Glossary
Adjustable-Rate Mortgage (ARM) - A mortgage where the interest rate adjusts periodically based on a predetermined index.
Amortization - The process of paying off a mortgage over time through regular payments.
Annual Percentage Rate (APR) - The total annual cost of borrowing money, including interest and fees.
Appraisal - An evaluation of the value of a property conducted by a professional appraiser.
Closing - The final step in the home buying process where ownership of the property is transferred to the buyer.
Closing Costs - Fees and expenses associated with the purchase or sale of a property, including title fees, loan origination fees, and appraisal fees.
Equity - The difference between the value of a property and the amount still owed on the mortgage.
Fixed-Rate Mortgage - A mortgage where the interest rate remains the same throughout the term of the loan.
Interest - The cost of borrowing money, usually expressed as a percentage of the total loan amount.
Lender - A financial institution or individual who provides financing for the purchase of a property.
Loan-to-Value (LTV) - The ratio of the amount of the loan to the value of the property.
Mortgage - A loan used to finance the purchase of a property, typically secured by the property itself.
Pre-Approval - A process where a lender reviews a borrower's creditworthiness and financial history to determine the amount they may be approved for before they begin shopping for a home.
Principal - The amount of money borrowed to purchase a property, not including interest or fees.
Refinancing - The process of replacing an existing mortgage with a new one, usually to take advantage of lower interest rates or better loan terms.
Title - The legal documentation that establishes ownership of a property.
Underwriting - The process of evaluating a borrower's creditworthiness and financial history to determine their ability to repay a mortgage.
VA Loan - A mortgage guaranteed by the U.S. Department of Veterans Affairs, designed to help eligible veterans and active-duty military members purchase homes with favorable terms.
Acceleration Clause - A clause in a mortgage contract that allows the lender to demand full repayment of the outstanding balance if the borrower violates the terms of the agreement.
Adjustable Payment Mortgage (APM) - A mortgage where the payment amount adjusts periodically based on the interest rate and remaining loan balance.
Assessed Value - The value of a property as determined by a local government for tax purposes.
Balloon Mortgage - A mortgage where the borrower makes small payments for a fixed term, then makes a large lump sum payment at the end of the term.
Closing Disclosure (CD) - A document that outlines the final terms and costs of a mortgage, required by law to be provided to the borrower before closing.
Debt-to-Income (DTI) Ratio - The ratio of a borrower's monthly debt payments to their monthly income, used to determine their ability to repay a mortgage.
Equity Loan - A loan taken out against the equity in a property, typically used for home improvements or other large expenses.
Foreclosure - The process by which a lender repossesses a property due to the borrower's failure to make mortgage payments.
Homeowner's Insurance - Insurance coverage that protects a property owner from losses due to damage or theft.
Interest-Only Mortgage - A mortgage where the borrower only pays interest for a fixed term, then must pay the entire principal balance at the end of the term.
Jumbo Mortgage - A mortgage that exceeds the conforming loan limit established by Fannie Mae and Freddie Mac.
Loan Origination Fee - A fee charged by the lender for processing and underwriting a mortgage.
Private Mortgage Insurance (PMI) - Insurance coverage required by lenders when the borrower has less than 20% equity in a property.
Quitclaim Deed - A legal document that transfers ownership of a property from one party to another, without guaranteeing the title.
Reverse Mortgage - A loan available to homeowners aged 62 and older that allows them to access the equity in their home, with repayment deferred until the home is sold or the borrower passes away.
Servicer - The company responsible for managing and administering a mortgage loan, including collecting payments and handling any delinquencies.
Title Insurance - Insurance coverage that protects against loss due to defects in the title or ownership of a property.
Underwater Mortgage - A mortgage where the outstanding loan balance exceeds the value of the property.
Adjustable Rate Mortgage Caps - Limits on how much and how often the interest rate can adjust on an adjustable-rate mortgage.
Annual Income - The total amount of income earned in a year, used to calculate a borrower's debt-to-income (DTI) ratio.
Certificate of Eligibility - A document issued by the Department of Veterans Affairs (VA) that certifies a borrower's eligibility for a VA loan.
Conforming Loan - A mortgage that meets the guidelines set by Fannie Mae and Freddie Mac.
Debt Consolidation - The process of combining multiple debts into one loan, often with a lower interest rate.
Earnest Money - A deposit made by the buyer to show their commitment to purchasing a property.
FHA Loan - A mortgage insured by the Federal Housing Administration, designed to help borrowers with lower credit scores and smaller down payments.
Good Faith Estimate (GFE) - A document provided by the lender that outlines the estimated costs associated with obtaining a mortgage.
Home Equity Line of Credit (HELOC) - A revolving line of credit that allows the borrower to borrow against the equity in their home.
Interest Rate Lock - An agreement between the borrower and lender to lock in a specific interest rate for a set period of time.
Lien - A legal claim on a property, often used as collateral for a loan.
Mortgage Broker - A middleman who connects borrowers with lenders and helps them find the best mortgage product for their needs.
Origination Point - A fee charged by the lender for originating a mortgage, typically expressed as a percentage of the loan amount.
Point - A fee charged by the lender to lower the interest rate on a mortgage, typically expressed as a percentage of the loan amount.
Private Lender - An individual or company that provides financing for a mortgage, often with more flexible terms and higher interest rates than traditional lenders.
Rate-and-Term Refinance - The process of refinancing a mortgage to obtain a lower interest rate or better loan terms, without taking cash out.
Settlement Statement - A document provided by the lender at closing that outlines the final terms and costs of the mortgage.
Title Search - An examination of public records to verify the ownership and legal status of a property's title.