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Adjustable Rate Mortgage (ARM): A mortgage loan with an interest rate that is subject to change from time to time.
Amortization: The repayment of a mortgage loan through monthly payments that include both principal and interest.
Annual Percentage Rate (APR): The APR includes the interest, points, mortgage insurance, and other fees, expressed as an annual interest rate.
Appraisal:A document that provides an estimate of the fair market value of the property. Mortgage lenders require it to make sure that the mortgage loan amount does not exceed the value of the property.
Assumable Mortgage: This is a home purchase loan that can be transferred from a seller to a buyer.
Balloon Mortgage: A short-term house purchase loan with a low, fixed interest rate, which allows the borrower to repay a small part of the principal amount. At the end of the term the borrower will have to repay the balance amount due or to refinance it.
Bankruptcy: This is a proceeding in a federal court involving the liquidation of assets of an insolvent loan borrower, to pay off the outstanding debts.
Cap: A limit on how much the interest and monthly payment of an ARM (Adjustable Rate Mortgage) can increase or decrease.
Closing: It is also known as the settlement, and is the time when a borrower gets the title from the seller, and takes on the loan obligation. The borrower also pays the closing costs at this time.
Collateral: Assets that have been pledged by a borrower to secure a loan, which may be seized in the event of a default.
Conventional Mortgage Loan: This is a private sector loan that is not guaranteed or insured by the U.S. Government. A fixed rate mortgage (FRM) may also be called a conventional loan.
Co-signer: A person other than the borrower, who assumes equal liability for the loan by signing a promissory note.
Down payment: The part of the purchase price of a home that is paid in cash, and is not a part of the home loan mortgage.
Depreciation: A method used to account for the reduction in the value of an asset due to age, wear and tear, or obsolescence.
Escrow Account: This is an account into which the mortgage company puts a part of each monthly mortgage payment. It is meant to meet expenses like mortgage insurance, homeowners insurance, and property taxes.
Fixed-rate Mortgage: This is a mortgage home loan with a fixed interest rate and other terms.
Foreclosure: This is a legal proceeding that involves selling mortgaged property to pay off the loan of a defaulting loan borrower.
Good faith estimate: This is an estimate of all closing fees that must be given to a borrower within three days after the loan application is submitted.
Lien: This is a legal claim against a mortgaged property that must be paid when the property is sold.
PITI: The monthly mortgage payment is made up of Principal, Interest, Taxes, and Insurance (PITI)
Points: They are mortgage loan fees that are paid to the lender or the broker for the loan. One point equals one percent of the mortgage amount. Points are usually linked to the interest rate, and usually the higher the points paid, the lower the interest rate will be.
Pre-approve: A commitment made by a mortgage loan company to lend to a potential borrower.
Pre-qualify: An informal determination by the lender of the amount a person is eligible to borrow.
Principal: This is the amount borrowed from a mortgage loan lender. The principal amount does not include interest or other fees.
Private Mortgage Insurance (PMI): A mortgage insurance program for borrowers who make a down payment of less than 20 percent of the purchase price of the property.
Sub prime mortgage loan: Mortgage loans that are given to borrowers with a low credit score, who do not qualify for conventional mortgages.
Title Insurance: It protects the lender or the loan borrower from claims that may arise due to disputes about the ownership of the property.
Title Search: This involves checking the public records to make sure if the seller is the recognized owner of the property, and that there is no unsettled lien or claim against the property.
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