Adjustable-rate mortgage (ARM): a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as a variable-rate mortgage.

Amortization: loan payment by equal installments of principal and interest calculated to pay off the debt at the end of a fixed period.

Annual percentage rate (APR): the interest rate reflecting the cost of a mortgage as a yearly rate. It allows home buyers to compare different types of mortgages based on the annual cost for each loan.

Appraisal: a document giving an estimate of a property's fair market value, generally required by a lender before loan approval.

Assessment: a local tax levied against a property for a specific purpose, such as a sewer or street lights.

Balloon (payment) mortgage: usually a short-term fixed-rate loan which involves small payments for a certain period of time; after that time period elapses, the balance is clue or is refinanced by the borrower.

Borrower (mortgagor): a person approved to receive a loan who is then obliged to repay it and any additional fees according to the loan terms.

Cap: a consumer safeguard on an adjustable-rate mortgage that limits how much a monthly payment or interest rate can increase or decrease.

Closing: the meeting between the buyer, seller, and lender or their agents where the property and funds legally change hands.

Commitment agreement: Often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paper work or compliance with stated conditions.

Contract sale or deed: contract between buyer and seller of real estate to convey title after certain conditions have been met.

Conventional loan: a private sector loan, one that is not guaranteed or insured by the U.S government.

Credit report: documents an individual's credit history, listing all past and present debts and the timeliness of their repayment.

Debt-to-income ratio: the ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debt is divided by their gross monthly income.

Down payment: the portion of a home's purchase price paid in cash and not part of the mortgage loan.

Earnest money: money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment,

Equity: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage from the fair market value of the property.

Escrow: an account held by the lender into which the home buyer pays money for tax or insurance payments.

FHA: the Federal Housing Administration provides mortgage insurance to lenders to cover most losses when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

FHA loan: loan insured by the FHA open to all qualified home purchasers. while there are limits, they are generous enough to handle moderately priced homes almost anywhere in the country.

FHA mortgage insurance: a policy paid at closing to insure the loan with FHA.

Fixed-rate mortgage: mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed.
Loan-to-value (LTV) ratio: a percentage calculated by dividing the amount borrowed by the sales price or appraised value of the home to be purchased.

Lock-in: guarantees a specific interest rate and the loan is closed within a specific time.

Market value: the highest price that a buyer would pay and the lowest price a seller would accept on a property.

Mortgage Insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan: usually required with a down payment of less than 20%.

Origination fee: fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually a percentage of the loan's amount.

Points: prepaid Interest charged at closing by the lender. Each point equals 1 percent of the loan (e.g., 2 points on a $100,000 mortgage would be S2,OD0).

Prepayment: permits the borrower to make payments in advance of their due date, thus saving money on interest. Prepayment penalty: charges for the early repayment of debt Principal: the borrowed amount less interest or additional fees.

Private mortgage Insurance (PMI): insurance paid by the borrower. This may be required by the lender when the down payment is less than 20%.

Realtor: a real estate agent or broker affiliated with the National Association Of Realtors and its local and state associations.

Recording fees: money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.