Home Loan Glossary

Adjustable Rate Mortgage (ARM):  This is a mortgage rate that is variable.  It changes every so often, depending on the current fluctuation of market conditions. 

Adjustment Period:  When the interest rate is fixed on an adjustable rate.  The fixed period is determined, and then after that time is will adjust again. 

Annual Percentage Rate (APR):  This is the interest rate that is of use for the year.  Closing costs are not taken into account, so it is usually a higher rate.   

Balloon Mortgage:  There is one large payment that is contracted to be paid on the principal amount.  Until that time, small payments are made with a short-term fixed-rate loan. 

Bankruptcy:  When someone is not able to pay their debts in any way and assets are surrendered.  They file for Chapter 7 or Chapter 13, where all their debts are wiped clean or payment plans are set up. 

Buyers Broker:  A broker is hired to represent the buyer when finding and purchasing property.  They are there to aid in negotiations for the best price for the property. 

Certificate of Title:  A written statement by an attorney or title company that states the property is legally held by the owner. 

Closing Costs:  Expenses for the buyer and seller that are associated and paid with the closing of a house.  They include insurance, taxes, interest, and fees.

Credit Report:  This is a report that details the history of someone’s credit.  It includes all accounts that are revolving and installment accounts.  Other information found in public records of the individual is also included. 

Down payment:  This is the amount that is paid for a property that is due at time of purchase and is in addition to the mortgage.  No closing costs are included in the down payment. 

Earnest Money:  This is considered “good faith” money, for it is a deposit made to hold the property for a buyer to purchase.  This money is put into an escrow account and held by the broker or the escrow company. 

Homeowners Association:  Many subdivisions or planned communities group together into an association of homeowners.  Money is usually paid each month or year for the management of the developed area and to help implement rules and regulations for the community. 

Loan Application:  An application to be filled out by the buyer to the lender prior to being approved for the loan.  There is information on the application that details history of the buyer and possibly the property. 

Market Value:  The price for a property that is the highest a buyer would go and the lowest a seller would agree to.  The price of the property can be different from the market value when it is sold. 

Prime Rate:  This is the rate given to “good” credit borrowers.  For short term loans, it is the lowest commercial rate of interest that is charged by a bank.

Principal:   This is the balance due on a loan, without interest included. 

Property Tax:  This is taxed owed on a property and is determined by the county assessor’s office based on the market value of the property. 

Realtor:  A person who is a member of the National Association of Realtors and has their profession in real estate. 

Real Estate Broker:  A person who is the owner or manager of a real estate company.  They are licensed to aid in the transaction for the buyer or seller on a real estate property.