Adjustable Rate Mortgage (ARM)— The interest rate on this type of home loan changes after a set period of time (1, 2, 3, 5, 7 or 10 years), based on a standard financial index.

Amortization Schedule — A table showing the beginning balance of a mortgage loan, the scheduled payments, the interest portion of each payment and the principal reduction for each payment, until the balance reaches zero.

Annual Percentage Rate (APR) — The APR is a figure designed to show the true cost of your loan, including mortgage insurance, loan-administration costs, prepaid interest and other closing costs. Because of these factors, the APR tends to be higher than the stated note rate or advertised rate on the mortgage. The APR allows buyers to compare the total annual cost for different types of loans.

Appraisal — A written estimate of market value for a home, made based on inspection of the property and figures on the sale of comparable homes in the vicinity. Appraisals are prepared by qualified independent appraisers.

Balloon Mortgage — A loan with regular amortized payments that requires a lump-sum "balloon" payment of the loan's principal balance at maturity.

Bridge Loan — Sometimes called an "interim loan," a bridge loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home or build a new home if the current residence will not be sold prior to your loan closing.

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Cash Out Refinance — A refinance loan that provides you with cash that exceeds the amount required to pay off existing mortgages on your home. You can use this additional cash for any purpose.

Clear Title — Title that is free of liens or defects.

Closing — A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, a closing usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the closing involves the borrower and the lender.

Closing Costs — Costs associated for the processing and closing of a loan application that are disclosed on the Good Faith Estimate statement.

Closing Fee — A fee charged by the lender, title company, closing agent or attorney to perform the closing of a real estate transaction.

Closing Statement — Also referred to as the HUD-1 or the settlement statement, this is the document that provides line-by-line detail of the financial details related to a specific real estate transaction, such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

Combined Loan-To-Value — The principal balance of all mortgages on the property divided by the value of the property.

Conventional Loan — A mortgage not insured by a government agency.

Conforming Mortgage — A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors. Loans that exceed this amount are referred to as "jumbo mortgages.” The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.

Construction Mortgage — A loan secured by real estate for the purpose of funding the construction of improvements or building(s) upon the property. The bank makes payments to the builder as the work progresses and the borrower makes interest payments on only the funds that have been disbursed to the builder during the construction period.

Credit Report — A report prepared by an independent credit agency, which verifies certain information concerning an applicant's credit history. A credit history helps a lender determine whether a borrower has a history of repaying debts in a timely manner.

Credit Score — Also referred to as FICO score. Your credit score is based on several types of information contained in your credit report: your payment track record; the amount of debt you owe; how long you've used credit; how often you've applied for new credit and whether you've taken on new debt; the types of credit you currently use, such as credit cards, retail accounts, installment loans, finance company accounts and mortgages

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Debt-To-Income Ratio — This is a key ratio used to determine the amount of money you can borrow. It is your monthly debt (payment obligation) divided by your gross monthly income. This gives a percentage that is compared to the guidelines provided by the bank for approval on your loan.

Deed — The written document that conveys a property from the seller to the buyer. The deed is recorded at the local courthouse so that the transfer of ownership is part of the public record.

Deed of Trust — A legal document that enables the lender, or mortgagee, to hold legal claim or titles to a property while the note is outstanding. The Deed of Trust transfers title to a trustee designated by the lender.

Down Payment — The difference between the sales price and the mortgage amount.

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Earnest Money — A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The earnest money is deducted from the purchase price at closing and is not an additional cost.

Easement — The right of limited use of land held by another. Examples include utility lines, and driveways.

Encroachment — A physical object that violates the land of another (i.e. a fence line).

Equity — The difference between the market value of your home and any outstanding mortgage loans or other liens.

Escrow Payment — An amount paid with the monthly mortgage payment for items such as taxes or private mortgage insurance.

Executed Sales Contract — A contract in which the buyer and seller have completed all the terms.

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Federal Home Loan Mortgage Corporation (Freddie Mac) — A quasi-governmental agency which is a publicly traded corporation. The purpose of the entity is to help facilitate the access of mortgage money by creating a secondary market for conventional mortgages. Conventional mortgages purchased by Freddie Mac are called conforming mortgages.

