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The Lingo

  • Adjustable-Rate Mortgage (ARM)
• Amortization
• Appraisal
• Closing
• Homeowner's Insurance
• Housing Expense Ratio
• Impound Account
  • Interest
• Loan-To-Value

• Lock-In Rate
• Mortgage
• Mortgage Insurance
• Percentage Rate (APR)
• Veteran's Administration (VA)

Adjustable-Rate Mortgage (ARM)
A mortgage loan that permits the lender to adjust its interest rate periodically on the basis of the movement in a specified index.

Gradual debt reduction. Normally, the reduction is made according to a pre-determined schedule for installment payments.

A formal, written estimation of the current market value of a home. The professional appraiser's job is to compute a fair estimate of market value based on the home's condition and the selling prices of comparable homes recently sold in the area. This helps the lender decide upon a reasonable loan amount.

The conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.

Homeowner's Insurance
A multiple peril insurance policy commonly called a "package policy". It is available to owners of private dwellings and covers the dwelling and contents in the case of fire or wind damage, theft, liability for property damage and personal liability.

Housing Expense Ratio
A homeowner's monthly housing expense as a percentage of his or her monthly income. Lenders use this ratio to qualify borrowers for mortgage loans.

Impound Account
That portion of a monthly mortgage loan payment held by the lender/servicer to pay for taxes, hazard insurance, mortgage insurance, or other items as they become due.

Money paid for the use of money - that is, money paid for the loan.

The relationship between the amount of a home loan and the total value of the property. For example, if you receive a loan of $95,000 on a home that costs $100,000, the loan-to-value ratio is 95 percent.

Lock-In Rate
A commitment from a lender to make a loan at a pre-set interest rate at some future date, usually between 15 to 90 days. A fee may be charged to "lock in" a rate.

A formal document executed by an owner of property pledging that said property is security for payment of a loan. This document creates a lien on the property. In California, this document is formally known as a Deed of Trust, although it is often referred to as a mortgage.

Mortgage Insurance
Mortgage insurance makes it possible to buy a home with as little as 5 percent down. The policy allows mortgage lenders to recover part of their financial losses if a borrower fails to fully repay a mortgage loan.

Percentage Rate (APR)
The cost of obtaining credit, expressed as a yearly rate, taking into account the interest rate, points, and certain loan fees.

The elements - principal, interest, taxes, and insurance - that are the components of most mortgage payments.

Veteran's Administration (VA)
An independent agency of the federal government, created in 1930. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.