Amortization: repayment of a mortgage loan through monthly payments of both principal and interest; the monthly payment amount is based on a schedule which allows ownership of the home at the end of a specified period of time. In legalese, it is a process of decreasing or accounting for an amount over a particular period of time

Annual Percentage Rate (aka APR): this is calculated by using a standard formula, and it basically shows the cost of a specific loan; expressed as a yearly interest rate.

Application: the initial step in the actual loan approval process; this form is used to record key data regarding the potential borrower which is necessary for the loan to take place.

Appraisal: a document which gives an estimate of a property's fair market value; an appraisal is usually required prior to loan approval to make certain that the mortgage loan amount is not in excess the value of the property.

ARM: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender.

Assessor: an official who is responsible for assesing the particular value of a property for taxation reasons.

Assumable mortgage: a mortgage which can be transferred from a seller to the buyer; once the loan is assumed by the purchaser the seller is no longer responsible for repaying it.

B

Balloon Mortgage: a mortgage which usually offers lower interest rates for an beginning period of time, after that time period passes, the balance is then due or is simply refinanced. In technical or legalese terms then, it is just a mortgage which does not completely amortize over the term of the note, and therefore leaving a balance due at it's maturity (credit Wikipedia on this one). The final payment is called a balloon payment because of its size

Bankruptcy: a federal law Whereby an individual's assets are turned over to a trustee and used to pay off the outstanding debts.

Borrower: In real estate or general terms, this refers to an individual who has been approved to receive a particular loan and is then obligated to repay it and any further fees.

Building code: based on agreed upon safety standards within a certain area, a building code is a regulation which determines design and materials used in building.

Budget: a specific record of all the money that is earned or spent during a particular time frame.

C

Cap: This is a certain limit, like that which is placed on an ARM, on how much a monthly payment or interest rate can increase or decrease.

Cash reserves: a cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

Certificate of title: a document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

Closing: also known as settlement, this is the time frame that the property is formally sold and transferred from the seller on to the purchaser; it is at this junction that the borrower takes on the loan obligation and pays all of the applicable closing costs.

Closing costs: customary costs above and beyond the sale price of the property in question which must be paid to cover the transfer of ownership at closing time; these costs often vary by geographic location and are usually detailed to the borrower after the submission of a loan application.

Commission: This is an amount, generally a percentage of the property sales price, which is collected by a real estate agent or broker as a fee for services rendered during the sales process.

Condominium: This is essentially a type of ownership in which you purchase a unit of housing in a multi-unit complex; the buyer likewise shares the financial burden for common areas in the form of 'homeowners fees'.

Conventional loan: This is just a private sector loan, and therefore a loan which is not guaranteed buy law as some other loans are.

Cooperative (Co-op): residents purchase stock in a cooperative-type of entity which owns the structure and each stockholder is thus entitled to live in a unit of the structure and is responsible for paying a portion of the loan in question.

Credit report: This is basically a record which lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.

Credit bureau score: This is just a number which represents the possibility a borrower may default; it is based upon the credit history of a person and is used to determine qualifications of a mortgage loan.

D

Debt-to-income ratio: This is a comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29 percent of the monthly gross income and the mortgage payment combined with non-housing debts should not exceed 41 percent of the income.

Deed: This is simply the document which transfers ownership of a particular property.

Deed-in-lieu: to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process does not allow the borrower to remain in the home but does nonetheless help to avoid costs, time, and effort associated with a foreclosure.

Default: This refers to not being able to pay monthly mortgage payments in a timely manner or to otherwise meet one's mortgage obligations.

Discount point: normally paid at closing and generally calculated to be equivalent to 1 percent of the whole loan amount, discount points are paid to minimize the interest rate on a loan.

Down payment: the portion of a home's buy price which is paid in cash and is not a part of the mortgage loan itself.

E

Earnest money: money put down by a potential purchaser so as to prove that he/she is serious about buying the propert after all.

EEM: Energy Efficient Mortgage; an FHA program which assists home purchasers save money on utility bills by helping them to finance the price of adding energy efficiency features to a new or existing house.

Equity: a home owner's financial interest in a particular property; this is calculated by simply subtracting the amount still owed on the mortgage loan from the value of the property.

Escrow account: This is just a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds required for expenses like property taxes, insurance coverage, and so on.

F

The Fair Housing Act: This is a law which outlaws discrimination in every individual part of the homebuying process. In particular cases involving discrimination in mortgage loans and/or home improvement loans, the Department may file suit under both the Fair Housing Act as well as the Equal Credit Opportunity Act

Fannie Mae: Federal National Mortgage Association (FNMA); This is a federally-chartered enterprise owned by private stockholders which buys residential mortgages and then converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds which lenders may then loan to potential homebuyers.

Fixed-rate mortgage: a mortgage with payments which remain the same throughout the life of the loan since the interest rate & other related terms are fixed and thus don't change.

Flood insurance: This is simply real estate insurance which covers homeowners against losses from a flood; if a home is located on a flood plain, the lender will usually mandate flood insurance before even approving the loan.

Foreclosure: This is a legal process during which mortgaged property is sold to pay off the mortgage of the defaulting borrower.

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers.

G

Ginnie Mae: Government National Mortgage Association (GNMA); This Corp pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to borrowers.

Good faith estimate: an estimate of all closing fees including pre-paid and escrow items plus lender charges. This has to be be submitted to the borrower within 3 days of submission of the loan application in question.

H

HELP: Homebuyer Education Learning Program; This is a program from the FHA which counsels people about homebuying in general and covers topics such as budgeting, finding a house, insurance issues, qualifying for and obtaining a loan, and maintenance issues. In the great majority of cases, finishing the program might entitle the purchaser to a lower mortgage insurance premium.

Home inspection: an examination of the structure & relevent mechanical systems to determine a house's safety; alerts the possible purchaser to any repairs which might be eventually required.

Home warranty: This offers protection for mechanical systems & appliances against unexpected repairs which are not covered by the insurance. The coverage extends over a particular period of time and doesn't include the actual structure of the house in question.

Homeowner's insurance: an insurance policy which combines protection against damage to a particular house and it's contents.

Housing counseling agency- This entity is tasked with providing counseling and other assistance on a wide range of issues such as loan default and homebuying.

HUD1 Statement: This itemizes all closing costs; it is required to be given to the borrower at or prior to closing time.

HVAC: Heating, Ventilation & Air Conditioning; a house's heating and cooling system.