Federal National Mortgage Association (Fannie Mae) — A quasi-governmental agency that is a publicly-traded corporation. The purpose of the entity is to help facilitate the access of mortgage money by creating a secondary market for conventional mortgages. Conventional mortgages purchased by Fannie Mae are called conforming mortgages.

Fixed Rate Mortgage — A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. The most common fixed rate mortgage terms are 30 and 15-years. With a 30-year fixed rate mortgage your monthly payments are lower than they would be on a 15-year fixed rate, but the 15-year loan allows you to repay your loan twice as fast and save more than half the total interest costs.

Fee Simple — Gives you total interest in real estate property. This also gives you the right to sell the property.

Finance Charge — This amount includes the interest and all charges the borrower will be expected to pay over the life of the loan.

First Mortgage — The primary (first) loan secured upon real estate.

Fixed Rate Mortgage — A mortgage in which the interest rate does not change over the term of the mortgage.

Float — A loan application in which the lender has not committed to lend at a particular interest rate (the rate is not locked-in).

Flood Certification — An inspection to determine if a property is located in an area prone to flooding also known as a flood plain. The federal government determines whether an area is in a flood plain. The bank relies on the flood certification to determine if flood insurance will be required in order to obtain a mortgage.

Flood Insurance — Insurance that protects a homeowner from the cost of damages to a property due to flooding or high water. The law requires that properties located in areas prone to flooding have flood insurance. The federal government determines whether an area is prone to flooding and considered to be in a flood plain.

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Gift Letter — A letter stating that money has been given to you to apply towards the purchase of your home. This money is usually from a relative or a friend and is stated in the letter that this money is not to be paid back.

Good Faith Estimate — A written estimate of the closing costs the borrower will have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Gross Monthly Income — Your income before deduction for taxes, medical insurance, etc. After deductions, the income is referred to as your take-home pay, or net income.

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Home Equity Loan — This type of loan lets you borrow money against the difference between your first mortgage balance and the appraised value of your home. The loan will be placed on record as a lien against your property and must be paid in full when you sell the property.

Homeowners Insurance —- Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards.

Housing Ratio — This ratio is used to determine how much of your income will be used for your house payment, taxes and insurance by dividing your housing expense into your gross monthly income.

Index — An indicator which is typically measured by an average of a variable over a certain period of time.

Interest — The amount of money you pay to borrow money. The interest is based on the rate, the amount of money you borrow and for how long you borrow the money.

Interest Rate — This is the rate you pay on the money you borrow. It's generally expressed as an annual percentage.

Interest Rate Cap — A limit on interest rate increases and/or decreases during each interest rate adjustment (adjustment period cap) or over the term (life cap) of the mortgage.

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

Joint Tenants — Co-owners of a property, each having equal interest and rights to the property.

Judgment Lien — A lien placed on a property by a court ruling due to a past debt not paid. This lien must be satisfied before you can refinance your property or when you sell the property.

Jumbo Mortgage — A loan that exceeds the maximum loan amount allowed by the most common mortgage investors. The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.

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Lien — Any legal claim against a property, ensuring payment of an unpaid debt.

Life Cap — The amount the interest rate is allowed to increase during the term of the mortgage.

Liquid Assets — Assets that can be readily converted to cash, such as stocks.

Loan Administration Fee — A fee charged by the bank to cover the administrative costs of processing your loan request.

Loan Commitment — A written agreement between lender and a borrower stating the terms and requirements of the mortgage loan.

Loan Term — The number of months that you will make monthly loan payments.

Loan-To-Value (LTV) — The percentage of the loan amount you borrow based on of the sale price or appraised value of the property. The LTV ratio is used to determine for what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.

Lock Period — The number of days the lender will guarantee the interest rate offered for a loan. In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.

Margin — The amount added to the index on an adjustable rate mortgage to determine the interest rate at each adjustment.

Maturity — The date on which the principal balance of a financial instrument becomes due and payable.

Mortgage — A loan secured against real estate as opposed to personal property. States, which are not Trust States, utilize a mortgage as the legal instrument to secure the lien against the real estate, which means that the owner holds title rather than a trustee.

Mortgagee — The lender of money which is secured by real estate

Mortgagor — The borrower of money which is secured by real estate.

