Glossary
Adjustable-Rate
Mortgage (ARM) - a mortgage with a variable interest rate that changes
during the term of the loan. The variable rate is linked to a published index.
Amortization - process of reducing the outstanding principal
on an open loan with each payment, usually monthly, so that it is fully repaid
at the loan's maturity.
Annual Percentage Rate (APR) - yearly interest rate that
includes interest, points, and other loan fees. The APR is the appropriate
number to use when comparing loan interest rates.
Appraisal - report that estimates the market value of a property.
Cap - on adjustable-rate loans, the set limit to which the
interest rate on your loan can increase during each adjustment period and/or
throughout the duration of the loan.
Closing Costs - costs linked with buying or selling real
estate including the title, transfer, and loan fees.
Earnest Money - deposit of cash given by the buyer to the
seller at the time of the purchase offer.
Equity - value of your home less the amount that you owe
on your mortgage.
Escrow Account - account established to pay for real estate
taxes and homeowners' insurance.
FHA Loan - guaranteed by the federal government.
Fixed-Rate Mortgage - loan with a specific interest rate that does
not change during the life of the loan.
Index - published interest rate used for adjustable-rate
mortgages.
Jumbo Mortgage - mortgage amount over $252,700 is considered
a jumbo loan.
Lien - claim against a property for outstanding debt.
Margin - amount added to the index which determines the interest
rate for adjustable-rate mortgages.
Mortgage - document that gives a lender a lien on real estate
property used as collateral for payment of a debt. Usually
borrowers refer to both the note and the lien collectively as the mortgage.
Point(s) - one point is equal to one percent of the mortgage
loan.
Prepayment - paying off the loan amount before it is due.
Principal - balance of the mortgage not including interest.
Private Mortgage Insurance (PMI) - lenders usually require
this insurance when a borrower makes a down payment of less than 20 percent.
Title - legal document that shows proof of ownership.
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