When looking at getting a mortgage, there are some terms
that you should familiarize yourself with so you know what
your mortgage lender is talking about. Below is a list of
the most commonly-used "mortgage phrases" and their
meanings to help you understand them better:

Adjustable Rate Mortgage (ARM) - A mortgage in which the
interest rate is adjusted periodically based on an index.

Appraisal - The determination of property value based on
recent sales information of similar properties.

Asset - Valuable items, encumbered or not, owned by a
person, corporation, or entity.

Biweekly Mortgage - Mortgage loan payments that requires a
payment twice monthly, yielding thirteen payments per year
instead of twelve. This significantly reduces the time a
principal is paid off.

Closing - Final arrangements to transfer title of property
as well as allocate charges and credits.

Closing Costs - Closing costs are fees paid by the borrower
when a property is purchased or refinanced. Costs incurred
include a loan origination fee, discount points, appraisal
fee, title search, title insurance, survey, taxes, deed
recording fee, and credit report charges.

Credit Report - A report to a prospective lender on the
credit standing of a prospective borrower. Used to help
determine creditworthiness. Information regarding late
payments, defaults, or bankruptcies will appear here.

Debt-to-Income Ratio (DTI) - The ratio of aggregate monthly
debt to aggregate monthly income.

Down Payment - Money paid by a buyer from his own funds, as
opposed to that portion of the purchase price which is
financed.

Earnest Money Deposit - A deposit made by a potential home
buyer to show that they are serious about purchasing the
property.

Equity - The difference between the current market value of
a property and the principal balance of all outstanding
loans.

Fixed-Rate Mortgage - A mortgage where the interest rate
does not change for the life of the loan.

Good Faith Estimate - An estimate of charges which a
borrower is likely to incur in connection with a loan
closing.

Gross Monthly Income - The total amount the borrower earns
per month, not counting any taxes or expenses. Often used
in calculations to determine whether a borrower qualifies
for a particular loan.

Interest Rate - The percentage of an amount of money that's
paid for its use over a specified time period.

Lender - The bank, mortgage company, or mortgage broker
offering the loan.

Loan - The principal, or amount of total borrowed money,
that is repaid with interest.

Loan Officer - An intermediary between lending institutions
and borrowers, loan officers solicit loans, represent
creditors to borrowers, and represent borrowers to
creditors.

Loan-To-Value Ratio - The relationship between the amount
of the mortgage loan and the appraised value of the
property expressed as a percentage. A LTV ratio of 90 means
that a borrower is borrowing 90% of the value of the
property and paying 10% as a down payment. For purchases,
the value of the property is assumed to be the purchase
price, for refinances the value is determined by an
appraisal.

Mortgage - A legal document that pledges property to a
creditor for the repayment of the loan, and is the term
used to describe the loan itself.

Mortgage Broker - A mortgage company that originates loans,
joining the borrower and lender for a real estate loan,
earning a placement fee.

Origination Fee - The fee imposed by a lender to cover
certain processing expenses in connection with making a
loan. Usually a percentage of the amount loaned.

Pre-Approval - A term used to mean that a borrower has
completed a loan application and provided debt, income, and
savings information that has been reviewed and pre-approved
by an underwriter.

Principal - The amount of debt, not counting interest, left
on a loan.

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

Refinancing - The process of paying off one loan with the
proceeds from a new loan, using the same property as
security.

You'll probably hear several of these phrases from your
mortgage lender when getting a loan. Whenever you don't
understand something, be sure to ask him or her to explain
it in layman's terms to be sure you understand the whole
mortgage process.

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