Acceleration Clause - Provision in a mortgage that allows the lender to demand payment of the entire principal balance if a monthly payment is missed or some other default occurs.

Additional Principal Payment - A way to reduce the remaining balance on the loan by paying more than the scheduled principal amount due.

Adjustable Rate - An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. See Adjustable Rate Mortgages.

Adjustable Rate Mortgage (ARM) - Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re-negotiable rate mortgage, or the variable rate mortgage.

Amortization - A repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.

Amortize - To repay a debt through a series of periodic payments.

Annual Percentage Rate (APR) - The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. It does not include title insurance, appraisal, and credit report.

Application - An initial statement of personal and financial information which is required to approve your loan.

Application Fee - Fees that are paid upon application. An application fee may frequently include charges for property appraisal and a credit report.

Appraisal Fee - A fee charged by an appraiser to render an opinion of market value as of a specific date. It is required by most lenders to obtain a loan.

Appraisal Report - A written report by an appraiser containing an opinion as to the value of a property and the reasoning leading to that opinion.

Appreciation - An increase in the value of property.

Assessment - A local tax levied against a property for a specific purpose, such as a sewer or street lights.

Assignment - The transfer of property rights by one person, known as the assignor, to another, known as the assignee.

Assumption - The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller.

Attorney-In-Fact - A person who is authorized by power of attorney to act for another.

Audited Financial Statement - A report on the financial position or operations of a company that has been reviewed by an independent auditor.

Balance Sheet - The balance sheet shows the financial condition of a company at a specific point in time. The balance sheet is broken down into the major sections: Assets, liabilities and net worth.

Balloon Payment - Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Bankruptcy - State of insolvency of an individual or organization - in other words, an inability to pay debts. There are two kinds of legal bankruptcy under U.S. law: involuntary, when one or more creditors petition to have a debtor judged insolvent by a court; and voluntary, when a debtor brings the petition. In both cases, the objective is an orderly and equitable settlement of obligations.

Blanket Mortgage - A mortgage covering at least two pieces of real estate as security for the same mortgage.

Bona Fide - In good faith.

Borrower (Mortgagor) - One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Broker - An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Cap - The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage. Cash Flow - The amount of cash derived over a certain period of time from an income-producing property.

Cash Out - Receiving money back when refinancing your present mortgage.

Certificate of Eligibility - The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes.

Certificate of Occupancy - A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations.

Certificate of Reasonable Value (CRV) - An appraisal issued by the Veterans Administration showing the property's current market value.

Certificate of Veteran Status - The document given to veterans or reservists who have served 90 days of continuous active duty.

Certified Check - A check drawn on the issuer's account but for funds that have been segregated by the bank, guaranteeing payment.

Chattel - Any type of personal property.

Closing - The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands.

Closing Costs - Any fees paid by the borrowers or sellers during the closing of the mortgage loan.

Commitment - An agreement, often in writing, between a lender and a borrower to loan.

Commitment Letter - A formal offer by a lender stating the terms under which it agrees to lend money to a borrower. Community Property - Property acquired by husband and wife during a marriage when not acquired as separate property by either spouse. Each spouse has equal rights, including the rights of survivorship.

Condominium - A form of property ownership in which the homeowner holds title to an individual dwelling unit plus an interest in common areas of a multi-unit project.

Conforming Loan - Generally, a mortgage with a loan amount under the maximum limits set by FNMA and FHLMC.

Construction loan - A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

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

Contract of Sale - The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Conventional Loan - A mortgage not insured by FHA or guaranteed by the VA.

Conventional/fixed rate mortgage - Payments and interest rates are fixed for 15, 20, 25, or 30 year.

Conveyance - The transfer of an interest in real property: a deed. Sometimes includes leases and mortgages.

Cooperative - A form of common property ownership in which the residents of an apartment building do not own their own units, but rather own shares in the corporation that owns the property.

Credit Report - A report documenting the credit history and current status of a borrower's credit standing.

Deed - The legal document conveying title to a property.

Default - Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Delinquency - Failure to make payments on time.

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

Depreciation - A decline in the value of property.

Discount Points (or Points) - A one-time charge imposed by the lender to lower the rate at which the lender would otherwise offer the loan to you. Each point is equal to one percent (1%) of the mortgage amount.

Down Payment - The difference between the purchase price and that portion of the purchase price being financed.

Due on Sale - A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in full.

Earnest money - Good faith money provided to seller by the potential buyer to demonstrate he is serious about purchasing the property.

Encumbrance - A claim against a property by another party which usually affects the ability to transfer ownership of the property.

Entitlement - The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA) - A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity - The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

Escrow - A fee charged by the escrow as a neutral third party to carry out the procedures necessary to transfer ownership of property.

FHA - The Federal Housing Administration is a government agency with great information on home finance programs, loan limits and other interesting items.

FHA Loan - A loan for which the Federal Housing Administration insures the lender against losses the lender may incur in case of default.

