Impound Account - An impound account, required and held by many lenders, is a trust account held in the borrowers name to pay obligations such as property taxes and insurance.
Index - A rate published by a third party such as the federal bank which acts as a base for calculating how much the annual percentage rate will change at the beginning of each adjustment period.
Inflation Rate - The inflation rate, stated as a percentage over a specific period, is the increase in the price of consumer goods.
Interest - Interest is the amount charged for borrowing money.
Interest Only Payments - These are mortgage repayments that only include interest. The balance does not decrease on the loan and the borrower is responsible for repaying the lender on maturity.
Interest Rate - This is a percentage of the loan that is charged to the borrower for its use.
Interest Rate Cap - A limit put on how much the interest can increase on an adjustable rate mortgage.
Interim Financing - This is known as a bridge or short-term loan used to provide temporary financing until more permanent financing has been sorted out. It maybe used between the purchase of a new home and selling an old home.
Jumbo Loan - A loan that exceeds the limit set by Fannie Mae and Freddie Mac, otherwise known as a non-conforming loan.
Late Charge - If a payment is made past the due date a penalty is charged to the borrower.
Leverage - This is using borrowed money to supplement an investment, otherwise known as gearing.
Liabilities - These are the opposite of assets and are from which an expense is expected on a periodic basis.
Lien - This is a legal right made by a creditor on a property to ensure payment of debt.
Lifetime Adjustment Cap - This is a limit set on the variable rate of interest during the term of a loan.
Line of Credit - Credit may be borrowed up to a maximum amount for a certain period of time as agreed by the lender.
Loan Agreement - A loan agreement is a contract setting out the terms and conditions of the loan between the lender and borrower.
Loan Application - This is a form which must be completed by the potential borrower prior to loan approval. Detailed Information on the borrower, such as employment or credit references, will be required by the lender.
Loan Term - This is the length of time over which the borrower must repay the loan.
Loan to Value - A Loan to Value (LTV) is a percentage of the total appraised property value the bank will lend. As an example a property worth 100,000 having been bought with a mortgage of 80,000 has a LTV of 80%.
Lock-In - A Lock-in is an agreement guaranteeing a specific interest rate for the borrower providing the loan is closed within in set period, usually 30 to more than 90 days. A lock-in also establishes the number of points to be paid at closing.
Loan Loss Reserves - This is an estimated amount of money a bank sets aside as a reserve against any potential loan losses.
Market Rate - This is the current rate of interest at any given time.
Market Value - Market value is the likely price a willing buyer will buy a property from a willing seller on the open market assuming either party are not desperate.
Maturity Date - The day when any outstanding principal, interest and fees are paid is otherwise known as a maturity date.
Minimum Payment - This is the minimum amount that must be paid each month on a loan or credit card.
Mortgage - A lien on real estate used as a security for a debt.
Mortgage Insurance - This is a policy that protects the mortgage lender if a borrower defaults. All loans that have down payments of less than 20% require private mortgage insurance or PMI.
Mortgage Points - A borrower can pay a lender for points, usually at the time of closing, to reduce the interest rate on a loan. A point is equal to 1% of the loan amount.
Negative Amortization - Occurs when payments made are less than the interest alone and as a result the loan balance starts to increase.
Negative Covenant - A bond covenant prevents any activities unless the bondholder agrees.
Net Worth - This is the value of total assets minus total liabilities.
Non-Conforming Loan - A non-conforming loan does not meet Fannie Mae or Freddie Mac guidelines, also known as a Jumbo loan.
Notarize - This is known as the act of certifying the validity of a signature on a legal document by a notary public.
Origination Date - The origination date is when the loan was made.
Origination Fee - Charges made by the lender for processing documents in connection with the loan application.
Payment Cap - A limit set on the amount a monthly payment may increase, often included in an adjustable rate mortgage.
Per Diem Interest - This is interest that accrues daily on a loan.
PITI - PITI is otherwise known as principal, interest, taxes and insurance.
Private Mortgage Insurance (PMI) - Private mortgage insurance is a form of protection for the lender if the borrower defaults on the loan.
Points - These are fees, also known as discount points, which are paid at closing to your mortgage lender to lower the interest rate on your mortgage loan. One point is equivalent to one percent of the loan amount.
Principal and Interest (PI) - A monthly payment that includes principal and interest amounts.
Prepayment Penalty - This is a fee charged to the borrower if a loan is paid off early.
Prequalification - This is the process by which a lender will offer an opinion of how much a prospective borrower may receive after an evaluation of any financial information (employment status, income, credit rating and any outstanding debts).
Processing Fee - A processing fee may be charged by the lender to cover any administration costs in processing the loan.
Promissory Note - This is written promise, between a borrower and a lender, to repay a specific amount on demand or at a certain time.
Property Tax - This is a tax levied by a city or county government against the estimated value of a property. Property tax may be paid annually, semi-annually or on a monthly basis and percentage rate may vary from county to county.