Adjustable Rate Mortgage (ARM) - A mortgage loan in which the interest rate can go up or down based on market conditions. Changes in the interest rate are determined by a financial index. ARM loans have a cap or a limit on how much the interest rate can change.

Amortization - Repayment of a mortgage loan with equal periodic payments of both principal and interest. The payments are calculated so that the debt is paid off at the end of a fixed period of time.

Annual Percentage Rate (APR) - A term that expresses the cost of a mortgage as an annual rate. The APR is normally higher than the advertised interest rate because it includes interest, points, and other finance charges. The APR is used to compare different types of mortgages.

Appraisal - A report created by a qualified appraiser that is an estimate of the value of the property being financed.

Assessment - An assessed value given to property which is used solely for determining property taxes.

Asset - An item that has monetary value such as cash, stocks and real estate. Information about your assets is required when applying for a mortgage loan.

Balloon Mortgage - A short-term mortgage loan of equal monthly payments in which a large final payment (balloon) is due on a specified date. The final payment is equal to the remaining balance of the loan.

Biweekly Mortgage - A mortgage loan in which payments are due every two weeks, totaling 26 (or possibly 27) payments each year.

Closing - The final step in the mortgage loan process which follows underwriting. The closing is a meeting between the homebuyer, seller and lender in which mortgage documents are signed and title to the property passes from the seller to-the buyer. At the same time, the home buyer receives the funds needed to purchase the property and pledges the property as security for repayment of the debt.

Closing Costs - Fees paid by either buyer or seller at closing which are usually 3 to 6 percent of the mortgage amount. Some examples of closing costs are. realtor fees, attorneys fees, appraisal fees and taxes.

Collateral - Property pledged as security for repayment of the mortgage loan.

Conventional Loan - A mortgage loan made by an approved lender in which the borrower's ability to repay the debt is not insured by a government agency such as the FRA or VA.

Convertible Mortgage - A type of adjustable rate mortgage loan that can be converted to a fixed-rate mortgage.

Discount Points - Also called "points". A one-time charge paid to the lender at closing to obtain a lower interest rate on the mortgage loan. One point is equal to 1 percent of the loan amount. For example, two points on a $100,000 mortgage would cost $2,000.

Escrow Account - An account -often required by the lender to pay taxes and insurance. Every time a mortgage payment is made, a portion goes into the escrow account. When the taxes and insurance bills are due on your home, the lender pays the bills with funds from this account.

Equity - The amount of the home -that you actually own. Equity is the difference between the market value of the home and what you still owe on it.

Balloon Mortgage - A short-term mortgage loan of equal monthly payments in which a large final payment (balloon) is due on a specified date. The final payment is equal to the remaining balance of the loan.

Biweekly Mortgage - A mortgage loan in which payments are due every two weeks, totaling 26 (or possibly 27) payments each year.

Closing - The final step in the mortgage loan process which follows underwriting. The closing is a meeting between the homebuyer, seller and lender in which mortgage documents are signed and title to the property passes from the seller to-the buyer. At the same time, the home buyer receives the funds needed to purchase the property and pledges the property as security for repayment of the debt.

Closing Costs - Fees paid by either buyer or seller at closing which are usually 3 to 6 percent of the mortgage amount. Some examples of closing costs are. realtor fees, attorneys fees, appraisal fees and taxes.

Collateral - Property pledged as security for repayment of the mortgage loan.

Conventional Loan - A mortgage loan made by an approved lender in which the borrower's ability to repay the debt is not insured by a government agency such as the FRA or VA.

Convertible Mortgage - A type of adjustable rate mortgage loan that can be converted to a fixed-rate mortgage.

Discount Points - Also called "points". A one-time charge paid to the lender at closing to obtain a lower interest rate on the mortgage loan. One point is equal to 1 percent of the loan amount. For example, two points on a $100,000 mortgage would cost $2,000.

Escrow Account - An account -often required by the lender to pay taxes and insurance. Every time a mortgage payment is made, a portion goes into the escrow account. When the taxes and insurance bills are due on your home, the lender pays the bills with funds from this account.

Equity - The amount of the home -that you actually own. Equity is the difference between the market value of the home and what you still owe on it.

