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Adjustable-Rate Mortgage (ARM)
A mortgage with a variable interest rate that changes during the term of the loan. The variable rate is linked to a published index.

Amortization
The process of reducing the outstanding principal on an open loan with each payment, usually monthly, so that it is fully repaid at the loan's maturity.

Annual Percentage Rate (APR)
A yearly interest rate that includes interest, points, and other loan fees. The APR is the appropriate number to use when comparing loan interest rates.

Appraisal
A report that estimates the market value of a property.

Cap
On adjustable-rate loans, the set limit to which the interest rate on your loan can increase during each adjustment period and/or throughout the duration of the loan.

Closing Costs
Costs linked with buying or selling real estate including the title, transfer, and loan fees.

Earnest Money
A deposit of cash given by the buyer to the seller at the time of the purchase offer.

Equity
The value of your home less the amount that you owe on your mortgage.

Escrow Account
An account established to pay for real estate taxes and homeowners' insurance.

FHA Loan
FHA loans are guaranteed by the federal government.

Fixed-Rate Mortgage
A mortgage loan with a specific interest rate that does not change during the life of the loan.

Index
A published interest rate used for adjustable-rate mortgages.

Jumbo Mortgage
A mortgage amount over $252,700 is considered a jumbo loan.

Lien
A claim against a property for outstanding debt.

Margin
The amount added to the index which determines the interest rate for adjustable-rate mortgages.

Mortgage
A document that gives a lender a lien on real estate property used as collateral for payment of a debt. Usually borrowers refer to both the note and the lien collectively as the mortgage.

Point(s)
One point is equal to one percent of the mortgage loan.

Prepayment
Paying off the loan amount before it is due.

Principal
The balance of the mortgage not including interest.

Private Mortgage Insurance (PMI)
Lenders usually require this insurance when a borrower makes a down payment of less than 20 percent.

Title
Legal document that shows proof f ownership