Arm: A mortgage with an interest rate that changes periodically, according to an index such as treasury bills. Monthly payments can go up or down when the rate is adjusted. The following arm options are available: 6 month, 1 year, 2 year, 3, 5, 7, and 10.


Amortization: The process of paying off the debt or mortgage usually by equal monthly payments. Monthly payments are mostly interest at first (because the debt is higher) and almost entirely principal in later years, when the loan balance is small. Amortization time frame is normally based on 30, 20, 15 or 10 years.

Annual Percentage Rate (APR): Charges including fees, interest rate, points, and other charges expressed as a percentage of the total amount of the loan. It is not your interest rate. If you had no cost to acquire a loan your APR would be the same as your interest rate.

Closing Costs: The total costs and fees associated with closings. This includes one-time non-recurring fees and charges for inspections and other services, as well as initial escrows for recurring costs such as property taxes and insurance.

Debt To Income Ratios (DTI): Total outstanding debt as a portion of total income. Divide your debt into your income to calculate your DTI. Lenders have different DTI guidelines. They range anywhere from 38-55.

Deed: Legal document which certifies title to a property

Earnest Money: A deposit made by the potential home buyer which restrains the seller from offering the property to another party for a specified period.

Equity: The market value of a property to the owner less all lien amounts outstanding against it. Equity is estimated by subtracting debts owed on the property from the property’s estimated market value.

Escrow: A special account created to hold money for taxes and insurance, or to hold deposit money prior to closing.

Hazard Insurance (Home Owners): Insurance to protect the homeowner and the lender against physical damage to a property from fire, windstorm, vandalism, and other hazards.

HUD Settlement: This statement shows the sellers net proceeds and the buyer’s net payment at closing. A standard form itemizing all of the monies paid at closing, including real estate commissions, loan fees, points, and initial escrow amounts.

Jumbo Loan: A mortgage for an amount greater than the amount eligible for purchase by Fannie Mae. Any loan amount over $400,000 (as of 10/12/05) rates are generally a little higher.

Loan To Value (LTV): The ratio between a mortgage loan and the market or appraised value, whichever is less.

Good Faith Estimate (GFE): An estimate of the fees and charges which the borrower must pay at closing.

Mortgage Insurance: Insurance purchased by the borrower to partially protect the lender against loss if the borrower defaults. Normally required for loans with an LTV greater than 80%

Note: A formal, signed document obligating a borrower to repay a loan at a stated interest rate during a specified period of time.

Principal, Interest, Taxes and Insurance (PITI): The four components that make up the monthly mortgage payment. Principal and interest are the portions of the payment assigned to repay the mortgage. Taxes and insurance are accumulated in an escrow account to make payments when they are due.

Title Search: An examination that is completed through public title records to ensure that the seller is the owner of the property and that there are no liens or other claims outstanding.

Title Insurance: Insurance against a loss (up to a specified amount) resulting from any dispute over ownership or other title defect.

Truth in Lending: Ensures disclosure or credit cost by lenders, including disclosure of all fees and charges associated with a loan, but separate from the quoted interest rate.

QuitClaim Deed: A deed that transfers all interest or title, if any, that a grantor may have at the time the conveyance is made.

Warranty Deed: A deed in which the seller guarantees that title is free and clear of encumbrances other than any stated in the contract or deed.