On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher in the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance.Private mortgage insurance is a financial guaranty that protects lenders against payment default.n the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

An estimate of the value of property, made by a qualified professional state licensed or certified appraiser.

Usually a short-term fixed-rate loan which involves small payments for the remaining amount of the principal at a time specified in the contract.

An individual in the business of assisting in arranging funding or negotiating contracts for the client but who does not loan the money him/herself. Brokers usually charge a fee or receive a commission for their services.

When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or life of the loan.

Consumer safeguards which establish the highest (maximum) rate an interest rate can be at any one time during the life of an adjustable rate mortgage.

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement.

Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 1 percent to 3 percent of the mortgage amount.

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

A short-term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

A mortgage not insured by FHA or guaranteed by the VA or Rural Economic Community Development (RECD) (aka. as Farmers Home Administration)

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 net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.

In many states, this document is used in place of a mortgage to secure the payment of a note.

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

An independent agency of the federal government which guarantees long-term, low- or no-down payment mortgages to eligible veterans.

Money paid to make up the difference between the purchase price and mortgage amount. Down payments usually are 5 percent to 20 percent of the sales price on conventional loans, and no money down up to 5 percent on FHA and VA loans.

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

The difference between fair market value and current indebtedness also referred to as the owner's interest.

Refers to a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or closing. Escrow may also refer to an account held by the lender into which the home buyer pays for tax or insurance payments.

See Federal National Mortgage Association.

A regulatory and supervisory agency for federally chartered savings institutions.

Also called Freddie Mac, is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

Now known as Fannie Mae. A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.

A mortgage on which the interest rate is set for the term of the loan.

The total amount the borrower earns per month, before any expenses are deducted.

The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income(FHA/VA loans) or gross monthly income (conventional loans). See debt-to-income ratio.

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one-, three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings institutions, and the monthly average costs-of-funds incurred by savings banks), which is then used to adjust the interest rate on an adjustable mortgage up or down.

A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because Jumbo loans can not be funded by these two agencies, they usually carry a higher interest rate.

A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA Loans.

The borrower or homeowner.

The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

Principal, interest, taxes and insurance. Also called monthly housing expense.

Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100,000 mortgage would cost $2,000).

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

The amount of debt, not counting interest, left on a loan.

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction used equity in the home as security.

A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller.

An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for a loan.

The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

A long-term, low- or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

See adjustable rate mortgage.

A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

A document signed by the borrower's employer verifying his/her position and salary.