Table Rate
An interest rate that changes periodically in relation to the financial index it is based upon. With an adjustable rate, your payments may increase or decrease accordingly - usually from year to year.

Adjustable Rate Mortgage (ARM)
A mortgage loan with an interest rate that increases or decreases periodically during the time it takes you to pay the loan back. The changes in the interest rate will usually happen once a year, and are based on how much the average interest rate rises and falls in the marketplace during that time. Usually, ARMs come with safety features called "caps" that prevent your payments from changing too drastically, even if the average interest rates rise or fall sharply in that period. The terms, adjustment schedule, and index are agreed upon at the inception of the loan.

Adjustable Rate Mortgage (ARM 3/1)
An adjustable rate home loan with a 30-year term. The interest rate remains the same for the first three years, then changes annually thereafter. The interest rate changes annually subject to margin and lifetime caps of the particular loan program. The interest rate is determined by the U.S. Treasury Securities index.

Adjustable Rate Mortgage (ARM 5/1)
An adjustable rate home loan with a 30-year term. The interest rate remains the same for the first five years, then changes annually thereafter. The interest rate changes annually subject to margin and lifetime caps of the particular loan program. The interest rate is determined by the U.S. Treasury Securities index.

Adjustable Rate Mortgage (ARM 10/1)
An adjustable rate home loan with a 30-year term. The interest rate remains the same for the first ten years, then changes annually thereafter. The interest rate changes annually subject to margin and lifetime caps of the particular loan program. The interest rate is determined by the U.S. Treasury Securities index.

Amenity
A feature that enhances a property's attractiveness and increases the occupant's or user's satisfaction (although the feature is not essential to the property's use). Natural amenities include a desirable location near water and scenic views of the surrounding area. Human-made amenities include swimming pools, tennis courts, and other recreational facilities.

Amortization
A repayment method in which the amount you borrow is repaid gradually through regular monthly payments of principal and interest for a predetermined length of time. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.

Amortization Schedule
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.

Amortization Term
The amount of time required to pay off the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Amortize
To repay a mortgage with regular payments of both principal and interest.

Annual Cap
The limit on the amount an adjustable rate mortgage's interest rate can change over a 12-month period. An annual cap prevents your payments from changing too dramatically, even if the factors that determine changes in an adjustable mortgage's rate rise or fall sharply during that period.

Annual Percentage Rate (APR)
A measure of the cost of credit expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made. This rate includes specified fees and costs paid up front to acquire the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Lenders are required by federal law to disclose the APR. The rate is used to compare various loans.

Application
A form used to apply for a loan on which you provide personal and financial information. This information is confidential and will be used by the lender to determine your loan eligibility and for required government reporting. The standard mortgage loan application form is commonly referred to as a 1003 form.

Application Fee
Fees that are paid upon application. An application fee may frequently include charges for property appraisal and a credit report.

Appraisal
The process of figuring out how much a home is really worth, given current market conditions. An appraisal, which is done by a qualified expert, is an important part of getting a mortgage. It helps determine the amount of money a lender will loan you to buy a house.

Appraised Value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.

Appreciation
An increase in the value of a property due to positive improvements of the area in market conditions or other causes. This is the opposite of depreciation.

Assessed Valuation
The determination, for tax purposes, of how much a home and the property it occupies is worth.

Assessed Value
The valuation placed on property by a public tax assessor for the purposes of taxation.

Assessment
The process of placing a value on property for the purpose of taxation.

Assessor
A public official who establishes the value of a property for taxation purposes.

Asset
Anything of monetary value that is owned by a person that can be used for the payment of debts. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).

Balance Sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Mortgage
A mortgage that has level monthly payments over a specified term along with a lump sum payment to be due at the end of that term.

Balloon Payment
The final lump sum payment due at the end of a balloon mortgage loan.

Bankrupt
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy
A proceeding in a federal court in which a person who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee for distribution to the creditors as full satisfaction of the outstanding debts. Types of bankruptcy are Chapter 7 (Straight Bankruptcy or total liquidation of assets), Chapter 11 (Business Reorganizations), Chapter 12 (Farm Debt Bankruptcy), and Chapter 13 (Wage Earner Repayment Plan).

