Adjustable Rate Mortgage - Loan on which the monthly payments will increase or decrease overtime. An ARM's interest rate may be tied ti the 11th. District Cost of Funds, one year T-note and six-month T-bill. ARM payments are typically adjusted every six months or once a year.
 
Amortization - The gradual repayment of a mortgage through monthly payments. In the early years of a mortgage, most of the monthly payment goes toward interest. Later in the mortgage, more of payment goes toward reducing the loan's principal balance.
 
Annual Percentage Rate (APR) - The annual cost of a mortgage, including interest, loan fees and other costs, stated as a percentage of the loan amount.
 
Appraisal/Appraised Value - An opinion of the market value of a home expressed by a professional real estate appraiser.
 
Caps - Provisions of an adjustable rate mortgage, which limit how much interest rate can change at each adjustment period (i.e. every six months or once a year) or over the life of the loan (rate cap). A payment cap limits how much the payment due on the loan can increase or decrease.
 
Closing Costs - Expenses in addition to the price of the home incurred by buyers and sellers when a home is sold. Common closing costs include escrow fees, title insurance fees, document recording fees and real estate commissions.
 
Comission - An amount paid to a RealtorŪ for his o her services, typically set a at percentage of sales price.
 
Conventional Mortgage - A loan not guaranteed, insured or made by the federal or state goverment.
 
Debt to Income Ratio - The ratio of monthly debt payments to monthly gross income. Lenders use a debt to income (or DTI) ratio to determine whether a borrower's income qualifies him or her for a mortgage.
 
Deed- A legal document conveying ownership of a property.
 
Down Payment - The portion of the home's purchase price the buyers pays in cash.
 
Earnest Money - The deposit given by a buyer to a seller to show thet the buyer is seriuos about purchasing the home. Earnest money binds the contract. Earnest money usually is refundable to homebuyers in the event a contigency of the sale contract cannot be met.
 
Equity - The difference between a home's value and the mortgage amount owed on the same.
 
Escrow - The holding of documents and money by a neutral third party untill all parties perform.
 
Fannie Mae and Freddie Mac - The Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation are government sponsored, privatley owned entities, which purchase mortgages from lender and turn the mortgages into securities, wich are bought by investors. Fannie Mae and Freddie Mac are the key secondary mortgage market agencies.
 
Fixed-rate Mortgage - A loan on which the interest rate and monthly payments do not change.
 
 
Hazard Insurance - A policy which protects against damage to a property caused by fire, wind or other hazards.
 
Homeowner's Warranty - A policy thet covers certain repairs (such as plumbing or heating) of a newly purchased home for a certain period of time.
 
Impound Account - An account established by a lender to collect a borrower's property tax and insurance payments. Impound accounts are normally required on mortgages with down payments of 10 percent or less.
 
Loan to Value (LTV) Ratio - The ratio of the amount of money owed on ahome to the home's value. The LTV ratio for a $100,000 home financed with a $90,000 mortgage would be  90 percent.
 
Mortgage Banker - A company which originates mortgages for sale into the secondary mortgage market (for example to Fannie Mae or Freddie Mac).
 
Mortgage Broker - A company that, for a fee matches borrowers with lenders. Mortgage brokers do not originate loans.
 
Mortgage Interest deduction - The ability of mortgage borrowers to deduct the interest paid on a home loan for purposes of federal; and state income.
 
Originate Fee - A fee charged by a lender for making a mortgage.
 
PITI - Principle, interest, taxes, and insurance, the rpimary component of a monthly mortgage payment.
 
Points - One point equals 1 percent of the mortgage amount. Points are charged by lender to increase the lender's return on the mortgage. Typically, lenders may charge anywhere from zero to two points. Loan points are tax deductible.
 
Principle - The loan amount borrowed or still owed.
 
Private Mortgage Insurance - Insurance issued by private insurers, which protects lenders against a loss if aborrower defaults on a mortgage with a low downpayment (less than 20 percent)
 
RealtorŪ - A real estate broker or agent who is a member of the local board of RealtorsŪ, and State Association of RealtorsŪ. RealtorsŪ adhere to ahigh standard of professionalism and strict code of ethics.
 
Seller Financing -  A financing agreement in which a seller provides part (or all) of the financing needed by a buyer to purchase the seller's home.
 
Title - Legal document establishing the right of ownership in the property.
 
Title Insurance - Insurance to protect the buyer and lender against losses arising from disputes over the ownership of the property.
 
Underwritting - The process of evaluating a loan application to determine if meets the lender's standards.