The basic, main terminologies /words used in the mortgage industry

The following terms are ones you should know and understand before you decide to buy a house and apply for a mortgage loan in the financing institutions:

ARM (Adjustable Rate Mortgage) expand/collapse
- A mortgage in which the interest rate is adjusted periodically, based on the movement of a specified financial index.
Amortization expand/collapse
- Repayment of a loan by installment payments. As the payments are made, the debt is reduced so that at the end of fixed period or term, no money will be owed.
Annual Percentage Rate (APR) expand/collapse
- The actual finance charge for a loan, including points and loan fees, in addition to the stated interest rate.
Application Fee expand/collapse
- A one time fee charged by the bank for processing your application for a loan. Sometimes called the "origination fee".
Appraisal expand/collapse
- A professional opinion made by a qualified person of the market value of a property as of a given date.
Assessed Value expand/collapse
- The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.
Certificate Of Title expand/collapse
- A statement that shows ownership of property, stating that the seller has clear legal title. Deed - A legal document by which title to property is transferred.
Default expand/collapse
- Failure to fulfill the terms as agreed to in the mortgage of not.
Down Payment expand/collapse
- The difference between the sale price of a property and the mortgage amount.
Foreclosure expand/collapse
- A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Interest expand/collapse
- The cost of borrowing money, usually expressed as a percentage over time.
Loan-To-Value expand/collapse
- The relationship between the amount of the mortgage and property value, usually shown as a percentage
Market Value expand/collapse
- The price at which a property will sell, assuming a knowledgeable buyer and seller, both operating without undue pressure.
Market Price expand/collapse
- The actual price at which a property sells.
Mortgage expand/collapse
- A contract in which a borrower's property is pledged as security for a loan which is to be repaid on an installment basis.
Mortgagee expand/collapse
- The lender in a mortgage contract.
Mortgagor expand/collapse
- The borrower in a mortgage contract.
Origination Fee expand/collapse
- A fee charged for the work involved in the evaluation preparation and submission of a proposed mortgage loan.
Prepayment Penalty expand/collapse
- A charge paid to the lend er by the borrower if a mortgage loan is repaid before its term is over.
Pre Approval expand/collapse
- A commitment by a lender to extend credit provided that specific conditions are met.
Pre-Qualification expand/collapse
- A preliminary assessment of a buyer's ability to secure a loan, based on a specific set of lending guidelines and buyer representations made. This is not a guarantee or commitment by a lender to extend credit.
Principal expand/collapse
- The amount borrowed sometimes called loan amount or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Underwriting expand/collapse
- The process of evaluating a loan application to determine the risk involved for the lender.