Glossary

Amortization:
This is the reduction of the size of your loan through regular (usually monthly) payments. These are payments that cover the principal and the interest, unlike"interest only" payments that delay amortization due to never fully paying off the mortgage.

Annual Percentage Rate (APR):
APR is a comparison the interest rates and closing fees offered by competing lenders. This rate gives you a more comprehensive perspective on value when shopping for the best deal on a loan.

Application:
An application is the form, either paper or electronic, used to apply for a loan. Application is also the first step in the process of obtaining a loan.

Asset:
Assets are any possessions of value, held by an applicant, which can be converted into cash. Possessions that can be quickly and easily converted to cash are called "liquid assets."

Brokerage Fees:
These are the fees charged by the real estate broker for processing the sale of a home. These are generally legal fees that are included in the closing costs of a mortgage.

Capital:
Capital is any money that is invested into property or a business. Money used as a down payment on a home is capital.

Closing costs:
These are fees that must be paid by the buyer or the seller on or before the mortgage closing date. These fees are typically 2-5% of the amount of the loan and are based on many factors that from lender to lender.

Debt:
Debt is money that you owe to a person or company. Debt comes in many forms including credit card debt, loan debt and alimony.

Deposit:
A deposit is money that a buyer gives to the seller of a home or property in order to indicate that the buyer is serious about the investment.

Down payment:
A down payment is that part of the price of a home or property that the buyer must pay with their own money. Lenders typically require a 20% down payment when a buyer is purchasing a home.

Escrow:
In brief, escrow is money paid by one party to another to hold until a specific date. This money can be for payment security, for future repairs, or for a number of other purposes.

Fair market value:
This is the price for a home or property in a fair and competitive market, where the property is available to any potential buyers on the open market. Property sold at auction due to foreclosure or bankruptcy is not sold at fair market value.

Fixed rate mortgage:
A fixed rate mortgage is a loan that retains the same interest rate and payment schedule for the entire life of the loan. Initial interest rate: This is the starting interest rate of an adjustable rate mortgage loan. The interest rate of an adjustable rate mortgage loan is subject to change as the market rates change.

Insurance fees:
Many mortgages include insurance to cover inability to pay due to illness or other serious situation. Often these insurance fees are included in the closing costs of a mortgage.

Liquid asset:
Liquid assets are any possessions held by buyers that can be quickly and easily converted to cash. Possessions that take time to sell are not considered liquid assets.

Mortgage:
A mortgage is a contract that offers the property that a buyer is purchasing as security for the repayment of the loan used to purchase that property. A mortgage gives the lender the right to seize the property and sell it in order to recover their money.

Mortgage Brokers:
Mortgage brokers are lenders that specialize in home mortgage loans.

Non-liquid asset:
These are items of value, held by buyers, which cannot be quickly and easily converted to cash. These are items that require time and effort to sell.

Origination fee:
This is a fee that is paid by the buyer, on the closing date, to both the lender and the real estate broker. This is a service charge that is usually about 2.5% of the value of the loan.

Preapproval:
Preapproval is when a lender offers a loan to a potential buyer before that buyer finds a home or property to purchase. This offers the buyer the benefit of knowing exactly what they can afford to offer when shopping for a home.

Prequalification:
This is the process where a lender determines how much a potential buyer is qualified to borrow. Often confused with preapproval, prequalification is not a guarantee from the lender that a potential buyer will actually secure the loan.

Title:
Title refers to the right to ownership of a property. Often in the form of a document, such as a deed, which proves the ownership of a home or other property.