Before-Tax Income
Income before taxes are deducted.

Blanket Mortgage
A mortgage covering more than one property of the mortgagor.

Borrower
The individual applying for or receiving a loan or line of credit

Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Buy Down
The option you have to lower the overall interest rate of a home loan by paying more money when you first get the loan. The money you pay-referred to as "discount points"-can reduce the interest rate for the entire life of the loan, or just part of it.

Call Option
A provision in the mortgage that gives the lender the right to call the mortgage due and payable at the end of a specified period for whatever reason.

Cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease for a specified amount of time.

Capital
(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Cash Out
Receiving money back when refinancing your present mortgage.

Ceiling
The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage (ARM).

Certificate of Deposit Index
An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit.

Certificate of Title
A statement provided by an abstract company, title company, or attorney stating that the current owner legally holds the title to real estate.

Chain of Title
The chronological history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent from the original owner to the present owner.

Change Frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Clear Title
A title that is free of liens or legal questions as to ownership of the property.

Closing
A meeting at which the buyer finalizes a sale of a property signing the mortgage documents and paying closing costs.

Closing Cost Item
A fee or amount that a homebuyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Closing cost items are included as numbered items on the HUD-1 statement.

Closing Costs
Any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney's fees, title insurance, survey, and any items which must be prepaid, such as taxes and insurance escrow payments. Closing cost percentage will vary according to the area of the country.

Closing Date
Lenders need to know when you expect or would like to complete the final procedures your new house, in which documents are executed and the sale is completed. 45-60 days is most common. You can always discuss changing this date with your lending institution.

Closing Statement
The final statement of costs necessary to close on a loan listing both buyer and seller fees, if applicable. This is also referred to as the HUD-1.

Cloud on Title
Any conditions revealed by a title search that adversely affects the title to real estate. Usually clouds on title can be removed by a quitclaim deed, release, or court action.

Co-Borrower
An individual who enters into an agreement along with the borrower. The co-borrower is responsible if the borrower should default on the loan.

Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment Letter
A formal offer by a lender stating the terms under which it agrees to lend money to a homebuyer.

Community Property
A form of ownership in some western and southwestern states in which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

Comparables
Comparables are used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Compound Interest
Interest paid on the original principal balance and on the accrued and unpaid interest.

Condominium
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Conforming Loan
Generally, a mortgage loan under $240,000. Qualifying ratios and underwriting methods are standardized to a large degree with this type of loan.

Consumer Reporting Agency (or Bureau)
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract
An oral or written agreement between two or more parties to do or not to do a certain thing.

Contract of Sale
The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal government.

Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Courier Fee
Cost associated with transporting closing documents to the closing agent. This fee may also include the cost of forwarding and/or obtaining other documents necessary to complete the preparation of your mortgage documents.

Covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History
A record of an individual's past and current debts. A credit history helps a lender to determine whether a potential borrower has met financial obligations on time in the past.

Credit Life Insurance
A type of insurance often bought by the borrower because it will pay off the mortgage debt if the borrower dies while the policy is in force.

Credit Limit
The maximum amount that you can borrow.

Credit Report
A report on the past ability of a loan applicant to pay installment payments.

Creditor
A person to whom money is owed.

Creditor Chargeoffs
A term generally used in accounting that indicates the creditor does not expect to successfully collect the balance owed on an account

Creditor Judgements
A decision by a court of law relative to an action or suit.

Debt
An amount owed to another.

Deed
The legal document conveying title to a property.

Deed of Trust
The agreement used in many western states to pledge your home or other real estate as security for a loan. The property is transferred to a trustee by the borrower in favor of the lender, and reconvened upon payment in full. This is similar to a mortgage.

Deed-in-Lieu
A deed given by a borrower to the lender to satisfy a debt and avoid foreclosure.

Deed Stamps
A recording fee charged by a local municipality or State for the financing/conveyance instrument, given to pass fee title to property upon sale

Default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

Delinquency
Failure to make mortgage payments when mortgage payments are due.

Deposit
A sum of money given to bind the sale of real estate, a sum of money given to ensure payment, or an advance of funds in the processing of a loan.