FHLMC - Federal Home Loan Mortgage Corporation, also called "Freddie Mac", is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

FNMA - The Federal National Mortgage Association also known as "Fannie Mae” is a major secondary market investor that purchases mortgage loans from mortgage bankers and other financial institutions.

Firm Commitment - A promise from a lender to make a mortgage loan.

First Mortgage - A mortgage which is in first lien position.

5/25 and 7/23 - Loans in which rates are fixed for five or seven year. Amortized for 30 years, loans are due in five or seven years or can be converted to a fixed-rate at the current market rate.

Fixed Rate - An interest rate which is fixed for the term of the loan. Payments are also fixed at one amount.

Flood Insurance - A form of hazard insurance that may be required by the lender as a condition of making the loan.

Floor - The minimum rate of interest payable on an adjustable-rate class or mortgage.

Foreclosure - The legal act by which the owner of a mortgage cuts off the rights or interest of the mortgagor in the mortgaged property.

GNMA - Also known as "Ginnie Mae" is a government owned secondary market investor that purchases FHA and VA mortgage loans from mortgage bankers and other financial institutions.

Good Faith Estimate - A written estimate of closing costs which a lender must provide to a borrower within three days of submitting an application.

Grace Period - A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late payments may be reported on your credit report.

Gross Income - The income of the borrower before taxes or expenses are deducted.

Guarantee – The assumption of liability of debts of another in the event of his/her default.

HUD - Housing and Urban Development is a federal agency that oversees the Federal Housing Administration.

HUD-I Settlement Statement - A form utilized at loan closing to itemize the costs associated with purchasing the home.

Hazard Insurance - A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium.

Home Equity Line of Credit - A loan providing you with the ability to borrow funds in the amount you choose, up to a maximum credit limit for which you have qualified.

Home Equity Loan - A fixed or adjustable rate loan secured by the equity in your home

Home Inspection - A home inspection is performed by a qualified home inspector to determine the structural soundness and condition of the home, at the request of a purchaser, seller or lender.

Homeowners Warranty - A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Housing Expenses-to-Income Ratio - The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income.

Impound - That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index - A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based.

Insolvency - Condition of a person who is unable to pay his debts as they fall due.

Installment Debt - Debts with more than ten months left to repay.

Insurance – Usually called Homeowners Insurance to cover fire and extended coverage insurance to cover loss of the property. In the event of a condominium property, coverage for personal property (contents) may also be needed.

Intangible Tax - This tax is required by State governments whenever real property is sold.

Interest Adjustment or Prepaid Interest - An estimated amount of interest due at closing, usually from the date of closing to the end of the month.

Interest Rate - The periodic charge, expressed as a percentage, for use of credit.

Interest Rate Cap - A safeguard built into a variable rate loan to protect the consumer in the rate of interest movements at time of adjustment.

Joint Liability - Liability imposed upon two or more persons.

Joint Tenancy - The ownership of property by two or more persons with the survivor taking the interest of the deceased.

Jumbo Loan - Mortgage loans over the conforming loan limit. Terms and underwriting requirements may vary from conforming loans.

LIBOR (London Interbank Offered Rate) - The interest rate charged among banks for short-term Eurodollar loans. A common index for adjustable-rate mortgages and securities.

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

Letter of Credit - A promise by a debtor's bank to pay the creditor upon presentation of specified documents.

Lien - The right to satisfy a debt out of certain property owned by the debtor.

Loan Application Fee - A lender's fee which the buyer must pay when applying for a mortgage.

Loan Origination Fee - A fee charged by the lender for processing a mortgage.

Loan to Value Ratio (LTV) - A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage. For example, with a sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80%.

Lock or Lock In - A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.

MIP - Mortgage Insurance purchased by the borrower to insure the lender or the government against loss in case of default. MIP, or Mortgage Insurance Premium, is paid on government-insured loans

Margin - An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

Market Value - The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Mortgage Banker - Originates mortgage loans, loaning you their funds and closing the loan in their name.

Mortgage Broker - As do mortgage bankers, takes loan application and processes the necessary paperwork. Unlike a mortgage banker, brokers do not fund the loan with their own money, but work on behalf of several investors, such as mortgage bankers, Savings and Loans, banks, or investment bankers.

Mortgage Loan - A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.

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

Mortgagee - The lender in a mortgage loan transaction.

Mortgagor - The borrower in a mortgage loan transaction.

Negative Amortization - A situation which may occur on variable rate loans which have the payment cap feature. Because your monthly payment is capped, your adjusted payment amount may, at times, be insufficient to pay the actual amount of interest due. The unpaid deferred interest will then be added to your loan balance. This increase in your loan balance is known as negative amortization.

Net - After taxes.

Net Effective Income - The borrower's gross income minus federal income tax.

Non dischargeable Debt - Debt, such as taxes, that cannot be forgiven in bankruptcy liquidation.

Note - A formal document showing the existence of a debt and stating the terms of repayment.

Notice of Default - A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Offer to Purchase - Also known as a purchase offer, earnest money agreement, contract of purchase, or deposit receipt. A document that lists the price conditions, and terms under which the buyer is willing to purchase a property.

