Home Buyer’s Glossary
Adjustable-Rate Mortgage (ARM)
A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index.
Amortization Schedule
A timetable schedule showing the amount of each payment applied to interest and principal and the remaining balance after each payment is made.
Annual Percentage Rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage, and loan origination fee (points).
Appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.
Biweekly Payment Mortgage
A mortgage requiring payments every two weeks instead of the standard monthly payment.The result for the borrower is a substantial savings in interest.
Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
Certificate of Title
A statement provided by an abstract company title or attorney stating that the title to real estate is legally held by the current owner.
Closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs.
Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan.
Commission
The fee charged by a broker or agent for providing services related to a real estate transaction such as procuring the property, bringing the parties together, and negotiating a purchase contract or loan.
Deed
The legal document conveying title to a property.
Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Equity
A homeowner's financial interest in a property.
Exclusive Listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property himself without the payment of a commission.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property.
Lien
The legal claim against a property that must be satisfied before the property may be sold.
Lock-In
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time.
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Insurance
A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage.
Net Worth
The value of all of a person's assets, including cash, minus all liabilities.
Prime Rate
The interest that banks charge to their preferred customers.
Principal
The amount borrowed or remaining unpaid.
Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
REALTOR®
A registered collective membership mark which identifies real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics.
Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachment, and other physical features.
Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
Truth in Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate and other charges.
Underwriting
The process of evaluating a loan application to determine the risk involved for the lender.