Depreciation
A decline in the value of property. The amount of yearly depreciation is influenced by property condition and supply and demand in the resale marketplace, and reputation of the manufacturer and model. This is the opposite of appreciation.

Discount Points (or Points)
The amount of money you can choose to pay when you first get a loan to reduce its overall interest rate. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

Document Preparation Fee
A cost charged by the lender for the preparation of documents necessary to close the loan.

Documentary Stamps
A state tax on the sale of property levied at the time legal instruments such as deeds and mortgages are recorded into public record. Most state charge %.55 per $500 of the taxable amount

Down Payment
The amount you pay in cash towards the total sales price of the home you are buying. Your down payment accounts for the part of the home's sales price not covered by the money you borrow from a lender. Most lenders require the down payment to be paid from the buyer's own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender. Making a larger down payment may also help you avoid the necessity of purchasing a mortgage insurance policy, which maybe required of buyers providing a down payment of less than 20% of the home's sales price.

Earnest Money Deposit
A deposit made by the potential homebuyer to show that he or she is serious about buying the house.

Effective Age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, restrictions, or a claim against a property by another party. These factors usually affect the ability to transfer ownership of the property.

Endorser
A person who signs ownership interest over to another party.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
How much of your home you actually own. To figure out your equity, subtract the amount you owe on your loan from your home's current market value.

Escrow
An item of value, money, or documents deposited with a third party in an account to pay for certain aspects of your loan when they become due.

Escrow Account
The account between you and your mortgage lender that stores money you have deposited until you need it to pay for certain aspects of your loan, like closing costs, taxes or insurance fees.

Escrow Payment
The portion of a borrower's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.

Estate
The sum total of all the real property and personal property owned by an individual at time of death.

Eviction
The lawful expulsion of an occupant from real property.

Exclusive Listing
A written contract between a property owner and a Real Estate broker, whereby the owner promises to pay a fee or commission to the broker if certain real property of the owner is sold during a stated period, regardless of whether the broker is or is not the cause of the sale

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Market Flood Insurance
An insurance policy that covers damage to your home due to flooding. If the home you are buying is in an area prone to flooding, then you may be required by your home loan provider to get flood insurance. To establish whether your home is in such an area, a land survey must be done-at the expense of the person selling the home. The lender must give notice that the property is in a flood zone at least 10 days prior to closing.

Fair Market Value
How much a home or property is worth, given the current conditions of the local real estate market. The fair market value of a home is usually used in conjunction with the amount of tax its owner must be charged. The highest price that a buyer, willing but not compelled to buy would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae (FNMA)
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. Fannie Mae is a nickname for the Federal National Mortgage Association, a corporation that specializes in buying loans from mortgage bankers, in order to add cash to the mortgage market. The United States government runs Fannie Mae, with assistance from private sector professionals.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Fee Simple
An estate under which the owner is entitled to unrestricted powers to dispose of the property, commonly a synonym for ownership.

Finder's Fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

First Mortgage
A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

Fixed Installment
The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.

Fixed Rate
A loan with an interest rate that stays the same throughout the life of the loan. Payments as well are fixed at one amount.

Fixed-Rate Mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.

Flood Certification Fee
This is a fee to obtain documentation that indicates whether or not a property is in a federally-designated flood zone, and whether or not flood insurance is required for that property.

Flood Insurance
Insurance that compensates against loss by flood damage. Typically not included in standard hazard insurance.

Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Forfeiture
The loss of money, property, rights, or privileges due to a breach of legal obligation.

Full Disclosure
A legal requirement that says a person selling a home must inform a potential buyer of everything they know about the home's physical and economic condition.

Fully Amortized ARM
A loan of equal, regular payments which cause the principal and interest to be completely paid by the due date.

Gift Letter
The form stating that a relative is giving you money to help you buy a home, and that they will not ask you to it pay back. The letter also provides proof, by referring to bank statements and other records, that the relative does in fact, have enough money to cover the amount of the gift, and that the money has been transferred to your possession.

Good Faith Estimate (GFE)
A written estimate of charges that a borrower is likely to incur in connection with obtaining a loan. A lender must mail to you a GFE within three business days after your application is received.

Grace Period
The period of time past the due date for a payment during which time the payment may be made and not considered delinquent.

