Glossary of Terms

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Adjustable Rate Mortgage: Loans with interest rates that can fluctuate during the term, based on an index to which the interest rate is tied.

Amortized Table: A chart that breaks out the total annual payment per year, over the entire term.

Amortized Loan: A loan that is paid off in equal installments during its term.

Annual Percentage Rate: The amount of loan costs, paid yearly and expressed as a rate of costs over the loan itself.

Appraisal: An estimate of real estate value. The most important factor in determining its value is comparable neighborhood sales.

Arbitration Agreement: An agreement between the seller and buyer to insure that an independent arbitrator will decide, out of court, any disputes over the property.

Assessments: A city determined tax on homeowners, used to pay for improvements to the city in which the homeowner lives.

Association Dues: Payments made by home owners to pay for the maintenance and management of shared property.

Assumable Loan: A type of mortgage that allows the buyer to take over the responsibility of the mortgage on the encumbered real estate.

Capital Gains Tax: A tax on the profit obtained from the sale of capital asset.

Closing Costs: Expenses incurred for the purpose of closing a real estate or mortgage transaction. Examples include: attorneys fee, recording charges, survey fee, title policies, lender fees, discount points, appraisal fee, et cetera.

Commitment Letter: A letter which your lender may send you, stating the terms of the loan and its approval.

Conventional Loans: Non-governmental home loans.

Contingency: A clause within a purchase agreement that has to be met before the contract can be exercised.

Down Payment: The initial payment of a home. There are certain minimums of down payments depending on the type of loan. Most down payments are five to 30 percent of the loan.

Earnest Money: Money that accompanies an offer made on a property. The money is then applied to the down payment at closing. If the offer is not accepted, the money is returned.

Equity: The difference between indebtedness and market value of a property.

Escrow: Funds, many times a bond, held by a third party which will not be released to the grantee until conditions of a contract or an agreement are fulfilled.

FHA Loan: A Federal Housing Administration loan program that provides a guarantee against default. The borrower benefits from a smaller down payment.

Fair Credit Reporting Act: Information in your credit report that federal law gives citizens the right to challenge.

Fixed Rate Mortgage: Loans with interest rates that do not fluctuate.

Homeowner's Insurance: Insurance home buyers must have in order to protect the investment of the property.

Loan Origination Fee: A fee for loan application.

Loan Processing: The lenders opinion of your financial and credit past, combined with your income to calculate your ability to qualify for a loan.

Loan to Value Ratio: This is the ratio of the amount borrowed to the appraised value of the home.

Lock-In Agreement: This agreement allows you to lock into an interest rate at or anytime up to the closing.

Mortgage Insurance: This insurance protects the investor from possible loss if the borrower defaults on the loan.

Multiple Listing Service (MLS): A service used by real estate agents to obtain information on homes and land for sale.

PITI: Principle, interest, taxes, insurance-Many mortgages are setup with monthly loan payments to include these.

Purchase Agreement: This is the agreement that legally binds the buyer and seller. All contingencies of the agreement must be listed here.

Title: Evidence of a person's legal right to the ownership of a property, usually in the form of a certificate or a signed contract.

Title Insurance: Insurance purchased to protect the lender and homeowner against claims on the title from previous owners or encumbrances.

Underwriting: An analysis done by the lender to determine if you qualify for a loan.

Veteran's Administration Loan (VA Loan): These loans are available to US Veterans and their surviving spouses. The loans require no down payment and you can borrow the entire purchase price of the home.