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Adjustable Rate Mortgage (ARM)
A loan in which the interest rate is periodically adjusted based on the movement of a pre-selected index.

ARM (LIBOR 6-Month)
An adjustable rate home loan with a 15, 20, 25 or 30-year term. The interest rate remains the same for the first six months, then changes every six months thereafter. The interest rate cannot change more than 1% every six months or more than 6% over the life of the loan. The interest rate is based on the InterBank offered rate for six-month United States dollar-denominated deposits in the London market (LIBOR) as published in the Wall Street Journal.

ARM (3/1)
An adjustable rate home loan with a 30-year term. The interest rate remains the same for the first three years, then changes annually thereafter. The interest rate generally does not change more than 2% annually or more than 6% over the life of the loan. The interest rate is based on the U.S. Treasury Securities index.

ARM (Treasury 1-Year)
An adjustable rate home loan with a 15, 20, 25 or 30-year term. The interest rate remains fixed for the first year, then changes thereafter. The interest rate cannot change more than 2% annually or more than 6% over the life of the loan. The interest rate is determined by the U.S. Treasury Securities index.

Amortization
Repayment of a home loan through monthly payments of principal and interest that are calculated to payoff your loan at the end of a fixed period of time.

Annual Percentage Rate (APR)
The total cost of obtaining a loan including interest, discount points and loan fees, stated as a percentage and expressed as an annual rate.

Appraisal
A report prepared for the benefit of the lender that gives an opinion of the fair market value of the property, also known as property evaluation.

Balloon
A loan with monthly installments of principal and interest that do not fully amortize the loan. The balance of the loan is due in a lump sum at specified date.

Balloon (5/25 Balloon)
Monthly payments are the same for the first five years of the home loan. At the end of the fifth year, a refinance option makes it possible for a qualified borrower to refinance the remaining balance with a 25-year fixed rate home loan.

Balloon (7/23 Balloon)
The interest rate is the same for the first seven years of the home loan. At the end of the seventh year, a refinance option makes it possible for a qualified borrower to refinance the remaining balance with a 23-year fixed rate home loan.

Cap (Interest Cap)
A limit on the periodic increase or decrease in the interest rate on an adjustable rate.

Closing
The consummation of a real estate transaction where title to a property is formally transferred, the note and security instruments are signed, and funds are disbursed.

Closing Costs
Expenses incurred to close on a home loan, including origination fee, discount points, title insurance, survey fees, and attorney fees, and pre-paid items, such as tax and insurance escrow payments.

Collateral
Property owned by a borrower that is pledged to a lender in order to secure a loan.

Conventional Financing
Home loan financing that is not insured by FHA or guaranteed by the VA.

Conventional 15 or 30-Year Fixed Rate
The interest rate is the same for the entire 15 or 30 year home loan term. The term "conventional" means this home loan is not an FHA insured or VA guaranteed home loan program.

Debt
Money that is owed, which the borrower promises to repay.

Debt-to-Income Ratio
Ratio commonly used to determined qualification for a home loan. Compares total monthly obligations plus your home loan payments with your total monthly gross income.

Down Payment
The part of the purchase price of a home that the buyer pays in cash. The purchase price minus the down payment equals the loan amount, exlcusive of closing costs.

Equity
The difference between the market value of a property and the balance owed on that property‰s home loans.

Fair Market Value
A price freely agreed upon by a willing buyer and a willing seller of a property, with neither party being under any compulsion to buy or sell.

Federal Housing Administration (FHA)
A federal agency that provides home loan insurance for residential loans and sets standards for construction and underwriting.

FHA 15 or 30-Year Fixed Rate
The interest rate is the same for the entire 15 or 30 year home loan term. The term "FHA" is the abbreviation for Federal Housing Administration--a government-insured program that provides money for home ownership.

FHA 1-Year ARM
An adjustable rate home loan with a 30-year term. The interest rate remains the same for the first year, then changes annually thereafter. The interest rate cannot change more than 1% annually or more than 5% over the life of the loan. The term "FHA" is the abbreviation for Federal Housing Administration--a government-insured program that provides money for home ownership. The interest rate is based on a U.S. Treasury Securities index.

Fixed Rate Mortgage
A loan in which the interest rate remains the same for the entire term of the loan.

Gift Letter
A signed statement by a gift donor explaining that a cash gift used by the borrower to qualify for a loan does not have to be repaid.

Good Faith Estimate (GFE)
A document prepared by the lender that tells borrowers the estimated cost they will pay at or before closing. The lender must mail the GFE to the applicant within three business days after the application is received.

Hazard Insurance
Insurance that compensates the insured for loss on property because of physical damage by fire, wind, or other natural disaster.

Index
A published interest rate such as the prime rate, London InterBank Offer Rate (LIBOR) or Treasury Bill. Lenders commonly use indexes to establish interest rates charged on adjustable rate mortgages.

Interest Rate
The charge for borrowing an amount of money for a certain period of time. Also known as the note rate.

Jumbo
A jumbo loan is a home loan in the amount that exceeds the conventional conforming loan limits.

Monthly Housing Payment
The total monthly payment amount involved in paying back a home loan: principal, interest, taxes, hazard insurance, mortgage insurance, and assessments.

Mortgage
A pledge of real estate as security for the repayment of a loan. .

Mortgage Insurance (MI)
An insurance policy that insures a lender against a loss if a borrower defaults on his or her loan payments. May be required on some loan types with a "Loan to Value" ratio that exceeds 80% of the sales price or appraised value.

Mortgage Insurer
A mortgage insurance company that insures a lender against loss if borrowers default on their loan payments.

Mortgage Note
A promise issued in writing stating that money borrowed for the purchase of a home loan will be repaid at a specific interest rate over a given period of time.

Mortgagee
The lender in a home loan transaction.

Mortgagor
The borrower in a home loan transaction.

Origination Fee
The amount charged by a lender to a borrower for processing, underwriting and completing home loan documents, and distributing loan proceeds.

Point (Discount Point)
A one time charge to reduce the interest rate.

Property Evaluation
A report prepared for the benefit of the lender that gives an opinion of the fair market value of the property, also known as appraisal.

Realtor^®
A registered trademark of the National Association of Realtors that refers to a real estate agent who is a member of, or is affiliated with, the National Association of Realtors^®.

Servicing
The procedures related to the collection of home loan payments and the management of escrow accounts.

Title
Evidence of the right to, or ownership of, property.

Title Insurance
A type of insurance that insures against loss brought on by defects in title to real estate.

Title Search
A search of public records to uncover the facts relating to the ownership of real estate.

Truth-in-Lending Act (TIL)
A federal law that requires lenders to disclose, in writing, certain credit terms and conditions of a home loan to the customer.

Underwriting
The process of analyzing information such as a borrower‰s ability to repay a home loan, the acceptability of the property as security, and the loan rate and term to determine the risk of lending money.

Department of Veterans Affairs (VA)
An agency of the federal government. A VA home loan is a home loan that is guaranteed by the VA The VA home loan guarantee program encourages lenders to offer long-term, low down payment financing to eligible veterans.