Adjustment Date - The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Amortization - Repayment of a mortgage loan through installments of principal and interest; the monthly payment is based upon a schedule that will allow you to won your house at the end of a specific time period (for example 15, or 30 years)

Annual Mortgagor Statement - A report sent to the mortgagor (borrower) each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate (APR) - calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

Appraisal - a written analysis prepared by a qualified appraiser that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

ARM - Adjustable Rate Mortgage a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

Asset - Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Biweekly Payment Mortgage - A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

Borrower (Mortgagor) - A person, or persons, who applies for and receives a mortgage, with the intention of repaying the loan in full.

Bridge Loan - A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."

Buydown Mortgage - A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

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.

Cash reserves - A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

Certificate of Eligibility - The document given to qualified veterans. This form entitles veterans guaranteed VA loans for homes, business and mobile homes. Certificates of eligibility may be obtained by sending your DD214 (Separation Paper) and Form 1880 (request for Certificate) to the local VA office.

Clear Title - A title that is free of liens or legal questions as to ownership of the property.

Closing Costs - Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.

Construction Loan - A short term loan paying for the construction of a home or building. Usually moved to a permanent mortgage after construction is complete.

Conventional Loan - A mortgage neither insured by the FHA nor guaranteed by the VA.

Convey or Conveyance - Process of transferring ownership of a property from one person to another.

Cost of Funds Index (COFI) - An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).

Costs for Settling Into Your Home - When figuring out how much home you can afford, you need to account for the costs associated with getting into your home. These can include the cost for repairs that need to be made before you can occupy your residence. There may also be the cost of purchasing appliances, such as a washer and dryer, refrigerator, or stove. The bottom line is you do not want to spend all your money on purchasing the home and not have any left to pay these types of costs.

Credit Bureau - The three main credit reporting agencies, or credit bureaus, are Equifax, Experian, and Trans Union. You can order a copy of your credit report (a nominal fee may apply) via telephone at:
Equifax: (800) 685-1111
Trans Union: (800) 916-8800
Experian: (800)

Credit History - History of an individual's debt payment; lenders use this information to gouge a potential borrower's ability to repay a loan.

Credit Report - A record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.

Credit Scoring - Your credit score is based on all the information in your credit report. This information is converted into a number -- a credit score -- that the lender uses to determine whether you are likely to repay your loan in a timely manner. The scores used in mortgage lending are typically in the 300 to 900 range. A general guide is that the higher your score the better. But you should keep in mind that your credit score is just one of several factors that will be used to evaluate your mortgage loan application.

Debt-to-Income Ratio - A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

Deed - A legal document which affects the transfer of ownership of real estate from the seller to the buyer. A document which, when properly excised and delivered, conveys (transfers) title (ownership) of real property.

Department of Veterans Affairs (VA) - An independent agency of the federal government, which, among other duties, guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Due-on-Sale-Clause - A clause in a deed of trust or mortgage, that grants to lender the right to demand immediate payment from the mortgage holder of the balance owed on the mortgage provided the property is sold.

Earnest Money Deposit - The earnest money deposit is a "good-faith" payment you submit with your offer on a home to show the seller you are serious about proceeding. The earnest money is deposited in an escrow account and will be applied to your closing costs.

Equal Credit Opportunity Act (ECOA) - A federal law that requires creditors and lenders to make credit equally available to borrowers without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage. A lender determines how much equity you have in your home by taking the appraised value of the home and subtracting any mortgage debt. For example, if your house is valued at $150,000 and your mortgage balance is $80,000, you have $70,000 equity in the house.

Escrow Fee - Charged by the title company to service the transaction and to escrow (hold and disburse) money and documents. Usually split between buyer and seller.

Fair Market Value - The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae - Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

FHA Mortgage - A mortgage that is insured by the Federal Housing Administration (FHA). With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower. FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a mortgage through a lender.

Freddie Mac - Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers.

Ginnie Mae - Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.

