80-10-10: A home loan split into a first and second lien requiring a 10% down payment. With a first mortgage at 80% and a second mortgage at 10%, homebuyers may avoid paying private mortgage insurance (PMI) or higher Jumbo interest rates. A common variation of this loan is the 80-15-5 program, which lowers the down payment to 5%.

Adjustable Rate Mortgage: Adjustable rate mortgages, or ARMs, usually start with a lower fixed rate, and then adjust according to a specified index after an initial period. ARM terms can be 3/1, 5/1, 7/1, 10/1 and a handful of other options. The first number indicates how many years the interest rate is fixed, and the second number indicates how often the rate adjusts after that initial period is over. For example, in a 7/1 ARM, your interest rate stays the same the first seven years, and then adjusts every year following up to a capped rate previously agreed upon.

Annual Fee:  A yearly cost charged in connection with maintaining a home equity line of credit.

Annual Percentage Rate (APR): Developed to provide you with a clearer description of how much your loan cots, the APR is the true cost of your credit stated at an annual, or yearly rate. The APR also takes into account any costs associated with your loan other than the interest rate. These may include origination fees, loan discount points, and private mortgage insurance premiums.

Appraised Value:  The estimate of a home's value made by a licensed professional appraiser.

Balloon Payment:  A lump sum payment due at the end of a balloon mortgage.

Cap:  The maximum rate to which a variable rate mortgage can increase during the life of the loan.

Closing:  The process in which a borrower signs required documents to obtain a mortgage loan.

Closing Costs:  Fees paid at a closing when obtaining a mortgage loan. Costs charged vary by company and depend upon state and county laws.

Conventional Loan: A non-government loan provided by banks, savings and loans, mortgage bankers and mortgage brokers.

Credit Approval: After we review your credit history and the additional information you provide, we may be able to provide you with a conditional approval. This conditional approval is subject to a satisfactory title review and appraisal of the property that will secure your loan with no substantial changes prior to closing to the information you provide. Generally, this will help you shop for a home in your price range, and show sellers you are likely to have the funds necessary to purchase their home.

Credit limit:  The maximum amount that can be borrowed on a home equity line of credit or credit card.

Debt to Income Ratio:  The relationship between your monthly income and your monthly debt payments; this is used as an indicator to determine your financial capability to handle additional debt.

Equity:  The difference between the appraised value in your home and the amount of your mortgage balances.

Equity Loan:  An installment loan or revolving line of credit that allows you to borrow money against the portion of your home that you already own (your equity). Generally the interest paid on equity loans is tax deductible.

Fixed Rate:  An interest rate that does not change from the time you obtain a loan until it is paid in full.

Good Faith Estimate:  A document provided at application and closing of installment equity loan that provides estimates of all closing costs associated with obtaining and closing a mortgage loan.

Index:  The base rate for changes that a financial institution uses to determine how the APR or yield will change over a period of time. The prime rate is typically used for home equity lines of credit. Interest: The sum paid for borrowing money.

Interest-Only Loan: This type of mortgage works best for people with fluctuating income from commissions or bonuses, or for those who expect to earn more money over the next few years. Borrowers pay only the interest on these loans for a fixed period of time, usually five or seven years.

Interest Rate:  The rate or periodic charge paid to obtain a loan.

Loan to Value Ratio:  The relationship between the appraised value of the property and the total amount of mortgage balances.

Low-Doc/No-Doc Mortgages: This is a good option for borrowers who are self employed and/or have credit issues but a lot of cash. Lenders typically look for two of three requirements for these loans: assets, income and credit.

Margin:  The fixed amount added to the index to determine the APR to be charged. Example: Prime + 2%

Mortgage Insurance Premium (MIP): The amount the FHA charges up front when they insure a loan under of their programs.

Origination Fee:  A fee charged by the lender to cover the cost of processing and underwriting a mortgage loan.

Points: An upfront cash payment required by the lenders as part of the charge for a loan. It is a percent of the total loan amount.

Prepayment Penalty:  An amount charged by some lenders if a loan is paid in full prior to the maturity date.

Pre-Qualification: A lender�s written opinion of a borrower�s ability to qualify a specified loan amount.

Private Mortgage Insurance (PMI): Lenders require insurance that will protect them in the event that a buyer defaults on their loan. PMI is required on mortgage loans that exceed 80% of the sales price of the home.

Ratio: Ratios are used to determine a borrower�s ability to repay a loan. This ratio usually compares the borrower�s fixed monthly expenses to their gross monthly income, and certain lenders have different ratio requirements. For example, the FHA requires a monthly mortgage payment of no more than 29% of monthly gross income, and that the total mortgage payment and non-housing debt is less than 41% of income.

Title Search:  A search of property records to determine legal ownership of a property and to insure there are no intervening liens, overdue taxes, or outstanding restrictive covenants which would adversely affect the value of the title.

Title Insurance:  An insurance policy which the borrower and lender secure to guarantee against errors in the title search.

Truth in Lending Statement (TLS): A federal law that requires lenders to fully disclose in writing the fees, conditions and terms associated with the loan, including the APR and other charges.

Underwriting:  The process a lender goes through to decide whether or not to make a loan based on credit history, assets, ability to repay, etc.

Variable Rate:  An interest rate that may change periodically in relation to an index. Rates could increase or decrease according to market conditions.