Annual Percentage Rate (APR):
Often confused with the Actual Interest Rate, APR is the cost of a mortgage in a yearly rate. It can include items such as mortgage insurance, interest, points, etc.

Amortization:
The process by which the amount borrowed and the interest are spread out throughout the term of the mortgage.

Appraisal:
Estimating the value of a particular property - this process is required in order to proceed with the rest of the mortgage process.

Assets:
Articles of value including cash, art, real estate, investments, stocks, etc.

Collateral:
An asset with value that guarantees payment of a loan. The borrower will lose these assets if the loan is not repaid according to the terms agreed upon.

Conforming Loan:
Any loan that meets the criteria required by Fannie Mae or Freddie Mac with a limit on a loan at $240,000.

Convertible ARM:
An adjustable rate mortgage that can be converted into a fixed mortgage.

Equity:
The difference taken from the Fair Market Value of the property and what is owed on the mortgage. For example, if the fair market value of your house is $200,000 and you owe $100,000, you then will have $100,000 in equity.

Escrow:
An account that is part of your mortgage, holding tax and insurance portions of your mortgage payments. At closing, the bank will collect from you the amount needed for necessary reserves, which will be held in the escrow account until the bank needs to release the funds for taxes and insurance.

Foreclosure:
When a borrow defaults on their payments - the lender must take back the property and sell it off to regain legal fees, amount owed on the mortgage, etc.

Home Owners Insurance:
If you plan on taking out a mortgage you will be required to get Home Owners Insurance. You must get this insurance before you go to closing.

Lock in:
Securing a set interest rate before all of the necessary documents have been processed - ensuring the buyer the rate they started with will not increase before closing.

Mortgage:
A written instrument that creates a lien upon real estate as security for the payment of a specified debt.

Fixed Mortgage:
A mortgage where the annual percentage rate (apr) stays fixed throughout the entire period of the mortgage.

Mortgage Banker:
One who originates, sells, and services mortgage loans. Most loans are insured or guaranteed by a government agency or private mortgage insurer.

Mortgage Broker:
One who, for a fee, places loans with investors, but does not serve such loans.

Mortgage Insurance:
1. a policy that guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the mortgager;
2. protection for the lender in the event of default, usually covering the top 25% of the amount borrowed.

Points:
Fees paid to induce lenders to make a mortgage loan. Each point equals 1% of the loan principal. Points have the effect of reducing the amount of money advanced by the lender. Same as discount points.

Pre-Payment Penalty:
Not all mortgages carry this - however those that do will charge a fee if you pay your mortgage off before the last payment date.

Principal:
The amount of debt that is owed on the mortgage but does not include the interest.

Term:
The length of time that spans the life of the loan. For example, if your term is 5/25 then you have a mortgage with 5 years fixed and 25 years ARM which equals 30 years total life, the term then is 30 years.

Title:
If you purchased your property with cash or you've paid your mortgage in full - then you most likely have a title to your property. The document stating legal ownership of a certain property.

Truth-in-Lending Act:
A lender is required to disclose in writing all costs associated with the credit portion of a transaction.