amortization
The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.

annual percentage rate (APR)
This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage, which includes the interest rate and other costs associated with the loan.

appraisal
A written evaluation of the market value of a property, primarily based on an analysis of comparable sales of similar homes nearby.

appreciation
The increase in the value of a property due to changes in market conditions, inflation, or other causes.

closing
This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

closing costs
Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

comparable sales
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

conventional mortgage
Refers to home loans other than government loans (VA and FHA).

deed
The legal document conveying title to a property.

deed of trust
Some states, like California, do not record mortgages. Instead, they record a deed of trust which is "essentially" the same thing.

deposit
A sum of money given in advance of a larger amount being expected in the future. Often called in real estate, an "earnest money deposit."

discount points
In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is one percent of the loan amount.

down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

fair market value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

home inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

homeowner's warranty
A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller pay for this coverage as a condition of the sale, but either party can pay.

lender
A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."

lien
A legal claim against a property that must be paid off prior to or when the property is sold. A mortgage or first trust deed is considered a lien.

loan
A sum of borrowed money (principal) that is generally repaid with interest.

loan-to-value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.

origination fee
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.

owner financing
A property purchase transaction in which the property seller provides all or part of the financing.

PITI
Principal, Interest, Taxes and Insurance – all paid as part of a monthly mortgage payment. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and may include mortgage insurance too.

point
A point is one percent of the amount of the loan amount.

pre-approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and makes assumptions about what the interest rate will actually be at the time the loan is made, and estimates the amount that will be paid for property taxes, insurance, etc.

prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due.

pre-qualification
This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

principal balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges.

purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Realtor^®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

recording
The noting in the registrar’s office of the details of a properly-executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

title
A legal document evidencing a person's right to or ownership of a property.

title company
A company that specializes in examining and insuring titles to real estate.

title insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

VA mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).