Adjustable Rate Mortgage (ARM)
A loan whose interest rate is adjusted according to financial market movements.

Amortization
A payment plan by which a borrower reduces a debt through equal periodic payments of principal and interest.

Annual Percentage Rate (APR)
The annual cost of credit over the life of a loan, including interest, service charges, points, loan fees, mortage interest and other items.

Appraisal
An estimate of the property value in the marketplace.

Balloon
A loan which has a series of monthly payments (often 5 years or less) with the remaining balance due in a large lump sum payment at maturity.

Closing Costs
Charges paid at settlement for obtaining a mortgage loan and transferring real estate title. These charges may include appraisal, abstracting, title opinion, title insurance, application fees, legal fees, document preparation, recording fees, credit reports and flood hazard determination.

Debt to Income Ratio
Your total monthly payments (including rent or mortgage payment) divided by your gross monthly income.

Earnest Money
A sum paid to the seller to demonstrate that a potential buyer is serious about buying the real estate. It is usually paid in compliance with the terms of an agreement to purchase real estate.

Escrow
The handling of funds or documents by a third party on behalf of the buyer and/or seller. Buyer may have account for funds to pay tax and or insurance payments.

Federal Housing Authority (FHA)
A federal agency which insures mortgages that have lower down payment requirements than conventional loans.

Fixed Rate Mortgage
A mortgage whose interest rate remains constant over the entire term of the loan.

Loan to Value
The mortgage loan balance divided by the appraised value of the property.

Private Mortgage Insurance (PMI)
Insures repayment of the loan balance to the lender in the event of default by the borrower. The insurance is similar to insurance issued by a government agency (such as FHA) except it is issued by a private company. PMI is usually required for homes financed with less than a 20% down payment.

Title
A certificate or deed of a person's legal right to ownership of a property.