Acceleration clause - It is a clause by which a lender can demand payment on outstanding loan balances. Most common reasons for a lender to do this are payment default or transfer of property title to another person.

Accrued interest - This is the interest expense that is built up but not yet paid. For example if you are making monthly interest payments at the end of the month and your home closes on the 20th of the month, you will owe accrued interest for the first 20 days.

Adjustable rate mortgage ( ARM ) - It is a type of mortgage where the interest rate can vary over the loan period duration.

Adjustment interval - This is the adjustment period during which interest rates change in an adjustable rate mortgage (ARM).

Affordability - An estimate of how much a buyer can pay to purchase a property. These ratios often 28 or 35% of a borrower’s income determine the amount a person can borrow and consequently the amount of house they can purchase.

Alt-A - This is a way for categorize the risk of mortgage. Alt A refers to a mortgage risk status that is between prime and sub-prime, but more closer to prime.

Amortization - The process of payment of loan (the principal portion) in regular schedules over a period of time, up to the point where it is completely paid off.

Amortization schedule - A table which lists the expected payment for the loan taken. It shows the amount due for interest and the amount used to pay off the principal. In traditional loans most of the payment at the outset is used to pay the interest expense.

Annual percentage rate (APR) - This term represents the percentage of interest to be borne by a borrower on a home mortgage. It is calculated based on the assumption that the loan will run to it full term and includes all points and costs.

Application (Form 1003) - Another term used to refer to the home loan application form

Appraisal - It refers to the process of evaluating a property value by which the value of property is determined done by a professional or expert in such services, who is referred to as the appraiser. There are three main approaches: comparables, income and cost, that are used to arrived at a value either singularly or in combination.

Appraiser - The professional in real estate who undertakes the job of carry out an appraisal. In a home mortgage process, the lender will send an appraiser to evaluate the property that a borrower is considering to purchase through a loan taken from them.

Appraisal fee - The fee paid to the appraiser for an appraisal. This is usually paid by the borrower.

Approval - This means that the lender has accepted the borrower’s loan application and considers the borrower to meet all their qualification requirements and underwriting requirements. It is a higher form of acceptance than qualification.

Assumable mortgage - In an assumable mortgage, the mortgage is transferred to a new buyer of the property without any change in the terms of the mortgage, which means the new buyer literally inherits the existing interest rates and monthly payment schedules. It cannot be done without full approval of the lender. The new buyer must meet lender qualification standards for this process to carry through.

Automated underwriting - Using computer software to perform the underwriting process as opposed to getting it done manually.

Back-end fee or commission - The fees or commission paid to a mortgage broker, by the lender. Usually not revealed to the borrower.

Balance - The principal amount still left to be paid on the home mortgage.

Balloon mortgage - A type of mortgage in which the borrower pays lower installments over the period of the loan. However, unlike a traditional mortgage at the end of the loan term the borrower still owes a large outstanding principal amount. Most balloon mortgages are re-financed or the asset sold.

Balloon - The large payment that has to be made at the end of the balloon mortgage loan period.

Bimonthly mortgage - In this mortgage type, the borrower pays one half of the monthly payment due on the first of the month and the other half on the fifteenth of the month. This accelerated payment results in significant savings over the course of a 30 year loan. Most institutions will accept these early payments without additional service charges.

Bridge loan - Loans taken to bridge the gap between the purchase of a new home and the sale of an old one. This is a short term loan and can be either secured or unsecured one.

Builder-financed construction - This term refers to new home constructions in which the builder has borrowed money to carry out the job of home-construction.

Buy-down - Payment of a lump sum to the lender at the time of taking of the home loan, to reduce interest rates and monthly loan payments. Often used as an incentive by sellers especially in new house developments.

Buy-up (Negative Points) - In a buy-up the borrower pays a higher interest rate on the home mortgage. This is done to reduce upfront cost to the borrower.

Cap - This is the limit on the increase and decrease on interest rate with respect to an ARM.

Cash-Out refinance - In this from of refinancing the borrower takes out cash for an amount that is more than the balance of the existing mortgage plus settlement costs. it is an alternative to a home equity loan. It is often done when a house has greatly appreciated in value since the last financing event.

Closing - The meeting in which property purchase is finalized between buyer and lender through signing of mortgage documents and paying closing costs. It is also known as settlement.

Closing costs - Costs associated with closing or settlement. Here, the buyer and seller will pay off the amount charged for transfer of ownership of a property and includes costs such as origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, real estate agent commissions. The HUD1 statement will itemize these at close. Your Good Faith Estimate should prepare you for these charges.

Co-Borrowers - Refers to a situation in which a property has two borrowers instead of one, wherein each of these borrowers are jointly and severally liable for loan repayments.

COFI (Cost of Funds Index) - This is an index which determines the interest rates applicable under different types of adjustable-rate mortgage (ARM) plans.

Conforming mortgage - A mortgage which meets all requirements for purchase as desired by any one of the government-sponsored agencies - Fannie Mae, Freddie Mac and Ginnie Mae. These requirements change from year to year.

Construction financing - A short-term loan taken for the purpose of home constructions as opposed to the concept of taking a loan for buying a built home.

Conventional mortgage - A traditional mortgage that is guaranteed by neither the FHA nor the VA.

Conversion option (From ARM to Fixed Rate) - An option available in an ARM by which the borrower may convert to a Fixed Rate mortgage. The advantage of this is that it may avoid refinancing costs and hassle.

Co-signing a note - This is where a person takes on the responsibility of someone else’s loan, in the event that the person taking the loan defaults on payments.

Credit report - A report detailing a person’s credit history. It is produced by a credit bureau.

Credit score - This is a three-digit number that is used by mortgage lenders to determine the credit-worthiness of a borrower. Also referred to as a FICO score

Cumulative interest - The total amount of interest paid by a borrower to date on a mortgage or over the loan period.