Grantee
The person to whom an interest in real property is conveyed, generally the seller.

Grantor
The person conveying an interest in real property, generally the buyer.

Gross Income
For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

Guarantee Mortgage
A mortgage that is guaranteed by a third party.

Hazard Insurance
A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium. This is an insurance policy many lenders require a homebuyer to have to cover damages due to occurrences like fires or storms.

Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify based on income, but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

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.

Homeowners' Association
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Homeowner's Insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

Homeowner's Warranty (HOW)
A type of insurance that covers repairs to specified parts of a house for a specific period. It is provided by the builder or property seller as a condition of the sale.

Housing Expense Ratio
The percentage of gross monthly income that goes toward paying housing expenses.

HUD
The U.S. Department of Housing and Urban Development.

HUD-1
A standard form, which itemizes the closing costs, associated with the purchase or the refinance of a one-to-four family residential property. .

Index
A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based. Some commonly used indexes include the 1-Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).

In-File Credit Report
An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.

Inflation
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Initial Interest Rate
The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM).

Installment
The regular periodic payment that a borrower agrees to make to a lender.

Installment Loan
Borrowed money that is repaid in equal payments, known as installments. An auto loan is often paid for as an installment loan.

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.

Intangible Tax
A nonrecurring tax imposed on notes, bonds, and other obligations for payment of money secured by a mortgage, deed of trust, or other lien evidenced by a written instrument presented for recordation that is due and payable when the instrument is presented for recordation. If there is no written instrument or if it is not presented within 30 days following creation of the obligation, then the tax shall be due and payable within 30 days following creation of the obligation.

Interest
The amount of money a lender charges you to borrow money. The interest you pay is a percentage of your total loan, and is paid over time.

Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.

Interest Adjustment or Prepaid Interest
An estimated amount of interest due at closing, usually from the date of closing to the end of the month.

Interest Rate
The periodic charge, expressed as a percentage, for use of credit.

Interest Rate Ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Investment Property
A property that is not occupied by the owner.

Joint Tenancy
A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.

Jumbo Loan
A loan that exceeds Fannie Mae's legislated mortgage amount limits. Also called a nonconforming loan. Terms and underwriting requirements may vary from conforming loans.

Late Payment Fee
A fee charged for failing to submit the minimum monthly payment by its due date.

Lender
A financial institution, like a bank, that loans you money, and expects you to pay the money back to them in a stated period, usually with interest.

Lien
A claim against a property by another party which utilizes the property as security for repayment of a loan or other claim. This usually affects the ability to transfer ownership.

Lifetime Cap
A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Loan Application
The formal document you fill out when you approach a lender to borrow money. It includes your name and personal information, the amount of money and other terms of the loan you need, as well as a detailed description of the purpose of the loan.

Loan Term
The total amount of time you are given by a lender to pay off your loan. Loan terms vary, but are generally set at 15 or 30 years.

Loan-to-Value Ratio (LTV)
A mathematical equation mortgage experts use to describe the amount you've borrowed from a lender to buy a home, in relation to the total cost of the home. For instance, if you have borrowed $80,000 to buy a $100,000 home, the LTV for your loan is 80%. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders. Loans with an LTV over 80% may require Private Mortgage Insurance.

Lock-In
A written agreement guaranteeing the borrower a specified interest rate provided the loan is closed within a set period. The lock-in also usually specifies the number of points to be paid at closing.

Margin
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period. A representative margin would be 2.75%.

Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

Maturity Date
The scheduled date for your final payment on a loan. After making the payment on a loan's maturity date, you assume complete ownership of your home from the lender.

Maximum Financing
A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.

Monthly Housing Allowance
The percentage of a person's income they can comfortably use each month to pay for where they live-with enough left over to spend on food, clothing, and other luxuries. This percentage is usually 28% of your total income.

Monthly Periodic Rate
The most common interest rate factor used to calculate the interest charges on a monthly basis. The factor is computed by dividing the yearly rate by 12.

Mortgage
The legal document outlining your responsibilities as a borrower, including the amount of the loan you have taken and the details and schedule of your re-payment. It states that if you do not make payments on your loan in a timely fashion, you may lose your right to ownership of the home.

