Adjustable-rate mortgage (ARM) - A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.

Amortization - The gradual repayment of a mortgage loan by installments.

Amortization schedule - A timetable for repayment of a mortgage showing the number of payments, the amount of each payment applied to interest and principal and the balance remaining.

Annual percentage rate (APR) - The total yearly cost of a mortgage stated as a percentage of the loan amount; includes such items as the base interest rate, primary mortgage insurance, and loan origination fee (points).

Appraisal - A professional opinion of the market value of a property.

Appreciation - An increase in the value of a property.

Assessed value - The value of a property determined by a public tax assessor for purposes of taxation.

Blanket loan – A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt. It can be used to assist in the purchase of a new home prior to the sale of a current residence (Also see “Bridge Loan”).

Bridge loan – A short-term mortgage loan against the current residence used to assist in the purchase of a new residence (Also see “Blanket Loan”).

Cap - A provision of an ARM that limits periodic interest rate or payment adjustment.

Cash reserve – Liquid assets in excess of down payment and closing costs.

Clear title – A title unencumbered by liens or legal issues.

Closing - A meeting at which a sale of a property is finalized by the buyer and the seller.

Closing costs – Funds required in excess of the down payment when purchasing a property, including lender and title fees, prepaid interest and escrow reserve requirements.

Commitment letter – A written offer by a lender stating the terms under which it agrees to lend money to a home buyer.

Convertible ARM - An adjustable-rate mortgage that can be converted to a fixed rate mortgage under specified conditions.

Credit report - A written report noting an individual's credit worthiness.

Deed – A legal document conveying title to a property.

Deed of trust - The document used in some states instead of a mortgage; title is conveyed to a trustee rather than to the borrower.

Default - The failure to comply with the terms of a mortgage.

Delinquency - A loan in which a payment is overdue.

Depreciation - A decrease in the value of property.

Equal Credit Opportunity Act (ECOA) - A federal law that prohibits lenders from denying mortgages on the basis of the borrower's race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity – An owner’s financial interest in a property typically caculated as the difference between the value of the property and the sum of liens on the preperty.

Equity loan - A loan based on the borrower's equity in his or her home.

Fannie Mae/Freddie Mac – Two government chartered shareholder-owned companies providing mortgage funds to lenders by purchasing single-family and multifamily residential mortgages.

First mortgage - A mortgage that has first claim in the event of default.

Fixed-rate mortgage - A mortgage in which the interest rate & payments do not change during the term of the loan.

Foreclosure - The legal process by which a mortgaged property may be sold when a mortgage is in default.

Good Faith Estimate - A Good Faith Estimate (GFE) provides an accurate estimate of all related closing costs associated with the proposed mortgage transaction.

Homeowner's insurance - An insurance policy that combines personal liability coverage and hazard insurance coverage for a dwelling and its contents

Interest - The fee charged for borrowing money.

Lien - A legal claim against a property.

Loan-to-value percentage (LTV) - The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property.

Mortgage - a legal document that pledges a property to the lender as security for payment of a debt.

Mortgage banker - A company that originates mortgages exclusively for resale in the secondary market.

Mortgage note - A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time; the mortgage note is secured by a mortgage.

Mortgage Insurance – See Private Mortgage Insurance (PMI)

Mortgagee - The lender in a mortgage agreement.

Mortgagor - The borrower in a mortgage agreement.

PITI - Principal, interest, real estate taxes, and insurance -- the components of a monthly mortgage payment.

Prepayment penalty - A fee charged to a borrower who pays off a loan before the date of it’s allowed pay-off.

Principal - The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Private mortgage insurance (PMI) - Insurance provided by non-government insurers that protects lenders against loss in the case of a loan default.

Qualifying ratios – Lender guidelines used to determine parameters of a loan.

Real Estate Settlement Procedures Act (RESPA) - A consumer protection law requiring lenders to give borrowers advance notice of closing costs.

Refinancing - The process of paying off one loan with the proceeds from a new loan using the same property as security.

Second mortgage - A mortgage that has a lien position subordinate to the first mortgage.

Survey - A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Title - A legal document evidencing a persons right to or ownership of a property.

Title company - A company that specializes in examining and insuring titles to real estate.

Title insurance - Insurance to protect the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of property.

Title search - A check of the title records for liens or other encumberances.

Truth-in-Lending - A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage.

Underwriting - The process of evaluating a loan application to determine the borrower and property risk.