A
Adjustable Rate Mortgage (ARM): A mortgage that has a low introductory interest rate that can change at designated intervals, generally tied to a financial index.
Amortization: The gradual elimination of a loan, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest.
Annual Percentage Rate (APR): The yearly cost of a mortgage, including interest, mortgage insurance, and the origination fee (points), expressed as a percentage.
Appraisal: A professional assessment of the market value of a property.

C
Closing: The finalizing of the sale of a property in which the transfer of property, from the seller to the buyer, becomes final. Also called settlement.
Closing Costs: Fees and expenses incurred by the buyer and/or the seller in the property ownership transfer.
Commitment: An agreement, often in writing, between a Lender and a Borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.
Contingency: A condition that must be met before a contract is legally binding.
Conventional Loan: A mortgage in which the interest rate does not change during the term of the loan.
Convertible ARM: An Adjustable Rate Mortgage that can be converted to a fixed rate mortgage under specified conditions.

D
Debt-to-Income Ratio: The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by their gross monthly income.
Down Payment: The part of the purchase price paid in cash up front, reducing the amount of the loan or mortgage.

E
Earnest Money: A deposit paid by the buyer when submitting an offer to show serious intent about purchasing a property.
Equity: The difference between the market value of a property and the outstanding mortgage balance.
Escrow: The holding of documents and money (such as a deposit) by a neutral third party prior to closing. Also, an account held by the lender into which a homeowner pays money for taxes and insurance.

F
Fixed Rate Mortgage: A mortgage in which the interest rate does not change during the entire life of the loan.
Flood Insurance: Insurance that compensates for physical damage to a property by flood. Typically not covered under standard hazard insurance.

H
Homeowners Insurance: Homeowners insurance is required by all lenders to protect their investment and must be obtained before closing. In most cases, coverage must be equal to the loan balance, or the value of the home.
Home Inspection: A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. This makes the potential buyer aware of any potential hazards or home repairs that may be needed.

I
Interest Rate Cap: A provision of an ARM that limits how much the interest rate can increase per adjustment period.

L
Lifetime Cap: A provision of an ARM limiting the total increase in the interest rate over the life of the loan.
Loan-to-Value Ratio (LTV): The percentage of the loan amount to the appraised value (or the sales price, whichever is less) of the property. This is calculated by taking the amount to be borrowed divided by the value of the home (ex: A home worth $100,000 with a $95,000 mortgage has a 95% LTV ratio).
Lock-In Rate: An interest rate the lender guarantees to the borrower for a set time period. The borrower usually pays a fee for this guarantee. The lock-in protects you against rate increases during that time.

M
Margin: The set percentage rate the lender adds to the index rate to determine the interest rate on an ARM.
Mortgage: A legal document that pledges a property to the lender as security for the payment of a debt.
Mortgage Loan: A loan for which real estate serves as collateral to provide for repayment in case of default.

O
Offer to Purchase: A formal document in which a buyer proposes to buy a property for a specified amount and under certain conditions. Acceptance by the seller creates a contract binding on both parties, subject to any contingencies.
Origination Fee: Fee charged by a lender to cover the administrative costs of processing a loan.

P
PITI: Stands for Principal, Interest, Taxes, and Insurance-the components of a typical monthly mortgage payment.
Points: A loan fee expressed as a percentage of the loan. Points are paid to the lender at the time that you get your loan. Each point equals one percent of your total loan amount (1 pt. = 1%). In general, the more points you pay, the lower the interest rate you get and the more cash you need up front because points are paid in cash at closing.
Prequalification: The process of determining how large a loan a prospective home buyer can qualify for; this procedure is done before actually applying for the loan.
Principal: The loan balance still owed to the lender or the original loan amount borrowed from the lender, excluding interest.
Private Mortgage Insurance (PMI): Insurance to protect the lender in case of default on loans. Generally required if a down payment is less than 20 percent of the purchase price.

R
Right Of Rescission: Under the provisions of the Truth-in-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing the note.

S
Second Mortgage: A second mortgage is a lien in which you are given a lump sum amount or Line of Credit that you pay off in installments over a specified period of time. Home improvement, debt consolidation loans and EquityLines are considered second mortgages. The lender who holds the second mortgage gets paid only after the lender holding the first mortgage is paid.

T
Title: A legal document establishing the right of ownership.
Title Insurance: Insurance to protect the lender (lender's policy) or the buyer (buyer's policy) against loss arising from disputes over property ownership.
Title Search: A detailed examination of the title records to ensure that the seller of a property is the legal owner and that there are no liens or other claims outstanding.
Truth in Lending: A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.