Defining Basic Mortgage TerminologyAdjustable Rate Mortgage (ARM) a mortgage whose interest rate changes over time based on index.
Annual Percentage Rate (APR) the total yearly cost of a mortgage expressed as a percentage. It includes interest and other finance charges such as points, origination fees and mortgage insurance.
Debt-to-Income Ratio the ratio to qualify you for a mortgage. Compares your total monthly housing expense and other debt (the amount you pay out) with your total monthly gross income (the amount you earn).
Deed the legal document conveying title to a property.
Down Payment the difference between the sales price of the home and the mortgage amount. Buyer pays with cash and does not finance with a mortgage.
Earnest Money a deposit given to the seller to show that a prospective buyer is serious about purchasing the house.
FHA Loan a mortgage that is insured by the Federal Housing Administration (FHA).
Fixed-Rate Mortgage a mortgage in which the interest rate does not change during the entire term of the loan.
Homeowners Insurance Insurance that protects your home and possessions from theft and damage.
Interest a fee you pay for borrowing money.
PITI "Principal-Interest-Taxes-Insurance", the four elements of your monthly mortgage payment.
Prequalification the process of pre-determining how much money a prospective buyer might be eligible to borrow. Prequalifying for a loan does not guarantee approval.
Principal your loan amount, not including interest; the amount borrowed or remaining unpaid. Also, the part of the monthly payment that reduces the outstanding balance of a mortgage.
Purchase/Sales Agreement a contract between the buyer and seller that defines the terms and conditions of the home purchase.
Title written evidence that proves you are the owner of your property.
Underwriting the analysis of your overall credit and property value and the determination of a mortgage rate and term.
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