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.

Home equity line of credit (HELOC): 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.

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

Loan-To-Value Ratio (LTV): 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.