Homebuyer training classes take participants through the steps of becoming a homeowner.  Like financial fitness classes, they are 12-hours long but homebuyer education classes are usually one of the last steps of homebuyer counseling.  Most counseling agencies will only allow you to enroll in a homebuyer education class when you are assessed to be “mortgage ready.”

Homeowner Insurance

Homeowner insurance is a form of property insurance that protects homeowners from liabilities to the property itself and the contents inside.  The cost of the policy generally depends on an assessment of what it would cost to replace the house and belongings.  Homeowner insurance does not include damage resulting from floods so homebuyers are encouraged, if not required by the lender, to obtain an additional flood insurance policy.

Homeownership Counseling

Credit counselors review your current situation and work with you to determine the best possible financial strategies.  They will perform a thorough analysis of your income, living expenses and debt to help create a plan to avoid or reduce debt.  You will receive advice for developing and balancing budgets, mapping money, using credit wisely and building a savings plan.  Certified counselors will help you develop your own plan so that you can do more with what you have.

Individual Development Account (IDA)

Individual development accounts (IDAs) are matched savings accounts that help individuals and families save for a lifelong asset like a down-payment on a home or a college education.  Participants open a savings account at a participating bank, make monthly deposits over a minimum period of time (usually six months or more) and work with a financial or credit counselor to gain budgeting and saving skills.  After the minimum payments, individuals receive a matching grant to help them achieve their saving goals.  There are usually income eligibility restrictions associated with individual development account programs.


A mortgage is a long-term loan used to purchase or construct a home.  It is secured by real property which means that if an individual defaults on the loan through non-payment, the lender (usually a bank) has the right to foreclose on the property and take it into bank ownership.  Important factors to consider when shopping for a mortgage is the amount of principal (the value of the home) and the interest rate.

Mortgage Ready

“Mortgage Ready” is a term that many professionals in the housing industry use to mean that a person has resolved any and all credit or income issues that would raise red flags if they submitted a mortgage application to the bank.  Mortgage ready means that, to the best of our knowledge, you are ready to start shopping for a home because you are in a position to submit a strong mortgage application to the bank.

Mortgage ready does not mean that you have to have perfect credit or that you are guaranteed to be approved by the bank.  However, it does mean that you have worked hard to resolve any major issues on your application.

Real Estate Agent

An individual who represents a seller, a buyer, or both in the purchase or sale of real estate.  Real estate agents are licensed professionals and perform such tasks (amongst others) as showing homes to perspective buyers and negotiating transactions on behalf of their client.


The term “REALTOR” is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS and subscribes to its strict code of ethics (which in many cases goes beyond state law).  In most areas, it is the REALTOR who shares information on the homes they are marketing through a Multiple Listing Service (MLS).  Working with a REALTOR who belongs to an MLS will give you access to the greatest number of homes and expose your property to the greatest number of REALTORS and potential purchasers.

Section 8 Homeownership Voucher

Individuals who already have a rental subsidy voucher through the Section 8 program may be eligible to exchange their rental voucher for a homeownership voucher.  Instead of subsidizing the individual’s monthly rent, this voucher will help the individual to meet their monthly mortgage payments.  Anyone interested in learning more about this program should speak with their caseworker for more information.

Soft-Second Mortgage

A soft-second mortgage is a type of subsidy provided to help make homeownership more affordable.  The soft-second mortgage fills the gap between the maximum first-mortgage amount that a family qualifies for, provided by a bank, and the total cost of a home.  For example, if an individual is purchasing a home that is valued at $100,000 and the lender qualifies the individual for a maximum bank mortgage of $80,000, he or she could qualify for a $20,000 soft-second mortgage to cover the difference.  Like most subsidies, soft-second mortgages are only awarded based on need.

A soft-second mortgage is structured as a forgivable loan that has a repayment term, just like a traditional loan.  However, rather than making monthly payments, the homeowner repays the soft-second mortgage by living in the home as their primary residency.  If the homeowner moves before the end of the repayment term, he or she will need to pay the remaining balance of the soft-second mortgage out of the proceeds from the sale of the house.  The amount of subsidy that has already been “paid off” stays with the homeowner as equity.  For more information on the City of New Orleans’ Soft-Second Mortgage Program, visit


Several housing developers are able to offer a subsidy to income eligible families.  The purpose of the subsidy is to fill the gap between what an individual can afford to pay towards his or her housing costs and the sales price of a home.  The amount and type of subsidy offered will differ from developer to developer but are commonly structured in the form of a soft-second mortgage (see definition above), closing cost assistance or down payment assistance.  Closing cost assistance is a grant that covers the legal and administrative costs associated with the real estate transaction of purchasing a home; down payment assistance is a grant that helps a family meet the minimum out-of-pocket threshold needed to purchase a home.