Net Worth — The total of all your assets, cash, stocks, bonds, home furnishings, transportation vehicles, less the total amount of liabilities (debt) that you owe.

No Cash Out Refinance — A refinance loan is an amount that pays off the existing mortgage balance on the property and does not provide the borrower with any cash at closing.

Note — The written agreement signed by the borrower at closing that contains the promise to repay the loan. The note also contains the terms of the loan, such as interest rate, payment, and term.

Offer to Purchase — An agreement between a buyer and seller to purchase real estate. An offer to purchase, also known as a binder or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.

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Per-Diem Interest — Interest charged from the day of closing to the first day of your new monthly mortgage payment.

PITI — The total mortgage payment comprised of (P) principal and (I) interest, (T) real estate taxes and (I) insurance.

POC — A charge which is paid outside of closing.

Power of Attorney — This is a legal document that allows one person to act on behalf of another person.

Pre-Approval — This allows you to get approved for a specific loan amount prior to finding the home you want to purchase. This can give you a great advantage with a homeowner or realtor if someone else is interested in the same home at the same time.

Prepaids — Closing costs that are actually paid at closing for charges which will occur in the future.

Private Mortgage Insurance (PMI) — Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The borrower usually pays the cost of the insurance. PMI is most often required if the loan amount is more than 80% of the home's value.

Property Taxes — Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.

Purchase Agreement — A written contract between buyer and seller for a piece of property. The purchase agreement details the terms and the price of the sale.

Qualifying Ratios — Calculations performed by lenders to determine your ability to repay a loan. The first qualifying ratio is calculated by dividing the monthly PITI by the gross monthly income. The second ratio is calculated by dividing the monthly PITI and all other monthly debts by the gross monthly income.

Rate Lock — An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.

Refinance Mortgage — Money borrowed by the present owner of real estate to replace an existing loan secured by the same real estate or to place a mortgage on free and clear property.

Recording Fees — A fee charged by the local government to record mortgage documents into the public record so that any interested party is aware that a lender has an interest in the property.

Second Mortgage — A loan which is secured by real estate, which is already secured by another loan, referred to as the first mortgage.

Second Home — A home used by the owners only occasionally or seasonally, primarily for recreational purposes.

Security —- The collateral offered to a lender in exchange for a loan. When a lender provides a mortgage, you provide your home as the security. This means that if payments are in default, the lender has the right to take title to the property.

Settlement Agent — A person or entity which coordinates or conducts a loan closing or settlement.

Survey — The measurement of the boundaries of a parcel of land, including any improvements, easements or encroachments within the boundaries of the property.

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Tax Lien — A claim against property for past due property taxes owed.

Tax Service Fee — A fee charged to a borrower by a lender so that another company will assume responsibility for verifying the amount of real estate taxes due.

Term — The period or life over which a mortgage exists.

Title — Ownership record of the property. A title company agent conducts a title search to make sure the seller has clear title to the property before conducting settlement. If there is not clear title, it is said that the title has defects. Title Insurance is typically required to cover the lender against such defects.

Title Commitment — A written commitment from the title insurance company to insure title to the property, subject to conditions listed.

Title Insurance — The policy covers the homeowner and lender against any errors in title search.

Treasury Index — An index that is used to determine interest rate changes for some adjustable-rate mortgage (ARM) programs. It is often based on the U.S. Treasury's daily yield curve.

Truth-In-Lending — This is a disclosure estimating the costs of the loan, including your total finance charge and the Annual Percentage Rate (APR). Truth-In-Lending must be provided to you within three business days of your application for a loan. This disclosure provides consumers with a standard method of comparing the financing costs from lender to lender.

Underwriting Fee — A fee charged to cover the cost of the lender's analysis of the risk associated with a loan.

Verification of Funds — Recent bank statements proved by the applicant that verifies the applicant’s liquid assets, held with a particular financial institution.

Verification of Employment — Recent pay stubs, W-2 forms and/or tax returns provided by the applicant to verify income.

Verification of Mortgage — Form which verifies an applicant's mortgage history with a financial institution, including the date of the mortgage, present balance, present payment, and history of late payments. The Verification of Loan and Verification of Rental History garners similar information for personal loans and the applicant's landlord (if renting).