Good Faith Estimate - An estimate of all closing fees including prepaid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

Homeowner's Insurance - Also called "hazard insurance" - an insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence or inappropriate action that result in someone's injury or property damage.

Interim Financing - A short-term loan usually made during the construction of a home, building, or project. This loan is usually replaced by a mortgage upon completion.

Jumbo Loan - A loan that exceeds mortgage amount limits.

Late Charge - The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

Lien - A legal claim against a property that must be paid off when the property is sold.

Merged Credit Report - A credit report that contains information from the three major credit bureaus. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of your credit.

Mortgagee - The lender.

Mortgagee's Title Policy - Required by lender to ensure that lender has a valid lien. It does not protect the buyer. Also required for second mortgages.

Mortgagor (Borrower) - The borrower in a mortgage agreement.

Negative Amortization - A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.

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 interest rate stated on a mortgage note.

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.

Owner Financing - A property purchase transaction in which the property seller provides all or part of the financing.

Owner's Title Policy - Insures the buyer against loss due to any defect in the title not excepted to or excluded from the policy.

PITI - Acronym for Principal, Interest, Taxes and Insurance. These items combined create a mortgage payment.
-- Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage.
-- Interest is the fee charged for borrowing money.
-- Taxes and Insurance refer to the amounts that are paid into an escrow account each month for property taxes and hazard insurance.

PMI - Acronym for Private Mortgage Insurance. Privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Points - Prepaid interest paid by the borrower to the lender at closing. Generally, by paying more points at closing, the borrower reduces the interest rate of his loan and thus future monthly payments.

Pre-Approve - lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Pre-Qualification - The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

Prepayment Penalty - A fee that may be charged to a borrower who pays off a loan before it is due. If you pay off your mortgage before it is due, you may be charged a fee -- this is referred to as a prepayment penalty. Any amount that is paid to reduce the principal balance of a loan before the due date -- such as the sale of the property, the owner's decision to pay the loan in full, the owner's decision to pay additional money every month to lower the principle or interest -- is considered prepayment. You may want to consider discussing the specifics of this fee as you negotiate the terms of your loan with your lender.

Primary Residence - A residence which the borrower intends to occupy as the principal residence.

Principal - The amount borrowed from a lender; doesn't include interest or additional fees.

Promissory Note - A written promise to repay a specified amount over a specified period of time.

Property Taxes - The taxes assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Such services may include police and fire department services, garbage pick up and snow removal.

Qualifying Ratios - Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

RESPA - Real Estate Settlement Procedures Act - A federal law that requires lenders to provide home loan borrowers with an estimate of settlement costs as well as the HUD booklet on settlement costs within three days of receiving an application.

Recording Fee - Charged by the County Clerk to record documents in the public records. Charges are based on the number of pages recorded.

Refinancing - paying off one loan by obtaiing another; refinancing is generally doens to secure better loan terms (like a lower interest rate).

Settlement Statement - The HUD-1 Settlement Statement itemizes the amounts to be paid by the buyer and the seller at closing. Items on the statement include real estate commissions, loan fees, points, and escrow amounts. The form is filled out by your closing agent and must be signed by the buyer and the seller. The buyer should be allowed to review the HUD-1 Settlement Statement on the business day before the closing meeting to know the closing costs in advance. The HUD-1 Settlement Statement is also known as the "closing statement".

Tax Certificate - Charged by taxing authorities to present certification showing that the current year's taxes were paid.

Title - The evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed that specifies to whom the subject property is vested. Title may be acquired through purchase, inheritance, devise, gift or foreclosure of a real estate loan.

Title Insurance - Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

Truth-In-Lending - A federal law requiring the disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan.

U.S. Department of Veterans Affairs (VA) - The Veterans Administration is a federal government agency authorized to guarantee loans made to eligible veterans under certain conditions. To obtain more information, you can contact the U.S. Department of Veterans Affairs. The VA guarantee allows qualified veterans to buy a house costing up to a limit set by the VA.

VA Funding Fee - Veteran's Administration fee for originating a VA loan.