Keywords

Adjustable-rate mortgage (ARM)
A type of mortgage with an interest rate that adjusts based on set criteria and follows the market’s rise and fall.

Agreement of sale
This contract is your written document for the sale of a home between the buyer and seller.

Amortization
This breakdown gives you a monthly schedule for the repayment of your loan.

Appraisal
This report determines the current market value of the home based on comparable recent sales in the area.

Borrower
You become a borrower when you receive a mortgage. This means you are borrowing funds that you will repay based on an agreed timeline.

Cash-out
When you refinance your home, you may be able to take out additional money based on the equity available on your property.

Certificate of occupancy
This confirms your home is habitable and meets the required regulations of local health and building codes.

Clear title
You need this to transfer property rights from the seller to the buyer. It proves that the property is free of any claims and/or disputes.

Closing statement
This document lists all the costs associated with the closing transaction and how much you will need to bring to the closing/settlement.

Combined loan-to-value (CLTV)
When you have more than one lien against your property, you combine them to determine this percentage. For instance, if you financed 80% with a mortgage and 10% with a home equity line of credit, then your CLTV is 90%.

Contingency
This is an item that must be completed before your loan and/or sale can be finalized.

Debt-to-income ratio
Your monthly mortgage payment divided by all your long-term debts.

Down payment
The amount you pay out of pocket toward the purchase of your home. You pay the down payment and the lender provides a mortgage for the balance.

Equity
Subtract your mortgage balance from the current market value of your property to know how much equity you have in your home.

Escrow
As a buyer, this is an amount you give to a neutral third party as your commitment to the seller in conjunction with your sales agreement.

Escrow account
Every month, your mortgage payment contains a portion of money that will cover your taxes and insurance. That money goes into this account so when the annual bill is due, there is enough money in that account to pay it.

First mortgage
This is your primary mortgage on your property. In case of a foreclosure, this is paid first and then other secondary loans are paid next.

Fixed-rate mortgage
This type of mortgage has one rate for the life of the loan. The rate doesn’t change.

Flood insurance
If your property is in a flood zone, this additional insurance will be required. The rates are nationwide.

Hazard insurance
This insurance covers losses and damages to your property.

Home equity loan or line of credit
This type of loan may be for a set amount (loan) or a variable amount (line of credit). It is secured by the equity in your property.

Impound (or reserves)
When you are closing on a home, a set amount is put aside to begin your escrow account. See the meaning of escrow account in this list of keywords.

Impound account
Another name for escrow account (see that definition above).

Interest rate
To calculate your mortgage monthly payment, this rate/percentage is used.

Interest rate cap
For adjustable-rate mortgages, this prevents your interest rate from fluctuating too much.

Jumbo loan
This is a mortgage over the conventional limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) and usually has a higher interest rate.

LIBOR (London Interbank Offered Rate)
Adjustable-rate mortgages utilize this as a tool to determine if your rate should stay the same, go up, or go down when it is time for your rate to be recalculated.

Lien
This is the terminology for a loan against your property to signify you owe someone or an entity that amount.

Life cap
With an adjustable-rate mortgage, this sets the maximum interest rate for your loan.

Loan application
When you want home financing, you will need to complete this detailed form – whether online or by paper – to provide your lender with necessary information about you and the property.

Loan origination fee
Lenders charge this amount as a percentage of your loan, typically, and it covers their fees.

Loan to value ratio (LTV)
Divide your loan amount by the appraised value to obtain your LTV percentage.

Lock
This is the length of time your interest rate is guaranteed between loan application and loan closing.

Mortgage note
The legal document that specifies the details of your loan: interest rate, length/term of the loan, and type of loan.

Non-conforming loan
When a conventional loan cannot be sold to Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac), it is classified as this.

Origination fee
A percentage of the loan (sometimes referred to as points) that covers some of the lender’s fees.

Owner financing
When the seller provides all or some of the financing for your property.

Per diem interest
Your interest rate is converted into a daily rate so that when you go to closing, the number of days you own the home prior to your first mortgage payment can be collected.

Prepaid expenses
To establish accounts for your taxes and insurance, this amount is collected at closing.

Prepaid interest
See per diem interest above.

Prepayment
When you make extra payments on your mortgage or pay off your mortgage prior to the original term/length of your loan, this is prepayment.

Pre-payment penalty
This is a penalty for paying off your mortgage prior to the original term/length of your loan. Check with your lender if this is part of your agreement or not.

Prequalification
To learn how much home you can afford, some basic info is collected by your lender.

Private Mortgage Insurance (PMI)
If your down payment is less than 20 percent of the purchase price, this insurance is added to your mortgage to protect the lender against default.

Purchase agreement
This is the contract both the buyer and seller sign for the sale of the property.

Refinancing
Many do this to lower their interest rate, reduce the term/length of their loan, or to gain access to the equity in their home. Basically, you are paying off your current mortgage and obtaining a new mortgage.

Survey
A licensed surveyor determines your property’s boundaries and any special notations you should be aware of prior to purchasing the property.

Sweat equity
When you make improvements to your home on your own, you are putting your own sweat into your property, hence the term “sweat equity.”

Tax lien
If there are unpaid real estate taxes, a claim will be placed against the property for that amount.

Term
This is the life of the mortgage loan – common lengths of a loan are 15 years, 20 years, and 30 years.

Title
This is evidence of ownership of a property.

Title company
This is who researches property ownership and insures it.

Title insurance
Protection for the lender and the buyer regarding property ownership.

Title search
The research the title company does to confirm property ownership and any liens/claims against the property.

Transfer tax
When a home is sold, this tax is assessed.

Underwriting
To verify all the information a borrower provides, this person reviews what was submitted to determine if there is sufficient detail to approve the loan or if more information is necessary.

Verification of deposit (VOD)
A financial institution provides this form to confirm your account balance and history.

Verification of employment (VOE)
An employer provides this form to confirm your job and salary.

Walk-through
This is the last time you visit the property to confirm everything is as it should be before you attend closing and finalize the sale.