100% financing – borrower finances 100% of the purchase price of a home.

Adjustable rates (ARMs) – a mortgage that has an interest rate that may change, up or down, according to a predetermined index.

Amortization – the process of gradually reducing a debt through installment payments of principal and interest.

Annual Percentage Rate (APR) – the interest rate reflected as a yearly rate that takes into account points and other fees.

Balloon Payment – the lump sum payment of the unpaid principal remaining at the end of the term of the loan.

Closing Costs – Fees incurred that are paid by the borrower and/or seller at the closing of the transaction. Such fees include but not limited to appraisal, attorney costs, title insurance, recording fees, lender fees…

Debt to Income Ratios – the ratio of monthly fixed debt to monthly income.

FICO score – a rating system that was created by Fair, Isaac, and Company, Inc that predicts a borrower’s ability to repay their debt.

Fixed Rate Mortgage – a mortgage that has a guaranteed fixed rate throughout the life of the loan. Terms are generally between 10 and 40 years.

Good Faith Estimate – a disclosure that estimates all of the settlement charges that are likely to be incurred at the closing. This is given to borrowers within 3 days of application.

Hazard Insurance – a home owner’s insurance policy that may protect against damage from fire, windstorm, and other common hazards.

Home Equity Line of Credit (HELOC) – a variable rate open-ended loan with specific limitations that allow a borrower to borrow against the equity in a property.

Home Equity Loan – a fixed or adjustable rate loan that is secured by the equity in a property.

Interest Only – a mortgage where the borrower is only required to pay the interest that comes due on the loan. The principal must be paid in full at the end of the loan term.

Lender credit – lender contribution towards settlement costs. In most cases the seller credit can be used to pay both closing costs and pre-paid items due at closing.

Listing Agreement – a contract between the seller and the real estate brokerage company your realtor works for.

No Documentation – borrower does not provide employment, income, or asset information for qualification purposes. Past credit history is the determining factor for approval.

Prepaids – Expenses such as taxes, insurance and assessments which are paid in advance of their due date and which must be paid by the buyer on a prorated basis at closing.

Pre-payment Penalty – a fee that is charged to a borrower who pays off a loan before it is due. This will be specified on your closing documents.

Private Mortgage Insurance (PMI) – insurance that protects the lender from a borrower defaulting on a mortgage.

Purchase and Sales Agreement – a written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Seller credit – seller contribution towards settlement costs. This is typically negotiated at the time the buyer is putting an offer on a property. In most cases the seller credit can be used to pay both closing costs and pre-paid items due at closing.

Settlement Statement – a complete breakdown of costs involved in a real estate transaction. This is the final document which will tell you the true cost of purchasing the home.

Stated Income – borrower only “states” income and does not provide supporting documentation. Past credit history and assets are the determining factor for approval.

Title Insurance – a policy that protects the lender and borrower against errors and omissions or defects in the title of the property.

Truth in Lending Disclosure – a disclosure that outlines all of the terms and conditions of a mortgage. The APR and other significant items are listed on this disclosure.