Adjustable Rate Mortgage (ARM)
A loan in which the interest rate adjusts periodically (usually once a year for a given period of time). The interest rate adjusts based on a standard rate index.

Annual Percentage Rate (APR)
A method of calculating the cost of a mortgage, expressed as a yearly percentage rate. Items include loan fees, interest, mortgage insurance and credit costs.

Assumable Mortgage
A mortgage that a buyer can assume (take over) from a seller.

Balloon Mortgage
A mortgage that is amortized over a specified term and calls for a lump sum payment at the end of the term.

Bridge Loan
A loan that "bridges" the gap between the purchase of a new home and the sale of the borrower's current home.

Closing Costs
Expenses both buyers and sellers pay at the time of closing or the transfer of real estate. Expenses may include, but are not limited to, escrow payments, origination fee, homeowner's insurance, REALTOR® fees, and taxes.

Closing Statement
Also known as a HUD-1 Statement. It is a final disclosure of all expenses and credits for both the buyers and the sellers at the time of closing.

Commitment Letter
A formal letter from a mortgage lender stating that the borrower meets all specified conditions to receive a mortgage.

Conventional Mortgage
A loan that is not backed by the federal government. Usually refers to a 30-year fixed-rate loan.

Credit Report
A report that is prepared by a credit bureau that states a borrower's past credit history.

Debt-to-Income Ratio
The percentage of a person's monthly income used to pay off revolving monthly debt obligations.

Discount Points
A point paid by either the borrower or the seller to reduce the interest rate on a borrower's loan.

Down Payment
The amount or percentage of the purchase price of the home that the buyer does not finance with a mortgage, but pays in cash at the time of closing.

Fannie Mae
Federal National Mortgage Association. One of the nation's largest sources of financing for home mortgages.

FHA Mortgage
A mortgage insured by the Federal Housing Administration.

Fixed Rate Mortgage
A mortgage in which the interest rate is fixed at a particular rate during the entire term of the loan.

Freddie Mac
Federal Home Loan Mortgage Corp. A financial corporation chartered by the federal government to buy pools of mortgages from lenders and sell back securities backed by these.

Good Faith Estimate
A written estimate of closing costs that is prepared by a mortgage lender and given to the buyer/borrower within three days of the completion of a loan application.

HUD-1 Statement
An itemized list of the closing costs for both the buyer and the seller of a transaction.

Jumbo Mortgage
Mortgages with loan amounts that are higher than the limits set by Freddie Mac and Fannie Mae.

Loan Origination
The process by which a mortgage lender obtains a mortgage secured by real property.

Loan-to-Value (LTV)
The ratio of the loan amount to the property's selling price.

Lock
The lender's guarantee that a quoted interest rate will be good for a specified amount of time.

Mortgage
A legal document that uses property as collateral to secure payment of a debt.

PITI
Acronym that stands for the usual components of a mortgage payment (Principal, Interest, Taxes and Insurance).

Point
Equal to one percent of a borrower's loan amount. A lender may charge points as a way to make a profit.

Pre-Approval
The mortgage lender verifies employment, bank records, assets and other information as provided on the loan application. In turn, the borrower receives a letter stating the loan qualification specifics.

Private Mortgage Insurance (PMI)
Insurance that protects the mortgage lender against default by a borrower. This insurance is usually required if the down payment is less than 20 percent and until the borrower has 20 percent equity in the home.

Title
A legal document stating an owner's right to claim entitlement to a property.

Title Search
A check of the title records for the buyer and the seller to assure there are no liens or outstanding judgments against any party involved with the sale of the home.

Transfer Tax
State or local tax that is paid when a property is transferred between owners.

Underwriter
A person given the responsibility of issuing a mortgage by analyzing a borrower's credit worthiness. The underwriter also sets the loan amount limits for the borrower.

VA Mortgage
A mortgage backed by the Veteran's Administration. It usually requires little or no down payment for the loan. Certain members of the U.S. armed forces are eligible for this type of a mortgage.

Warranty Deed
A legal document that claims the property is being conveyed with clear title, free of liens or encumbrances.