Federal Rousing Administration (FHA) - A division within the Federal Department of Housing and Urban Development (HUD) that provides mortgage insurance for residential mortgages and sets standards for construction and underwriting.

FHA Loan A mortgage loan made by an approved lender in which the Federal Rousing Administration insures the borrower's ability to repay the debt.

Good Faith Estimate - An estimate of the fees you will be required to pay at closing. It i~ required by law that the lender provide the good faith estimate within three days of your initial loan application.

Graduated Payment Mortgage (GPM) - A type of mortgage loan in which payments increase for a specified period of time and then level off. This type of mortgage is for homebuyers who expect to be able to make larger monthly payments as their income grows.

Growing Equity Mortgage (GEM) - A type of mortgage loan in which payments increase yearly until the mortgage is paid off. The increasing payments are applied directly to the principal, allowing the homebuyer to acquire equity more rapidly and pay off the mortgage sooner.

Housing-to-Income Ratio - A ratio that compares all your monthly housing expenses to your monthly income. This ratio is used as one factor by the lender to see if you qualify for a mortgage loan.

Liability - An outstanding debt such as a loan or credit card balance. Information about your liabilities is required when applying for a mortgage.

Mortgage - A legal document that pledges your property as security for repayment of the mortgage loan.

Mortgage Broker - A real estate financing professional who brings homebuyers and lenders together to arrange funding and mortgage contracts.

Mortgage Insurance - Insurance that protects the lender in case the house payments are not made. Typically, you would be required to pay a fee for mortgage insurance if your down payment is less than 20 percent.

Mortgage Note - A document that you sign at closing which states your promise to pay a sum of money at a specified interest rate for a fixed period of time.

Mortgagee - the lender

Mortgagor - the homebuyer or borrower

Origination - The first step in the mortgage loan process. During the origination phase a loan application is filled out with details of your financial position. You will be asked to provide supporting documentation such as W-2s and paystubs. Your loan officer will then be required to provide you with a Good Faith Estimate and a Truth-in-Lending disclosure shortly after your initial loan application.

Origination Fee - A fee that the lender may charge the homebuyer for the service of creating the mortgage loan. This fee is usually stated as a percentage of the loan.

Points - See Discount Points.

Prequalification - A process in which the loan officer calculates the housing-to-income ratio and the total debt-to-income ratio to see if you qualify for a mortgage loan.

Principal - The amount owed on a loan. excluding interest.

Private Mortgage Insurance (PMI) - Insurance provided  by a private mortgage insurance company that protects the lender in case the house payments are not made. Typically, you would be required to pay a fee for mortgage insurance if your downpayment is less than 20 percent.

Processing - The second step in the mortgage loan process which follows origination. During processing, documents are collected and your loan file is examined to ensure that all information is complete and accurate. Verifications. appraisals, credit reports and other necessary documents are ordered at this time.

Recording Fees - Fees that the lender charges for officially recording the signed mortgage documents to make them a public record.

Servicing - Activities that the lender performs such as collecting the payments and paying taxes and insurance if you have an escrow account.

Title Insurance - An insurance policy which insures the homebuyer against errors in the title search. The fee for the title insurance policy is paid at closing.

Title Search - An examination of officially recorded documents to determine the legal ownership of property.

Total Debt-to-Income Ratio - A ratio which compares all of your monthly debt payments, such as credit cards and car payments. to your monthly income. This ratio is used as one factor by the lender to see if you qualify for a mortgage loan.

Truth-in-Lending Disclosure - A document which the lender is required by law to give to the homebuyer shortly after loan application. This disclosure gives details of the house payments along with the corresponding APR.

Underwriting -The third step in the mortgage loan process which follows processing. During underwriting, the documents in the loan file are evaluated to determine whether the loan should be approved, denied, or approved with conditions.

Veterans Administration (VA) - Known as the Department of Veterans Affairs, an agency within the Federal Government which administers benefit programs for veterans.

VA Loan - A long-term, low- or no-downpayment mortgage loan in which the Veterans Administration guarantees the ~ ability to repay the debt. Only veterans are eligible for this type of loan.