Adjustable-rate mortgage (ARM): A mortgage with an interest rate that can change periodically based on market conditions.
Amortization schedule: A table showing the breakdown of each mortgage payment between principal and interest over time.
Amortization: The process of gradually paying off the mortgage through regular payments over a specified period.
APR (Annual Percentage Rate): The total annual cost of the mortgage, including interest and fees, expressed as a percentage.
Assumption: Allowing a new borrower to take over an existing mortgage.
Balloon mortgage: A short-term mortgage with lower monthly payments but a lump sum due at the end of the term.
Borrower: The person or entity that receives the mortgage loan and is responsible for repayment.
Closing costs: Fees and expenses incurred during the property purchase or refinancing process.
Closing disclosure: A document outlining the final loan terms and closing costs before the mortgage is finalized.
Debt-to-Income Ratio (DTI): The percentage of a borrower's monthly income that goes toward paying debts, including the mortgage.
Deed in lieu of foreclosure: Transferring ownership to the lender to avoid foreclosure.
Deed of trust: A legal document similar to a mortgage, used in some states.
Deed: A legal document transferring ownership of the property from the seller to the buyer.
Default: Failing to make mortgage payments as agreed.
Down payment: The upfront payment made by the borrower towards the purchase price of the property.
Equity: The portion of the property's value owned by the homeowner, calculated as the property's value minus outstanding mortgage balance.
Escrow: An account where funds are held by a third party until all conditions of the property purchase are met.
Fannie Mae (Federal National Mortgage Association): A government-sponsored enterprise that buys and guarantees mortgages.
Fixed-rate mortgage: A mortgage with a constant interest rate throughout the loan term.
Foreclosure: The legal process in which a lender takes possession of a property due to the borrower's failure to repay the mortgage.
Freddie Mac (Federal Home Loan Mortgage Corporation): A government-sponsored enterprise that purchases mortgages and issues mortgage-backed securities.
Grace period: A period after the due date during which late payments may be made without penalty.
Home appraisal: An assessment of the property's value by a professional appraiser.
Home equity line of credit (HELOC): A revolving line of credit using a property's equity as collateral.
HUD (Department of Housing and Urban Development): A U.S. government agency responsible for housing programs and policies.
Interest: The cost charged by the lender for borrowing money, expressed as a percentage of the principal.
Jumbo loan: A mortgage exceeding the loan limits set by government-sponsored enterprises.
Lender: The financial institution or individual that provides the mortgage loan.
Loan modification: Changing the terms of a mortgage to make it more affordable for the borrower.
Loan-to-Value Ratio (LTV): The percentage of the property's value that the mortgage represents.
Mortgage broker: An intermediary who connects borrowers with lenders and assists in the mortgage application process.
Mortgage insurance: Insurance protecting the lender in case the borrower defaults.
Mortgage: A loan used to finance the purchase of a property, with the property serving as collateral.
Origination fee: A fee charged by the lender for processing a new mortgage.
PITI: An acronym for the components of a mortgage payment: Principal, Interest, Taxes, and Insurance.
PMI (Private Mortgage Insurance): Insurance required by lenders for borrowers with a down payment below a certain threshold.
Points: Upfront fees paid to the lender to reduce the interest rate on the mortgage.
Pre-approval: A lender's commitment to provide a mortgage up to a specified amount, based on the borrower's financial situation.
Principal: The initial amount borrowed, excluding interest and fees.
Refinancing: The process of obtaining a new mortgage to replace an existing one, often to secure a better interest rate or term.
Reverse mortgage: A mortgage allowing homeowners over a certain age to convert home equity into cash.
Second mortgage: A subordinate loan taken out against a property with an existing mortgage.
Servicer: The company responsible for collecting mortgage payments and managing the loan.
Short sale: Selling a property for less than the outstanding mortgage balance.
Subprime mortgage: A mortgage offered to borrowers with less favorable credit histories.
Term: The length of time to fully repay the mortgage, usually in years.
Title insurance: Insurance protecting the buyer and lender against potential defects in the property title.
Title search: An investigation to ensure the property's title is clear and can be transferred.
Title: Legal ownership of the property.
Underwriting: The process of evaluating a borrower's creditworthiness and the property's value to approve the mortgage.