A
- Adjustable-Rate Mortgage (ARM)
- A type of mortgage with an interest rate that can change periodically, usually in relation to an index, resulting in payment fluctuations.
- Amortization
- The process of gradually paying off a debt over a period of time through regular payments of principal and interest.
- Appraisal
- An estimate of a property’s market value, performed by a licensed appraiser.
- Asset
- Anything of value that is owned by an individual or entity, such as real estate, stocks, or cash.
B
- Balloon Mortgage
- A mortgage with a large final payment, known as a balloon payment, due at the end of the loan term.
- Bridge Loan
- A short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing one.
- Buydown
- An arrangement where the seller pays a portion of the buyer’s mortgage interest, reducing monthly payments for a specific period.
C
- Capital Gains
- The profit made from the sale of a capital asset, such as real estate, which is subject to taxation.
- Cash-Out Refinance
- Refinancing a mortgage for more than the outstanding balance, converting home equity into cash.
- Closing Costs
- The expenses incurred in transferring ownership of a property, including fees for the loan, appraisal, title search, and more.
- Collateral
- An asset pledged as security for a loan, which can be seized by the lender if the borrower defaults.
- Conventional Mortgage
- A mortgage not insured or guaranteed by the federal government, typically requiring higher credit scores and down payments.
D
- Debt-to-Income Ratio (DTI)
- A measure of a borrower’s monthly debt payments compared to their gross monthly income, used by lenders to assess creditworthiness.
- Deed
- A legal document that transfers ownership of real property from one party to another.
- Down Payment
- The initial payment made when purchasing a property, typically a percentage of the total purchase price.
E
- Earnest Money
- A deposit made by a buyer to demonstrate their serious intent to purchase a property, which is applied to the down payment or closing costs.
- Equity
- The difference between the market value of a property and the amount owed on the mortgage.
- Escrow
- An arrangement where a third party holds funds or documents until specific conditions are met during a real estate transaction.
F
- FHA Loan
- A mortgage insured by the Federal Housing Administration, designed to help low-to-moderate income borrowers with lower down payments and credit scores.
- Fixed-Rate Mortgage
- A mortgage with an interest rate that remains the same throughout the loan term, resulting in consistent monthly payments.
- Foreclosure
- The legal process by which a lender takes possession of a property due to the borrower’s failure to make mortgage payments.
G
- Gift Letter
- A letter from a donor stating that a monetary gift to the borrower is not a loan and does not need to be repaid.
- Good Faith Estimate (GFE)
- A document that provides an estimate of the closing costs a borrower will incur when purchasing a home.
H
- HUD-1 Settlement Statement
- A document used in real estate transactions prior to October 2015, detailing all fees and charges paid by the buyer and seller.
- Home Equity Line of Credit (HELOC)
- A revolving line of credit secured by the equity in a home, allowing homeowners to borrow funds as needed.
I
- Interest Rate
- The percentage of a loan amount charged by a lender for borrowing money.
- Investment Property
- Real estate purchased with the intention of earning a return through rental income, future resale, or both.
J
- Jumbo Loan
- A mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA), typically used for high-value properties.
L
- Lien
- A legal claim against a property, securing the payment of a debt or obligation.
- Loan-to-Value Ratio (LTV)
- A measure of the loan amount compared to the appraised value or purchase price of a property, expressed as a percentage.
M
- Mortgage
- A loan used to purchase or refinance real estate, where the property serves as collateral for the loan.
- Mortgage Insurance Premium (MIP)
- A fee paid by borrowers with FHA loans to insure the lender against default.
N
- Negative Amortization
- A situation where the monthly mortgage payments are not enough to cover the interest, causing the loan balance to increase.
- Net Worth
- The total value of an individual’s or entity’s assets minus their liabilities.
O
- Origination Fee
- A fee charged by a lender for processing a mortgage loan application, typically a percentage of the loan amount.
- Owner Financing
- A situation where the seller of a property provides financing to the buyer, bypassing traditional lenders.
P
- Points
- Fees paid to the lender at closing to reduce the interest rate on a mortgage, with one point equal to 1% of the loan amount.
- Pre-Approval
- A process where a lender evaluates a borrower’s financial information to determine the maximum loan amount they can qualify for.
- Principal
- The amount of money borrowed for a mortgage, excluding interest.
Q
- Qualifying Ratio
- A ratio used by lenders to determine a borrower’s ability to repay a loan, typically including the housing expense ratio and debt-to-income ratio.
R
- Refinance
- The process of obtaining a new mortgage to replace an existing one, usually to secure a lower interest rate or better terms.
- Reverse Mortgage
- A loan available to homeowners aged 62 and older, allowing them to convert home equity into cash without selling the property.
S
- Second Mortgage
- A loan secured by a property in addition to the primary mortgage, often used for home improvements or other expenses.
- Short Sale
- A sale of real estate where the proceeds are less than the outstanding mortgage balance, with the lender agreeing to accept a reduced payoff.
T
- Title
- A legal document proving ownership of a property.
- Title Insurance
- Insurance that protects against losses due to defects in the title or disputes over property ownership.
U
- Underwriting
- The process where a lender evaluates a borrower’s risk and decides whether to approve a mortgage loan.
V
- VA Loan
- A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans and active-duty service members.
W
- Warranty Deed
- A deed that guarantees a property is free from any claims or liens and that the seller has the right to sell it.
- Wraparound Mortgage
- A type of seller financing where the new mortgage wraps around the existing mortgage, combining both into one loan.
Y
- Yield Spread Premium (YSP)
- A payment made by a lender to a mortgage broker for originating a loan with an interest rate higher than the lender’s par rate.
Z
- Zoning
- Regulations governing the use of land and buildings, controlling property development and land use within specific areas.