Origination Fee - The fee charged by a lender to cover administrative costs incurred during the processing of the loan, often expressed as a percentage of the loan amount.

Origination Points - Points charged by the Broker for their services.

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

Owner's Title Policy - An insurance premium charged by the title company to insure the buyer that the title is free from defects up to the date the conveying instrument is recorded. Buyer is the beneficiary.

PITI - Principal, interest, taxes and insurance, which comprise your monthly mortgage payment.

Payment Cap - Provision of some ARMs limiting how much a borrower's payments may increase regardless of how much the interest rate increases; may result in negative amortization.

Payoff Statement - A fee charged by the lender or collection company for payoff information on a loan which you are paying in full.

Per Diem Interest - Depending on the day of the month you close, you will have to pay interest from the date of closing to the end of the month. Then, usually, the first mortgage payment will be due the first of the following month.

Permanent Loan - A long term mortgage, usually ten years or more. Also called an "end loan."

Pest Inspection - A certified pest inspector will check the home's interior and exterior to ensure that it is free from destructive insects. The inspector will provide the lender with a detailed report.

Points (or Discount Points) - A one-time charge imposed by the lender to lower the rate at which the lender would otherwise offer the loan to you. Each point is equal to one percent (1%) of the mortgage amount.

Power of Attorney - A legal document authorizing one person to act on behalf of another.

Prepaid Expenses - Necessary to create an escrow account or to adjust the seller's existing escrow account. They can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepaid Interest - The amount of interests collected to cover the period from close of escrow until the beginning of the first payment.

Pre-payment - The unscheduled payment of all or part of the outstanding principal of a mortgage loan.

Prepayment Penalty - A penalty found in a Promissory Note imposed by the lender when the loan is paid before it is due.

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

Principal - The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI) - With down payment less than 20%, borrowers are usually required to carry private mortgage insurance. It is provided by nongovernment insurers that protect lenders against loss if a borrower defaults

Profit and Loss Statement - Part of the financial statement that shows sales, expenses and profits for a specific period of time. Also known as Income Statement.

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

Qualifying Ratios - Comparisons of a borrower's debts and gross monthly income.

Quitclaim Deed - A deed that transfers, without warranty, whatever interest or rights a grantor may have at the time the transfer is made.

RESPA - Short for the Real Estate Settlement Procedures Act is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.

Real Estate Agent - A person licensed to negotiate and transact the sale of real estate on behalf of the owner.

Real Estate Settlement Procedures Act - A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real Property - Land and everything that is permanently affixed to it.

Record Date - The date used to determine the owner of a security for purposes of distributing the next scheduled payment.

Recording Fees - Fees charged by the County Recorder's Office for recordation of Deed, Mortgage or Deed of Trust, and, at times, additional documents requiring public notice.

Refinancing - The process of paying off one loan with the proceeds from a new loan secured by the same property.

Satisfaction - The discharge of an obligation by paying a party what is due.

Second Mortgage - A mortgage made subsequent to another mortgage and subordinate to the first one.

Simple Interest - Interest which is computed only on the principal balance.

Survey - A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to know points, its dimensions, and the location and dimensions of any buildings.

Sweat Equity - Equity created by a purchaser performing work on a property being purchased.

Tax Impound - An amount for taxes required and collected by the lender and held in the impound account to insure adequate funds are available to pay the taxes.

Tenancy by the Entirety - The joint ownership of property by a husband and wife with the right of survivorship.

Tenancy in Common - A form of ownership on which the tenants own separate but equal parts. To inherit the property, a surviving tenant should either have to be mentioned in the will or, in the absence of a will, be eligible through state inheritance laws.

Title - The written evidence that proves the right of ownership of a specific piece of property.

Title Company - A company that specialized in insuring title to property.

Title Insurance - Insurance to protect the lender (lender's policy) or the buyer (owner's policy) against loss arising from 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 outstanding.

Truth-in-Lending Act - 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 verifying data and approving a loan.

VA Loan - A government agency guaranteeing mortgage loans with no down payment to qualified veterans. Available only to veterans possessing a Certificate of Eligibility.

VOD (Verification of Deposit) - A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VOE (Verification of Employment) - A document signed by the borrower's employer verifying his/her position and salary.

Variable Rate - An interest rate that changes periodically in relation to an index.

Waiver - The relinquishment of some right.

Walk-through - A final inspection of a home before settlement or closing.

"Wrap Around" Mortgage - A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the "Wrap Around" mortgagee, who then forwards the payments on the first mortgage to the first mortgagee. These mortgages may not be allowed by the first mortgage holder, and if discovered, could be subject to a demand for full payment.

Yield - The rate of return on an investment over a given time, expressed as an annual percentage rate.

Zone - A geographic area or region reserved and defined by local ordinance for specific limited use. Zones are almost always subject to certain restrictions or conditions.

Zoning Regulations - established by local governments regarding the location, height, and use for any given piece of property within a specific area.