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Adjustable Rate Mortgage (ARM) - A mortgage permitting the lender to adjust its interest rate periodically on the basis of a specified index.

Amortization - The gradual reduction of debt by means of periodic payment sufficient to pay principal and interest, thereby liquidating debt.

Annual Percentage Rate (APR) - A term used in the Truth in Lending Statement to represent the percentage relationship of the total finance charge to the amount of the loan.

Appraised Value - An estimate of property value made by a qualified expert, typically an appraiser, who is qualified by his/her education, training, and experience.

Cash Out Refinance - A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Closing - In real estate, the closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.

Closing Costs - Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, origination fees, etc.

Closing Date - The date established by contractual agreement for the transferring of title.

Commercial Loan - A mortgage loan on a property that produces income.

Construction Loan - A short-term interim loan for financing the cost of construction. The lender disburses funds to the builder at periodic intervals as work progresses.

Conventional Loan - A mortgage loan neither insured by FHA or VA.

Co-Signer - One who voluntarily binds him/herself to be obligated for the debt or obligation, is equally responsible for the payments, but has no interest in the title of the property.

Credit Rating - An evaluation of oneís ability to repay a loan. A Credit rating is based on an individualís current financial situation as well as past performance in debt repayment. Any defaults or a history of slow or delinquent payments are taken into consideration.

Debt-To-Income Ratios - Calculations that are used in determining whether a borrower qualifies for a mortgage. These ratios consist of two separate calculations: a monthly housing expense-to-income and a total obligation-to-income ratio.

Deed - A written document by which the ownership of land is transferred from one party to another.

Down Payment - The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Earnest Money Deposit - A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Equity - In real estate, the difference between the fair market value and the current balance on the loan.

Escrow - A transaction in which a third party, acting as the agent for the seller and buyer, carries out instructions of both and assumes the responsibilities of handling all the paperwork and disbursement of funds.

Escrow account - An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Fannie Mae - Nickname for the Federal National Mortgage Association, FNMA is a public corporation originally established by the federal government. Fannie Mae purchases mortgage loans from lenders, and thus, is a major source of funds for mortgage companies.
Federal Housing Administration (FHA) - The Federal Housing Administrationís main activity is insuring residential mortgage loans made by private lenders. FHA does not lend money.

First Time Home Buyer - Loan programs for the first time homebuyers at 100% financing are available depending on the fico score. Applicants must have 2 open trade lines (accounts on your credit report) to qualify. Verification of rent, if applicable will also be used for a credit reference.

Fixed Rate Mortgage - A mortgage that provides for only one interest rate for the entire term of the mortgage.

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.

Freddie Mac - Another government sponsored enterprise formerly called Federal Home Loan Mortgage Corporation (FHLMC) that purchases conventional mortgages in the secondary mortgage market. It also sells and insures securities made up of pools of qualifying mortgage loans.

Hazard Insurance - Insurance coverage that compensates for physical damage by fire, wind, or other natural disasters, to the property.

Home Equity Line of Credit (HELOC) - A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.

Homeowners Association - An organization of homeowners, residing within a particular development, whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.

Homestead Exemption - Some states grant this statutory exemption, which protects homestead property against the rights of creditors. Property tax exemptions are also available in most states.

Interest - Consideration in the form of money paid for the use of money, usually expressed as annual percentage.

Interest Only Loan - A loan that only pays on the interest and the principal balance remains the same after each payment. Typically, payment on the principal balance may be made without penalty.

Investment Property - Real property acquired for the specific purpose of realizing a profitable return at some future date.

Joint Tenancy - An equal undivided ownership of property by two or more persons, the survivors to take the interest upon death of any one of them.

Jumbo - A loan that exceeds Fannie Maeís legislated mortgage amount limits. Also called a nonconforming loan.

Lease - A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the property.

LIBOR (London Interchange Bank Offered Rate) - This is based on rates that contributor banks in London offer one another for inter-bank deposits.

Loan to Value (LTV) - The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.

No Cash-Out Refinance - A refinance transaction in which the mortgage amount is limited to the sum of the unpaid principal balance of the existing first mortgage.

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 amount of the shortfall is added to the remaining balance to create "negative" amortization.

PITI - Principal, interest, taxes and insurance. These are the four costs normally included in a monthly mortgage payment.

Pre-Paids - Items that are payable at closing. These include, interest from the day of closing through the end of the month in which the loan closes, first year hazard insurance premium, mortgage insurance (if applicable), and first year flood insurance (if applicable).

Prepayment Fee - A fee granted to the lender if the loan is paid off prior to the agreed time.

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

Prime Rate - The interest rate that commercial banks set as their base lending rate. This rate is set separately by banks and is closely watched as an indicator of general trends in interest rates.

Principal Balance - The outstanding balance of a mortgage, exclusive of interest and any other charges.

Private Mortgage Insurance (PMI) - Insurance written by a private company protecting the lender against loss occasioned by a mortgage default.

Property Tax - An impersonal levy which focuses on both real and personal property. It is determined by the propertyís exchange value and is levied against the property owner.

Rate & Term Refinance - 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.

Refinancing - The repayment of a debt from the proceeds of a new loan using the same property as security.

Recission - The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.

Seasoned Mortgage - A mortgage that has been closed for more than one year.

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

Subordinate Financing - Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Title - The rights of ownership and possessions of a particular property and the documents that prove those rights.

Title search - An examination of public records, laws, and court decisions to disclose the past and current facts regarding ownership of certain real estate.

VA - Department of Veteranís Affairs

VA Loan - Loans made by lenders that are guaranteed by the Veterans Administration for veterans. The veteran must have their VA Eligibility Certificate and plan to live in the home. The benefits are a lower down payment and cost requirements. (use this definition for VA loans)

VA Mortgage - A mortgage that is guaranteed by the VA. This is typically referred to as a ìgovernment loan.

Variable Rate Mortgage - A mortgage agreement that allows for adjustment of the interest rate in keeping with the fluctuating market and terms agreed on in the note.