Adjustable Rate
Mortgage (ARM)
A fully amortizing mortgage where the interest rate is not fixed,
but changes at specific periods during the life of the loan at
a determined margin above an established index.
Amortization
The systematic and continuous payment of an obligation through
installments until the debt has been paid in full.
Annual Percentage
Rate (APR)
A term used to represent the percentage relationship of the total
finance charge (interest, loan origination fees, discount points,
mortgage insurance, etc.) to the amount of the loan.
Appraisal
A report that sets an estimate or opinion of value.
Balloon Mortgage
A mortgage with periodic installments of principal and interest
that do not fully amortize the loan. The balance of the mortgage
is due in a lump sum at a specified date.
Borrower
The person(s) obtaining a mortgage loan to buy or refinance property.
Buydown
Money advanced by an individual to reduce the mortgage interest
rate for a home mortgage either for the entire term or for an
initial period of years.
Closing
The consummation of a real estate transaction. The closing includes
the delivery of a deed, financial adjustments, the signing of
notes and the disbursement of funds necessary to complete the
sale and loan transaction.
Co-Borrower
Additional borrower(s) whose income contributes to qualifying
for a loan and name(s) appear on all documents with equal obligations.
Commitment
An agreement between a lender and a borrower to loan money by
a specified date, subject to compliance with stated conditions.
Conventional
Mortgage
A mortgage not insured or guaranteed by a government agency (such
as FHA or VA).
Credit Report
A report on the credit history of a prospective borrower used
to help determine creditworthiness.
Discount Point
Amount payable to the lending institution by the borrower or seller
to increase the lender's effective yield. One point is equal to
one percent of the loan.
Down Payment
The difference between the purchase price of the real estate and
the mortgage amount.
Earnest Money
A portion of the down payment delivered to the seller or an escrow
agency by the purchaser of real estate with the purchase offer
as evidence of good faith.
Equity
That portion of property value in excess of any debt against it.
Escrow
A procedure whereby a third party (often your mortgage lender)
collects, holds and pays out certain funds on your behalf such
as real estate taxes and insurance premiums.
First Mortgage
A lien that has a prior claim to any other liens (except real
estate taxes) against a property.
Fixed Interest
Rate
An interest rate that does not change during the term of the loan.
Floating
The interest rate and fees not established at the time of application.
They may fluctuate up or down with the market until the lender
and borrower agree to set them.
Flood Certification
Letter
A letter indicating whether or not a property is located in a
flood plain.
Hazard or Homeowners
Insurance
Insurance coverage that compensates for physical damage to the
property by fire, wind, rain, hail or other natural disaster.
Interest
Consideration in the form of money paid to a lender for use of
other money.
Loan Processor
Person responsible for gathering all information necessary to
determine the qualifications for the loan requested.
Lock In
The interest rate and fees have been agreed upon by both the lender
and the borrower.
Monthly Payments
The specified dollar amount to be paid promptly each month. This
payment includes the principal, interest and, if applicable, taxes
and insurance.
