A

(ARM) Adjustable Rate Mortgage -
A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

Adjustment_date -
The date the interest rate changes on an ARM (adjustable rate mortgage).

Amortization -
Literally to "kill off" (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.

(APR) Annual Percentage Rate -
A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add-on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.

Annuity -
A series of income payments of receipts over a period of years.

Application -
A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more.

Appraisal -
The determination of property value based on recent sales information of similar properties.

Assessment -
Determining a property's value for the purpose of taxation.

Appreciation -
Increases in property value due to fluctuations in the market, inflation, et al.

Asset -
Valuable items, encumbered or not, owned by a person, corporation, or entity.

Automated Valuation Model (AVM) ¬

Abbreviated appraisal reports used by lending institutions to estimate property values.

 B

(BK) Bankruptcy -
A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loans until after two years after declaration and a re-establishment of credit.

Biweekly Mortgage -
Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.

Broker -
An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Buydown -
Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In oder to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. After the discount period, the payment is calculated as the note rate.

 C

Caps -
A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.

Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.

Closing -
Final arrangements to transfer title of property as well as allocate charges and credits.

Closing Costs -
Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid." Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre-paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate.

Commitment -
A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

Conforming Loan -
A loan for up to and including $417,000 in the continental United States (Alaska and Hawaii limits are higher).

Construction Loan -
A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Conventional Mortgage -
A mortgage loan that is obtained without any additional guarantees for repayment, such as FHA insurance, VA guarantees, or private insurance. This is usually given at an 80% loan-to-value ratio.

(FICO) Credit Rating/Score -
Borrowers are rated by lenders according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.

Credit Report -
A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

 D

(DTI) Debt-to-Income Ratio -
The ratio of aggregate monthly debt to aggregate monthly income.

Deed -
A legal document which affects the transfer of ownership of real estate from the seller to the buyer.

(DOT) Deed of Trust -
Synonymous to a mortgage. A deed of trust or mortgage is obtained, depending on the state in which the borrower will reside.

Default -
The failure to make payments on a loan.

Delinquency -
Late- or non-payments of principal, interest, taxes, or insurance.

Depreciation -
In real estate and mortgage terms, the decline in the property value.

Down Payment -
Money paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.

 E

Earnest Money Deposit -
A deposit made by a potential home buyer to show that they are serious about purchasing the property.

(ECOA) Equal Credit Opportunity Act -
The act declaring the elimination of discrimination on the basis of age, sex, and race in finance.

Equity -
The difference between the current market value of a property and the principal balance of all outstanding loans.

Escrow -
A third party agent that receives, holds, and/or disburses certain funds or documents upon the performance of certain conditions. For example, an earnest money deposit is put into escrow until the transaction is closed. Only then can the seller receive the deposit.

Escrow Account (impound account) -
An account that a borrower can hold with a lender once a purchase transaction is closed. This requires borrowers to pay more than the principal and interest each month. The overage is put into escrow, which the lender uses to pay items like property taxes and homeowner's insurance when they are due. This eliminates the actual number of payments that a homeowner has to worry about, but not the amount that has to actually be paid.

 F

Fair Credit Reporting Act -
A law that protects consumer that regulates the reporting of consumer credit by agencies and establishes procedures for correcting errors on an individual record.

Fees -
Up-front costs associated with a loan. Clicking on the word VIEW shown under the "Fees Detail" column on the quotes results page will display detailed information about the financial institution's fees and requirements pertaining to that rate.

FHA Loan -
A government-backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD).

First Mortgage -
A mortgage that has priority over other mortgages.

Fixed-Rate Mortgage -
A mortgage where the interest rate does not change for the life of the loan.

Float -
Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures.

Foreclosure -
A legal procedure in which real estate is sold by the lender to pay a defaulting borrower's debt .

 G

Good Faith Estimate (GFE) -
An estimate of charges which a borrower is likely to incur in connection with a loan closing.

Government Loan -
A type of mortgage insured by the FHA (Federal Housing Authority), VA (Veteran's Administration), or RHS (Rural Housing Authority).

Grace Period -
A time allowed, usually 15 days, for making late payments without a penalty.

Gross Monthly Income -
The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.

 H

Hazard Insurance -
A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes.

(HELOC) Home equity line of credit -
A mortgage loan in second position that allows a borrower to obtain cash drawn against home equity, up to a certain amount.

Home Inspection -
A thorough assessment by a professional regarding the structural and mechanical condition of a property.

Homeowner's insurance -
An insurance policy that combines personal liability insurance and hazard insurance for a home and its contents.

 I

Index -
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest -
Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share, or title in property.

Interest Only -
A term loan arrangement calling for payments of interest only, not to include any amount for principal.

Interest Rate -
The percentage of an amount of money that's paid for its use over a specified time period.

 J

Jumbo Loan -
A loan for $417,001 or more in the continental United States (Alaska and Hawaii limits are higher). These limits are set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

 L

Lease Agreement -
A written agreement between a property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

Lender -
The bank, mortgage company, or mortgage broker offering the loan. Many institutions only "originate" loans and then resell the obligation to third parties.

