Adjustable Rate
An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

Amortization
A repayment method in which the amount you borrow is repaid gradually through regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.

Amortization Term
The amount of time required to amortize the loan. The amortization term is expressed as a number of months. For example, for a 15-year fixed-rate mortgage, the amortization term is 180 months.

Annual Percentage Rate (APR)
The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the Federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Appraisal Report
A written report by an appraiser containing an opinion as to the value of a property and the reasoning leading to that opinion.

Balloon Payment
A lump sum payment for the unpaid balance of the loan.

Cash Out
Receiving money back when refinancing your present mortgage.

Ceiling
The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Closing
The time and place at which all documents for your loan are signed, dated and notarized.

Combined Loan to Value (CLTV)
The relationship between the unpaid principal balances of all the mortgages on a property and the property's appraised value.

Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Debt-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income.

Down Payment
The difference between the purchase price and that portion of the purchase price being financed. Most lenders require the down payment to be paid from the buyer's own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.

Equity
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

First Mortgage
A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

Fixed Rate
An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

Gross Income
For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

Home Equity Line of Credit
A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home Equity Loan
A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax-deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt and education loans.

HUD I Settlement Statement
A form utilized at loan closing to itemize the costs associated with purchasing the home. Used universally by mandate of HUD, the Department of Housing and Urban Development.

Index
A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based. Common indices include the Cost of Funds for the Eleventh Federal District of banks or the average rate of a one year Government Treasury Security.

Lender
The bank, mortgage company, or mortgage broker offering the loan.

Lien
The right to take and hold or sell the property of a debtor as a security or payment for a debt.

Margin
An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

Mortgagee
The lender in a mortgage loan transaction.

Mortgagor
The borrower in a mortgage loan transaction.

Note
A written agreement containing a promise of the signer to pay to a named person, or order, or bearer a definite sum of money at a specified date or on demand.

PITI
Principal, interest, taxes and insurance which comprise your monthly mortgage payment.

Right to Rescission
The legal right to void or cancel your mortgage contract in such a way as to treat the contract as if it never existed. Right of rescission is not applicable to mortgages made to purchase a home, but may be applicable to other mortgages, such as home equity loans.

Servicing a Loan
The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

Title
The written evidence that proves the right of ownership of a specific piece of property.

Title Insurance
Protection for lenders or homeowners against financial loss resulting from legal defects in the title.

Underwriting
The process of verifying data and approving a loan.