Mortgage Banker
A company that originates mortgages. They loan you their funds and close the loan in their name, then resell the loan in the secondary mortgage market.

Mortgage Broker
An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services. As do mortgage bankers, they take a loan application and process the necessary paperwork. Unlike a mortgage banker, brokers do not fund the loan with their own money, but work on behalf of several investors, such as mortgage bankers, S and L's, banks, or investment bankers.

Mortgage Disability Insurance
A disability insurance policy which will pay the monthly mortgage payment in case of a covered disability of an insured borrower for a specified period of time.

Mortgage Insurance
A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or most of the mortgage loan. This is an insurance policy you are required to get if the amount of your down payment is less than 20% of the total cost of the home.

Mortgage Insurance Premium (MIP)
The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

Mortgage Life Insurance
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Mortgage Loan
A loan, which utilizes real estate as security or collateral to provide for repayment should you, default on the terms of your loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.

Mortgagee
The person or company who receives the mortgage as a pledge for repayment of the loan. The lender in a mortgage agreement.

Mortgagor
The mortgage borrower who gives the mortgage as a pledge to repay. The borrower in a mortgage agreement.

Negative Amortization
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The portion of the payment, which should be paid, is added to the remaining balance owed. The balance owed is added to the remaining balance to create "negative" amortization.

New Loan Escrow
A fee charged by the escrow company to carry out the additional procedures necessary when a new loan is created by a lender in connection with a purchase.

No Cash-Out Refinance
A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

No Doc Loan
A loan requiring no documentation of income. This type of loan is ideal for self-employed individuals with good credit.

Non-Conforming Loan
Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium. The current non-conforming loan limit is $227,151 and above. This is also called a jumbo loan.

Note
Legal document obligating a borrower to repay a loan at a stated interest rate for a specified period of time. The agreement is secured by a mortgage or deed of trust

Notice of Default
A formal written notice to a borrower that default has occurred and that legal action may be taken.

Obligations
The things you have to pay for consistently each month, excluding housing costs. Obligations include things like car loans, credit card bills, student loans, and alimony or child support.

Original Principal Balance
The total amount of principal owed on a mortgage before any payments are made.

Origination
A loan processing fee charged by the lender for originating a new loan (usually 1% of the loan amount, or one "point").

Origination Fee
A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount. These are charges you must pay when first buying a home to cover credit checks, property appraisals, title searches, and other expenses not directly linked to the cost of the home.

Owner of Record
The actual owner of a property, according to public records.

Owner's Title Policy
An insurance premium charged by the title company to insure the buyer that the title is free from defects up to the date the conveying instrument is recorded. The seller frequently pays this premium.

Parcel
A piece of land or property under one ownership. Parcels are created when a single large property is sub-divided into many smaller pieces of property.

Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Payoff or Prepayment Penalty
A penalty imposed by the lender when the loan is paid before it is due. The penalty is intended to recover some of the money they would've gotten from you in the form of interest payments, had you taken the full term of the loan to pay it off.

Per-Diem Interest
Interest charges that cover the period of time-usually a matter of days, or a few weeks-between when you close on your home, and the first day of the first month of your regular loan payments.

Periodic Payment Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period.

Periodic Rate Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal Property
Any property that is not real property.

PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes, mortgage, and hazard insurance.

PITI Reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Points
A one-time charge by the lender paid to either maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

Power of Attorney
A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods.

Pre-Approval
A way you can establish your ability to get a home loan worth a certain amount of money, even before you have found the home you want to buy. The pre-approval process is done in conjunction with a specific lender, and the results are based on the total income of your household, the amount of your monthly debt, as well as other factors-depending on your situation as a home buyer.

Prepaid Interest
The amount of interest to cover the period from close of escrow until the beginning of the first payment.

Prepaids
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Prepayment
Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Pre-Qualification
The process of determining how much money a prospective homebuyer will be eligible to borrow before he or she applies for a loan.

Private Mortgage Insurance
Insurance to protect the lender in case the borrower defaults on his/her loan. With conventional loans, mortgage insurance may not be required if you make a down payment of a least 20% of the home's purchase price. (FHA and VA loans have different insurance guidelines)

Prime Rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

Principal
The amount borrowed or remaining unpaid. When you buy a home, the principal of your loan, combined with your down payment, covers the total sales price. When you make payments to the lender each month, you pay back a portion of the principal as well as additional fees in the form of interest charges.

