Vocabulary

• Mortgage – A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.
• Interest Rate – The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
• Principal – The original sum of money borrowed in a loan, or put into an investment.
• Amortization – The process of reducing the value of an asset or the amount of a loan by a small amount over a period.
• Fixed-Rate Mortgage – A type of mortgage where the interest rate does not change during the entire term of the loan.
• Adjustable-Rate Mortgage (ARM) – A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.
• Down Payment – An upfront payment made by the buyer of a home or car, typically a percentage of the total purchase price.
• Credit Score – A numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual.
• Refinancing – The action of replacing an existing debt obligation with another debt obligation under different terms.
• Equity – The difference between the market value of a property and the amount the owner still owes on its mortgage.
• Escrow – A contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties.
• Foreclosure – The action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.
• Loan-to-Value Ratio (LTV) – A financial term used by lenders to express the ratio of a loan to the value of the asset purchased.
• Private Mortgage Insurance (PMI) – An insurance policy that a mortgage holder uses to reduce the risk of loss in case the borrower defaults on the loan.
• Underwriting – The process by which a lender determines if a potential borrower's loan application is a good risk.
• Closing Costs – Expenses, over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction.
• Origination Fee – An upfront fee charged by a lender for processing a new loan application, used as compensation for executing the loan.
• Points – Fees paid to a lender or broker for the loan and are often linked to the interest rate; usually, the more points you pay, the lower the rate.
• Appraisal – An estimation of the value of a property, made by a qualified professional appraiser.
• Title Insurance – Insurance that protects the holder from financial loss sustained from defects in a title to a property.
• Pre-approval – A lender's offer to loan money to a potential borrower, specifying the loan amount, interest rate, and terms.
• Pre-qualification – An evaluation of a potential borrower's ability to qualify for a home loan before they apply for a mortgage.
• Jumbo Loan – A loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA).
• Default – Failure to repay a loan according to the terms agreed upon in the promissory note.
• Annual Percentage Rate (APR) – The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.
• Debt-to-Income Ratio (DTI) – A personal finance measure that compares the amount of debt you have to your overall income.
• Conventional Loan – A type of mortgage loan that is not insured or guaranteed by the government.
• FHA Loan – A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration.
• VA Loan – A mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing.
• Balloon Mortgage – A type of mortgage that is generally paid over a short period of time but provides for a lump sum payment to be due at the end of the term.
• Home Equity Loan – A type of loan in which the borrower uses the equity of his or her home as collateral.
• Reverse Mortgage – A type of mortgage loan for seniors age 62 and older, that allows homeowners to access a portion of their home's equity and convert it into cash.
• Seller Carryback – A type of financing in which the seller acts as a lender to a buyer in exchange for a secured promissory note.
• Subprime Mortgage – A type of mortgage that is normally made out to borrowers with lower credit ratings.
• Bridge Loan – A short-term loan used until a person or company secures permanent financing or removes an existing obligation.
• Home Inspection – An examination of the condition of a real estate property, performed by a professional home inspector prior to the property's sale.
• Contingency – A condition or action that must be met for a real estate contract to become binding.
• Earnest Money – A deposit made to a seller showing the buyer's good faith in a transaction.
• Real Estate Agent – A professional who represents buyers and sellers in real estate transactions.
• Real Estate Broker – A person who represents sellers or buyers of real estate or real property.
• Multiple Listing Service (MLS) – A service used by a group of real estate brokers to see each other's listings of properties for sale.
• Loan Servicer – A company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a loan.
• Closing Disclosure – A document provided by the lender that outlines the final, detailed costs of the mortgage.
• Good Faith Estimate (GFE) – An estimate of the fees due at closing for a mortgage loan that must be provided by a lender within three days of applying for a loan.
• Homeowners Association (HOA) – An organization in a subdivision, planned community or condominium that makes and enforces rules for the properties within its jurisdiction.
• Home Equity Line of Credit (HELOC) – A loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the borrower's equity in his/her house.
• Credit Report – A record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy.
• Cosigner – A person who signs an agreement to pay a loan on behalf of another person if they default on their payments.
• Loan Modification – A change made to the terms of an existing loan by a lender as a result of a borrower's long-term inability to repay the loan.
• Rate Lock – A lender’s promise to "lock" a specified interest rate for a certain amount of time while your loan application is processed.