A type of loan for which the interest rate can change, usually in relation to an index interest rate. With an ARM, the interest rate and monthly payment may start out lower than a fixed-rate mortgage, but both the interest rate and monthly payment can increase substantially.

Paying off a loan with regular payments over time, so that the amount you owe decreases with each payment.

A factor in a mortgage loan application that typically refers to your total earned, pre-tax income over a year. Whether a lender will rely upon a specific income source or amount when considering you for a loan will often depend upon whether you can reasonably expect the income to continue.

A broader measure of the cost of borrowing money than the interest rate. The APR reflects the interest rate, any points, mortgage broker fees, and other charges that you pay to get the loan. For that reason, your APR is usually higher than your interest rate.

A written document that shows an opinion of how much a property is worth. The appraisal gives you useful information about the property, such as what makes it valuable and how it may compare to other properties in the neighborhood.

A type of refinance that replaces your old mortgage with a new one that has different terms. You will likely take out a loan larger than what you have left to pay on the home, so that you can receive the surplus in cash.

A required five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage.

Any mortgage loan that is not insured or guaranteed by a government agency, such as the Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture.

Someone who agrees to take full responsibility to pay back a mortgage loan with you. This person is obligated to pay any missed payments and even the full amount of the loan if you do not pay. Having a co-signer on your mortgage loan gives your lender additional assurance that the loan will be repaid, but your co-signer’s credit record and finances are at risk if you don’t repay the loan.

A record of your credit accounts and your history of paying on time as shown in your credit report. Consumer reporting companies collect and update information about your credit record and provide it to other businesses, which use it to make decisions about you.

The sum of your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.

The amount you pay toward the home upfront. You put a percentage of the home’s value down and borrow the rest through your mortgage loan. Generally, the larger the down payment you make, the lower the interest rate you will receive and the more likely you are to be approved for a loan.

A deposit a buyer pays to show good faith on a signed contract agreement to buy a home. The deposit is held by a seller or third party like a real estate agent or title company. If the home sale is finalized, the earnest money may be applied to closing costs or the down payment. If the contract is terminated for a permissible reason, the earnest money is returned to the buyer. If the buyer does not perform in good faith, the earnest money may be forfeited and paid out to the seller.

The amount your property is currently worth minus the amount of any existing mortgage on your property.

An account set up by your mortgage lender to pay certain property-related expenses, like property taxes and homeowner’s insurance. If your mortgage doesn’t have an escrow account, you pay the property-related expenses directly.

A loan from a private lender that is regulated and insured by the Federal Housing Administration. FHA loans allow for lower credit scores and down payments, compared to conventional loans. Maximum loan amounts vary by county.

A type of home loan for which the interest rate is set when you take out the loan. The interest rate will not change during the term of the loan.

When your servicer temporarily allows you to pay your mortgage at a lower rate or to stop paying your mortgage. Depending on the kind of loan you have, there may be different forbearance options. Remember that you will have to make up these missed or reduced payments when your forbearance period is over.

When the lender or servicer takes back property after the homeowner fails to make mortgage payments. Generally, borrowers must be notified if the lender or servicer begins foreclosure proceedings. Federal rules may apply to when the foreclosure may start.

A line of credit that allows you to borrow against your home equity. Unlike a home equity loan, HELOCs usually have adjustable interest rates. You can borrow money for a specified time from when you open your account, known as the “draw period”. During the draw period, you can borrow money, and you must make minimum payments. When the draw period ends, you will no longer be able to borrow money from your line of credit.

A loan that allows you to borrow money using the equity in your home as collateral. You receive the money from a home equity loan as a lump sum. A home equity loan usually has a fixed interest rate.

Insurance that pays for losses and damages to your property if something unexpected happens, like a fire or burglary. When you have a mortgage, your lender generally wants to make sure your property is protected by insurance.

The cost you will pay each year to borrow the money from a mortgage loan, expressed as a percentage rate. The interest rate does not reflect fees or any other charges you may have to pay for the loan.

The maximum interest rate increase that can occur annually for an adjustable rate mortgage, even if the rate would have increased more under market interest rates.

An agreement which allows a borrower to avoid foreclosure by postponing his or her overdue mortgage payments. The deferred amount comes due when the borrower refinances the loan or sells the home, or the mortgage ends in another way.

A three-page form that you receive after applying for a mortgage. The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs. The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward with the loan.

A change in your loan terms that can reduce your monthly payment to an amount you can afford. Modifications may involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing or reducing your principal balance.

A measure comparing the amount of your mortgage with the appraised value of the property. Mortgage lenders may use the LTV in deciding whether to lend to you and to determine if they will require private mortgage insurance.

An agreement between you and a lender that allows you to borrow money to purchase or refinance a home, and that gives the lender the right to take your property if you fail to repay the money you’ve borrowed.

Insurance that protects the lender if you fall behind on your payments. Mortgage insurance is typically required if your down payment is less than 20 percent of the property value. Mortgage insurance also is typically required on FHA and USDA loans.

The period of time over which you have to repay a loan. For most types of homes, mortgage terms are typically 15, 20, or 30 years.

What the lender charges the borrower for making the mortgage loan. The origination fee may include processing the application, underwriting and funding the loan, and other administrative services.

Insurance that provides protection to the homeowner if someone sues and says they have a claim against the home before the homeowner purchased it.

How much you will actually have to pay to satisfy the terms of your mortgage loan and completely pay off your debt. Your current balance might not reflect how much you actually have to pay to completely satisfy the loan, as the payoff includes the payment of any interest you owe and any other fees you may have incurred.

The amount of a mortgage loan that you have to pay back. Your monthly payment includes a portion of that principal. When a payment on the principal is made, the borrower owes less, and will pay less interest based upon a lower loan size.

A type of refinance that replaces your initial mortgage with a new one that comes with better terms. Your refinanced mortgage brings a new interest rate and a different required monthly payment, and probably a new term length. A rate/term refinance allows you to pay off your mortgage sooner and to pay less in interest.

The right of a consumer to cancel certain types of loans. If you are buying a home with a mortgage, you do not have a right to cancel the loan once the closing documents are signed. If you are refinancing a mortgage, you generally have until midnight of the third business day after the transaction to cancel the mortgage contract.

A sale of your home for less than what you owe on your mortgage. A short sale is an alternative to foreclosure, but because it is a sale, you will have to leave your home.

A loan that is part of one of the U.S. Department of Agriculture’s mortgage programs. The USDA offers mortgage programs with no down payment and generally favorable interest rates to rural homebuyers who meet income eligibility requirements.

A loan that is part of the Department of Veterans Affairs’ mortgage program. This loan program helps servicemembers, veterans, and eligible surviving spouses buy homes. The VA does not make the loans, but sets the rules for who may qualify and the mortgage terms.