Assumable Mortgage - A mortgage that can be taken over ("assumed") by a buyer when a home is sold. This type can either be a qualified or a non-qualified assumption.

Borrower - A mortgagor who receives funds I the form of a loan with the obligation of repaying the loan in full with interest.

Broker - One who receives a commission or fee for bringing buyer and seller together and assisting in the negotiation of contracts between them. In most states a license is required.

Cap - A provision of an A.R.M. limiting how much the interest rate or mortgage payments can increase during a set time period.

Cash Reserve - A requirement of some lenders that buyers have sufficient cash remaining after closing to make a set amount of mortgage payments.

Clear Title - A title that is free of liens and legal questions as to ownership of the property.

Closing - The occasion where a sale is finalized: where the buyer signs the mortgage, and closing costs are paid.

Closing Costs - Expenses, above the price of the home, incurred by buyers and sellers in the transfer of ownership of the property. Also, these are called "settlement costs".

Closing Statement - A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.

Commitment Letter - A formal offer by a lender stating the terms under which it agrees to loan money to a home buyer.

Community Home Buyer's Program - An alternative financing option that allows households of modest income to qualify for mortgages using non-traditional credit histories.

Condominium - A form of ownership or real property. The purchaser receives title to a particular unit and a proportionate interest in certain common areas.

Contingency - A condition that must be met before a contract is legally binding.

Conventional Mortgage - A mortgage loan not insured by FHA or guaranteed by VA or Farmers Home Administration.

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

Credit Rating - A rating given to a person to establish willingness to pay obligations based upon one's past history of timely payments.

Debt-To-Income Ratio - Long term debt expenses as percentage of monthly income. Lenders use this ratio to qualified borrowers for mortgage loans, typically setting a maximum debt-to-income ratio of 36%.

Deed - The legal document conveying title to a property.

Default - Failure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.

Delinquency - A loan in which a payment is overdue but not yet in default.

Deposit - Cash paid to the seller when a formal sales contract is signed.

Depreciation - A decline in the value of a property, opposite of appreciation.

Discount Points - A one time charge by a lender to increase or decrease the stated interest rate on a loan.

Down Payment - The part of the purchase price which the buyer pays in cash and does not finance with the mortgage.

Earnest Money - A sum of money given to bind a sale of real estate; a deposit.

Easement - A right of way giving persons other than the owner access to or over a property. A common is a utility easement, which gives the power company the right to put power lines and poles over properties to deliver electricity.

Equity - The home owner's interest in a property; the difference between fair market value and the current amount the owner owes on the property.

Escrow-Account - An account set up by the lender into which the borrower makes periodic payments, usually monthly, for taxes, hazard insurance, assessments, and mortgage insurance premiums. The funds are held in trust by the lender who pays the sums as they become due.

FHA Loan - FEDERAL HOUSING ADMINISTRATION - A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders.

First Mortgage - The mortgage that has first claim (or "lien") in the event of a default.

Fixed Rate Mortgage - A mortgage in which the interest rate does not change the entire term of the loan.

Flood Insurance - Insurance required for properties in federally designated flood areas.

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

Gross Monthly Income - The amount of consistent and stable income that an individual receives each month, averaged over a period of time. This amount includes overtime pay, bonuses, commissions, and income from dividends or interest, provided that the individual can show consistent history or receiving such income.

Hazard Insurance - Insurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism and other hazards.

Homeowner's Insurance - An insurance policy that combines liability coverage and hazard insurance.

Homeowner's Warranty - A type of insurance that covers repairs to specified parts of a house for a specified period of time.

Inspector - The property/mechanical inspector examines a home to evaluate its plumbing, electrical work, appliances, hearing and cooling systems, roof and structural stability.

Interest - The fee, or rent, charged by the lender for borrowing money.

Late Charge - The penalty a borrower must pay when a payment is made after the due date.

Lien - A legal claim against a property that must be paid when the property is sold.

Lifetime Cap - A provision of an A.R.M. that limits the total increase in interest rates over the life of the loan.

Loan-To-Value Ratio (LTV) - The total loan amount divided by the value of the house.

Lock-In-Rate - A commitment from the lender to make a loan at a pre-set interest rate at some future date, usually for not more than 90 days. A fee may be charged to "Lock-In" that particular rate.

Margin - The set percentage the lender adds to the index rate to determine the current interest rate of an A.R.M.

Market Value - The highest price that a willing buyer would pay and the lowest a willing seller would accept.

Mortgage - An interest in real property given as security for the payment of an obligation.

Mortgage Broker - A company that matches the borrower with a lender.

Mortgage Insurance - A policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to repay a loan.

Mortgagee - The lender in a mortgage agreement.

Mortgagor - The borrower in a mortgage agreement.

Negative Amortization - Payment terms under which the borrower's monthly payments do not cover the interest due; as a result, the balance due is added to the loan balance making it rise-thus the term "negative amortization".

Origination Fee - A fee paid to a lender for processing a loan application. It is stated as a percentage of the mortgage amount.

Owner Financing - A purchase in which the seller provides all or part of the financing.

PITI - Principal, Interest, taxes, and Insurance are the components of a mortgage payment.

Planned Unit Development (PUD) - A subdivision having lots or areas in common and reserved for the use of some or all of the owners of the separately owned lots.

Point - A dollar amount paid to the lender for making a loan. A point is usually 1% of the loan amount.

Prepayment Penalty - A fee charged to a borrower who pays off a loan before it is due. Some loan programs contain a prepayment penalty, others do not, check with your loan officer for further details.

Pre-Qualification - The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for.

Principal - The original balance of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest.

Private Mortgage Insurance (PMI) - Insurance provided by a nongovernmental insurer that protects lenders against a loss if a borrower defaults. Usually required on all loans with a LTV equal or greater than 80%.

Purchase and Sales Agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Qualifying Ratios - Guidelines applied by lenders to determine how much of a loan to grant to the homebuyer. The debt-to-income ratio is your current monthly debt on loans and monthly minimums on your credit cards, divided by your monthly gross income. The housing-to-income ratio is your new housing payments divided by your gross income. These ratios should be 36% and 28% respectively.

Realtor - A person licensed to negotiate and transact the sale of real estate on behalf of either the borrower or seller, or in some cases both parties.

Real Estate Settlement Procedures Act (RESPA) - A federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement charges.

Refinancing - The process of paying off one loan with the proceeds form a new loan secured by the same property to lower mortgage payments.

Second Mortgage - A mortgage that has rights that are subordinate to the rights of the first mortgage. As such, these loans are often less secure and may demand a slightly higher interest rate.

Settlement - The closing of a mortgage loan.

Survey - A drawing showing the legal boundaries of a property , it's fixtures, and any easements of encroachments.

Title - The evidence of the right to or ownership in property.

Title Company - A company that specializes in title searches and insuring title to property.

Title Insurance - Insurance to protect the lender or the buyer against loss arising form disputes over ownership of a property.

Title Search - A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims against the property.

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.

Underwriting - The process of evaluating a loan application to determine the risk involved for the lender.

Unsecured Note - A loan that is not backed by collateral (property).

VA Loan - An independent agency of the federal government created in 1930. The VA home loan guaranty program is designed to encourage lenders to offer long term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.

Zoning - City or county laws specifying how property may be used in specific areas.