Processing Fee
A fee incurred for the preparation of a mortgage loan application and for the preparation of supporting documents for underwriting.

Punch List
A written inventory of things that need to be done to a home in order to meet the requirements of a sales contract.

Qualifying Ratios
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.

Rate-Improvement Mortgage
A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.

Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real Property
Land and property, including anything of a permanent nature such as structures, trees, minerals.

Recording Fees
Fees charged by the County Recorder's Office for recordation of Deed, Mortgage or Deed of Trust, and, at times, additional documents requiring public notice.

Refinancing
The way you can replace your current home loan with a new loan to get an interest rate lower than the one you have, or to borrow cash from the amount you have paid back on your current loan.

Remaining Balance
The amount of principal that has not yet been repaid.

Remaining Term
The original amortization term minus the number of payments that have been applied.

Residential Mortgage Credit Report (RMCR)
A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.

Right of First Refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Second Mortgage
A mortgage that has a position subordinate to the first mortgage.

Secondary Mortgage Market
The buying and selling of existing mortgages.

Secured Loan
A loan that is backed by collateral.

Security
The property that will be pledged as collateral for a loan.

Security Interest
An interest that a lender takes in the borrower's property to assure repayment of a debt.

Step-Rate Mortgage
A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.

Subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordination Agreement
An agreement under which a prior or superior lien is made inferior or subject to an otherwise junior lien.

Survey
A drawing or map showing the precise legal measurements of the boundaries of a property, together with the location of all improvements and sometimes its area and topography. This is performed by a trained professional called a surveyor, and occurs before a home sale is finalized.

Tax Liens
A lien against real estate for unpaid taxes.

Tax Search
A part of a title search which determines if there are any unpaid taxes or assessments which may be a lien against the property being searched

Tax Service Fee
A fee charged to administer a tax search.

Term
The period of time between the beginning date of the legal documents and the date the entire balance of the loan is due.

Third-Party Origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Tiered Interest Rate
A method of computing interest in which the rate is based upon 1) the amount of the outstanding balance, 2) the amount of cumulative charges made, or 3) the borrower's credit and risk rating.

Title
The legal, written evidence that identifies the owner of a home or piece of property, and outlines that person's rights as owner. At the time of a home sale, the title passes from the seller to the buyer and the lender who is providing the buyer's home loan. The buyer gets the title when their home loan is paid back in full.

Title Company
A company that specializes in examining and insuring titles to real estate.

Title Insurance
The insurance policy you must purchase to protect yourself and the lender against any possible problems of the home you are buying. These problems may include disputes over ownership of a property unresolved legal claims, or an interruption of the deed transferal process between previous owners of the property.

Title Search
An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.

Total Debt Ratio
Monthly debt and housing payments divided by gross monthly income.

Trade Equity
Equity that results from a purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.

Transfer of Ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.

Treasury Index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges. This is intended to facilitate comparisons between the lending terms of different financial institutions.

Underwriting
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.

Underwriting Fee
The cost to cover the evaluation of a loan application to determine the risk involved for the lender.

Unsecured Loan
A loan that is not backed by collateral.

Up-Front Costs
The total amount of cash you need to pay when you buy a home, minus the amount of your loan. Up front costs include your down payment, any closing fees you must pay-like broker's commissions or insurance charges-and the discount points you can use to lower your overall interest rate.

Variable Rate
An interest rate that changes periodically in relation to a specific financial index. Payments may increase or decrease accordingly due to changes in the index. Adjustments are usually made on a quarterly basis.

Wage Garnishments
A notice to an employer that a portion of an employee's wages must be applied to a debt owed by said employee.

Warehouse
A fee charged by the lender to cover the expense incurred between funding and the sale of the loan to the ultimate investor.

Wraparound Mortgage
A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the borrower. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

Zoning
The way cities and towns define how areas within their borders are to be used as real property. Zoning determines which areas of a city or town can contain stores and other businesses, which should be used as residential areas, and which can mix both types of property.