ALL THE TERMS IN YOUR
NEW MORTGAGE DEFINED.

Adjustable Rate: A type of home loan in which the interest rate and monthly payment may be adjusted periodically according to the pre-selected index also referred to as a variable-rate mortgage or adjustable.

Amortization: Loan payment by equal periodic payments calculated to retire the principal at the end of a fixed period and to pay accrued interest on the outstanding balance.

Annual Percentage Rate: A figure that represents the percentage relationship of the total finance charge to the amount of the loan.

Appraisal: A report made by a qualified, licensed firm or individual on the estimated value of a property. This report evaluates the subject property in comparison to other homes in the area.

Balloon Mortgage: A mortgage with periodic installments or principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date in the future, usually at the end of a term.

Buy Down: Money advanced by an individual to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years. This is known as a "temporary" buy down. A "permanent" buy down is also available in the form of a note rate "buy down" at the time of lock in. This is accomplished through the payment of additional discount points to provide the lower rate.

Caps: The maximum allowable interest rate or payment increase on adjustable rate mortgages.

Closing: Also referred to as "settlement", closing is the conclusion of the sale transaction and includes the delivery of the deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction. In most states, closing is handled by a title company or law firm.

Collateral: Property pledged as security for a debt, such as the real estate as security for a mortgage.

Conventional Loan: A mortgage loan not insured by the Federal Housing Administration (FHA) or guaranteed the Veterans Administration (VA). These loans are sold to private investors, or a secondary market organization.

Escrow: That portion of a homeowner_s monthly mortgage payment which is held by the lender to pay taxes, hazard insurance, mortgage insurance, flood insurance, etc. as they become due. Generally, 1/12 of the annual bill is escrowed from the mortgage payment each month.

FHA Loan: A loan insured by the Federal Housing Administration (FHA). This program is federally insured and open to all qualified homebuyers. Generally, this financing is used for purchase of moderately priced homes in the US. The program requires less than the down payment required for conventional financing and the underwriting is seen to be somewhat more lenient.

Mortgage: A formal legal document executed by an owner of property, pledging the property as security for payment of a debt or performance of some other obligation. (Also known as a Deed of Trust)

Origination: The process of generating a new loan application and the process associated with making a commitment for the loan.

Principal: The part of your mortgage payment that directly pays off your loan. This does not include the interest, taxes or insurance that may be a part of your loan payment.

Promissory Note: A written promise to pay a specific amount at a specific time and place.

Refinancing: Taking out a new mortgage to pay off the old one, or if the rates drop significantly.

Second Mortgage: A mortgage that has rights secondary to the first mortgage.

Title: The document which is evidence of property ownership. In the case of real estate the documentary evidence of ownership is the title deed that specifies in whom the legal estate is vested and the history of ownership and transfers.

Truth in Lending: A requirement that lenders fully disclose credit terms and conditions, the annual percentage rate and other mortgage financing charges in writing to the borrower within three business days of application.

VA Loan: A mortgage offered to eligible veterans and guaranteed by the Veterans Administration.