Lien -
A legal claim by one party against the property of another as security for a debt. Must be paid off when property is sold. A mortgage or a first trust deed is a lien.

Loan Amount -
The amount of money that you intend on borrowing from a financial institution for the purchase of your home. Subtracting the down payment from the purchase price of the home will provide you with the loan amount.

(LO) Loan Officer -
An intermediary between lending institutions and borrowers, loan officers solicit loans, represent creditors to borrowers, and represent borrowers to creditors.

(LTV) Loan-To-Value Ratio - -
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is assumed to be the purchase price, for refinances the value is determined by an appraisal.

Lock -
The act of committing to a mortgage rate. This action, taken by a borrower some time between the application and the closing dates, is sometimes accompanied by a payment by the borrower to the lender.

 M

Margin -
The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate.

Merged Credit Report -
A credit report that reports data from two or more major credit repositories.

Monthly Housing Expense -
Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

Mortgage -
A legal document that pledges property to a creditor for the repayment of the loan, and is the term used to describe the loan itself. Some states use the term First Trust Deeds to refer to mortgage loans.

Mortgagee -
The lender in a mortgage agreement.

Mortgage Broker -
A mortgage company that originates loans, joining the borrower and lender for a real estate loan, earning a placement fee.

 N

Negative Amortization -
Essentially occurs when a borrower makes a minimum payment that may not cover the interest that is due. Loan balance then increases as a result.

No Cash-out Refinance -
A refinance transaction that is not intended to put cash in the hand of the borrower, but instead calculates a new balance to cover the balance due on a current loan and any costs with obtaining a new mortgage.

No-Cost Loan -
A no-cost loan can either be: 1) a loan that has no "lender costs" associated with it or, 2) a loan that also covers purchases or refinancing costs, which may be incurred in buying a home, obtaining and/or refinancing a loan, but are not directly charged by the lender. The interest rate on this type of loan is higher.

Note -
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note Rate -
The stated interest rate on a mortgage note.

 O

Origination Fee -
The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.

 P

PITI -
PITI stands for principal, interest, taxes, and insurance. An "impounded" loan means that the monthly payment covers all of these, and perhaps mortgage insurance, if your loan so calls for it. If one does not have an "impounded" account, then the lender still calculates these amounts separately and uses it as part of determining one's debt-to-income ratio.

Points -
The site allows lenders to post rates via point ranges. Points are broken out on the site for Discount and Origination. The definitions for each are as follows:

Discount Points = Interest Charges paid up-front when a borrower closes a loan. A point is equal to 1 percent of the loan amount (e.g. 1.5 points on a $100,000 mortgage would cost the borrower $1,500). Generally, by paying more points at closing, the borrower reduces the interest rate of his loan and thus future monthly payments.

Origination Points = A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.

Pre-Approval -
A term used to mean that a borrower has completed a loan application and provided debt, income, and savings information that has been reviewed and pre-approved by an underwriter.

Pre-Paids -
Expenses such as taxes, insurance, and assessments, which are paid in advance of their due date, and on a prorated basis at closing.

Pre-Payment -
Any amount paid so as to reduce the principal before the due date.

Prepayment Penalty -
Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule.

Pre-Qualification -
After a loan officer has made inquiries about a borrower's debt, income, and savings, he or she can write a written statement (pre-qualification) about the borrower's chances for qualifying for a home loan.

Principal -
The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI) -
Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-to-Value Ratio is greater than 80%.

Purchase Agreement -
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

 Q

Quitclaim Deed -
A deed that transfers, without warranty, whatever interest or title a grantor may have at the time the conveyance is made.

 R

Rate Lock -
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

Real Estate Agent -
A person licensed to negotiate and transact the sale of real estate.

Real Estate Settlement Procedures Act (RESPA) -
An act requiring the revelation of all costs involved in a real estate closing to all participants.

REALTOR® -
A real estate agent, broker, or associate that holds an active membership in a local real estate board that is affiliated with the National Association of REALTOR®s.

Recast -
To redesign an existing loan balance into a new loan for the same period or longer, to reduce payments and help a distressed borrower.

Refinancing -
The process of paying off one loan with the proceeds from a new loan, using the same property as security.

Revolving Debt -
A credit arrangement that allows a customer to borrow against a pre-approved line of credit used to purchase goods and services. The borrower is responsible for the actual amount borrowed plus any interest due.

 S

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 lower than that of the first mortgage, or senior loan. See second mortgage.

 T

Tax Lien -
A claim against real estate for the amount of its unpaid taxes.

Title -
A legal document showing a person's right to or ownership of a property.

Total Debt Ratio -
Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.

 V

Variable Rate Mortgage -
See Adjustable Rate Mortgage.

Vested -
Means that one has a right to use a portion of a fund, such as an individual's retirement fund.