| Adjustable Rate Mortgage (ARM): A mortgage agreement that allows for adjustment of the interest rate in keeping with the fluctuating market and terms agreed upon in the note. | | Amortize: to pay off a loan with regular payments. Part of each payment is applied to principal and part to the interest. | | Annual Percentage Rate (APR): A term used to represent the percentage relationship of the total finance charge to the amount of the loan. A guide to compare the cost of loans. | | Assumable: An assumable mortgage is one that can be transferred from one owner to another with the same terms and conditions as the previous mortgage. | | Cap (lifetime): This is the maximum that your ARM can adjust over the entire term of the loan. | | Closing: The conclusion of a transaction. The delivery of a deed, financial adjustments, the signing of notes and the disbursement of funds necessary to the sale or loan transaction. | | Closing Costs: All fees, in addition to the purchase price of the property that are charged at closing. | | Declining Values: The possibility that in a real estate downturn, the appraiser may adjust the value downward to adjust for the steady decline in housing prices. The loan-to-value is usually cut back by 5% in such cases. | |
| Escrow Account: Money collected in advance by the lender usually on a monthly basis, for the payment of real estate taxes, PMI, and insurance. | | FNMA: Fannie Mae is a private corporation that purchases mortgages from Mortgage Bankers, Commercial Banks and Savings and Loans. | | Loan-to-Value Ratio: The percentage comparison between the unpaid principal balance of the mortgage and the appraised value or sale price. | | Point: Equal to one percent of the principal amount of the mortgage. | | Principle: This is the amount of money that you borrow, or what you currently owe on your property. It is also the base in which interest is figured. Usually, a portion of your mortgage payment will go to pay down your principal. | | Private Mortgage Insurance (PMI): Insurance written by a company protecting the mortgage lender against loss occasioned by a mortgage default. A borrower must pay PMI if the loan-to-value is higher than 80%. | | Truth-in-Lending: Federal laws require lenders to provide borrowers with full disclosure of the cost of the loan. | | | |
