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Adjustable-rate mortgage

A mortgage with an interest rate that changes periodically. Also known as a variable rate mortgage. Typically an adjustable-rate mortgage will remain fixed for a number of years before adjustments begin.

Adjustments are determined by the performance of certain financial indexes, and the rate may fluctuate up or down. Once the adjustment periods begin, the interest rate will typically be adjusted every year.


The way mortgages function. A gradual paying off of a debt by periodic installments which pay principal and interest.


An opinion or estimate of the value of a property at a given date. Performed by licensed real estate appraisal professionals. An appraisal is a necessary part of the mortgage process.

Appraisal fees

Fees associated with the required appraisal which may or may not be covered by the mortgage, depending on the type of loan.


The individual or individuals applying for a loan secured by real estate. Responsible for paying the loan.


Arranges financing for a borrower by placing loans with lenders.

Buyer’s agent

Buyer's agents are licensed professionals that are responsible for searching, evaluating and negotiating the purchase of property on behalf of a buyer. They do not sell real estate, but do help real estate deals come to fruition.

Closing costs

Costs associated with the closing of a mortgage, or the moment the mortgage is executed. Includes attorney fees, broker fees, title fees and others. May or may not be included in the loan amount, depending on the type of mortgage.


A statement indicating that a sale or other contract is conditional on some other occurrence or action. For example, a sale contract being effected only if the buyer is approved for a mortgage. If the demands of the contingency are not met, the contract is invalid.

Conforming Loan

Loans that conform to the guidelines and borrowing limits set out by GSE, or Fannie Mae and Freddie Mac. This limit in most areas is $417,000. Guidelines also include parameters for credit score, loan-to-value ratio, debt-to-income ratio, and others. Available in fixed and adjustable rate.

Conventional Mortgage

A loan that conforms to the guidelines set forth by Fannie Mae and Freddie Mac. Conventional Mortgage borrowers must meet or exceed these guidelines, and thus these loans are best for those with better credit who can afford a down payment of 5% or more.

Down payment

The initial payment by the borrower on the loan, due at the closing of the loan.

Fixed Rate Mortgage

A mortgage with an interest rate that is constant for the life of the loan. Typically a fixed rate loan period is 10, 15, or 30 years, with interest rates increasing with longer loan periods.

Loan Estimate

An estimation by a lender of the fees due at closing, due within three days of a mortgage application.

Homeowners insurance

Insurance taken out by the homeowner that protects the home from various hazards. Also protects the lender’s interest in the home. Homeowners insurance is required as a condition of a mortgage.

Jumbo mortgage

A loan exceeding the loan limit set forth by Fannie Mae and Freddie Mac. Jumbo loan interest rates and down payments are typically higher than those on conforming loans.

Loan Officer

A mortgage loan originator who’s primary service is to recommend applicants for approval for a mortgage. A loan officer intermediary between a borrower and a lender.


A fixed percentage rate added to the fluctuating index rate on an adjustable rate mortgage. This fixed margin does not change even while the adjustable interest does.

Market Value

The estimated value of a property on a given date. Typically calculated by an appraisal.

Net income

The overall positive income of a person, after debts and other obligations are accounted for. Similar to a company’s profit.

Non-conforming loan

Loans that do not conform to the borrowing guidelines set forth by Fannie Mae and Freddie Mac. Made available to borrowers who otherwise do not qualify for a conventional loan.

Origination fee

A fee issued by a lender to a borrower as part of closing costs to cover the cost of processing a loan.


Points are purchased to lower, or “buy down” the interest rate of a loan in exchange for an amount due at closing, usually a percentage of the principle of the loan. Useful to make monthly payments more affordable.


An examination of a borrower’s credit worthiness based on credit score, employment stability, debt-to-income ratio and others. Used to determine the size and interest rate of the loans made available for a borrower.


The non-interest portion of a loan that must be paid back, as opposed to the interest on a loan.

Processing fees

See origination fee

Property valuation

See appraisal

Sellers agent

An agent who represents the interests of a seller of a piece of real estate.

Short sale

A short sale occurs when the sale of a property does not cover all of the liens or debts associated with the property. In this case, the seller would still be responsible for the outstanding balance on these debts.


Underwriting is the process of determining whether the risk of issuing a loan to a given borrower is acceptable to a lender or if the risk of default is too high.

VA Loans

Loans made available to qualified members of the armed services. VA Loans typically have more favorable interest rates and conditions.