Buying a new home requires a bit of education on the part of the consumer. This is especially true when it comes to industry specific terms and definitions. We developed the following glossary of terms as a resource defining many common terms and phrases you will encounter.

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Abstract of Title Abstract of Title
	Documents recording the ownership of property throughout time.
Acceptance Acceptance
	The written approval of the buyer's offer by the seller.
Additional Principal Payment Additional Principal Payment
	Money paid to the lender in addition to the established payment amount. It is applied directly against the loan principal to shorten the length of the loan.
Adjustable-Rate Mortgage (ARM) Adjustable-Rate Mortgage (ARM)
	A mortgage loan that does not have a fixed interest rate. During the life of the loan, the interest rate will change based on the index rate. Also referred to as adjustable mortgage loans (AML) or variable-rate mortgages (VRM).
Amortization Amortization
	A payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest-only. The monthly amount is based on the schedule for the entire term or length of the loan.
Annual Mortgagor Statement Annual Mortgagor Statement
	Yearly statement to borrowers detailing the remaining principal and amounts paid for taxes and interest.
Annual Percentage Rate (APR) Annual Percentage Rate (APR)
	A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.
Application Application
	The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
Application Fee Application Fee
	A fee charged by lenders to process a loan application.
Appraisal Appraisal
	A document from a professional that gives an estimate of a property's fair market value based on the sales of comparable homes in the area and the features of a property; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
Appraisal Fee Appraisal Fee
	Fee charged by an appraiser to estimate the market value of a property.
Appraised Value Appraised Value
	An estimation of the current market value of a property.
Appraiser Appraiser
	A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appreciation Appreciation
	An increase in property value.
Assessed Value Assessed Value
	The value that a public official has placed on your home. It is used to determine taxes.
Balloon Loan or Mortgage Balloon Loan or Mortgage
	A mortgage that typically offers low rates for an initial period of time (usually 5, 7 or 10) years. After that time period elapses, the balance is due or is refinanced by the borrower.
Bridge Loan Bridge Loan
	A short-term loan paid back relatively fast. Normally it is used until a long-term loan can be processed.
Buy Down Buy Down
	The seller pays an amount to the lender, and in return, the lender provides a lower rate and lower payments (many times for an ARM). The seller may increase the sales price to cover the cost of the buy down.
Cap Cap
	A limit, such as one placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease, either at each adjustment period or during the life of the mortgage. Payment caps do not limit the amount of interest the lender is earning.
Capital Improvements Capital Improvements
	Property improvements that either will enhance the property value or will increase the useful life of the property.
Casualty Protection Casualty Protection
	Property insurance that covers any damage to the home and personal property either inside or outside the home.
Certificate of Occupancy Certificate of Occupancy
	A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied and stating the legally permissible use of the building.
Closing (settlement) Closing (settlement)
	The final step in property purchase where the title is transferred from the seller to the buyer. Closing occurs at a meeting among the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property.
Closing Costs Closing Costs
	Fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes. A common estimate of a buyer's closing costs is 2 to 4 percent of the purchase price of the home. A common estimate for seller's closing costs is 3 to 9 percent.
Co-Borrower Co-Borrower
	An additional person that is responsible for loan repayment and is listed on the title.
Co-Signer Co-Signer
	A person that signs a credit application with another person, agreeing to be equally responsible for the repayment of the loan.
Collateral Collateral
	Security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral and can be taken away from the borrower if mortgage payments are not made.
Construction Loan Construction Loan
	A short-term loan to finance the cost of building a new home. The lender pays the builder based on milestones accomplished during the building process. For example, once a sub-contractor pours the foundation and it is approved by inspectors, the lender will pay for their service.
Conventional Loan Conventional Loan
	A private sector loan that is not guaranteed or insured by the U.S. government.
Convertible ARM Convertible ARM
	An adjustable-rate mortgage that provides the borrower the ability to convert to a fixed-rate within a specified time.
Covenants Covenants
	Legally enforceable terms that govern the use of property. These terms are transferred with the property deed.
Credit Report Credit Report
	A report generated by a credit bureau that contains the borrower's credit history for the past seven years. Lenders use this information to determine if a loan will be granted.
Deed (title) Deed (title)
	A document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description and the owner's signature. Also known as the title.
Default Default
	The inability to make timely monthly mortgage payments or otherwise comply with mortgage terms. A loan is considered in default when payment has not been paid after 60 to 90 days. Once in default the lender can exercise legal rights defined in the contract to begin foreclosure proceedings.
Delinquency Delinquency
	Failure of a borrower to make timely mortgage payments under a loan agreement. Generally after fifteen days a late fee may be assessed.
Deposit (Earnest Money) Deposit (Earnest Money)
	Money put down by a potential buyer to show that they are serious about purchasing the home. It becomes part of the down payment if the offer is accepted; it is returned if the offer is rejected or is forfeited if the buyer pulls out of the deal. During the contingency period, the money may be returned to the buyer if the contingencies are not met to the buyer's satisfaction.
Depreciation Depreciation
	A decrease in the value or price of a property due to changes in market conditions, wear and tear on the property, or other factors.
Discount Point Discount Point
	Normally paid at closing and generally calculated to be equivalent to 1 percent of the total loan amount. Discount points are paid to reduce the interest rate on a loan. In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give you a lower rate and lower payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index rate.
Down Payment Down Payment
	The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. This amount varies based on the loan type. It is determined by taking the difference of the sale price and the actual mortgage loan amount. Mortgage insurance is required when a down payment less than 20 percent is made.