ANNUAL PERCENTAGE RATE - This is not the Note rate for which the borrower applied. The Annual Percentage Rate (APR) is the cost of the loan in percentage terms taking into account various loan charges of which interest is only one such charge. Other charges which are used in calculation of the Annual Percentage Rate are Private Mortgage Insurance or FHA Mortgage Insurance Premium (when applicable) and Prepaid Finance Charges (loan discount, origination fees, prepaid interest, and other credit costs). The APR is calculated by spreading these charges over the life of the loan which results in a rate higher than the interest rate shown on your Mortgage/Deed of Trust Note. If interest was the only Finance Charge, then the interest rate and then Annual Percentage Rate would be the same.

ADJUSTABLE RATE MORTGAGE - An ARM is a mortgage in which the interest rate is adjusted periodically based on a preselected index. Also sometimes known as the re-negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

Balloon loans are short term mortgages that have some features of a fixed rate mortgage. The loans provide a level payment feature during the term of the loan, but as opposed to the 30 year fixed rate mortgage, balloon loans do not fully amortize over the original term. Balloon loans can have many types of maturities, but most balloons that are first mortgages have a term of 5 to 7 years. At the end of the loan term there is still a remaining principal loan balance and the mortgage company generally requires that the loan be paid in full, which can be accomplished by refinancing. Many companies have other options such as a conversion feature at the end of the term. For example, the loan may convert to a 30 year fixed loan at the thirty year market rate plus 3/8 of a percentage point. Your conversion can be guaranteed based on certain criteria such as having made your last 24 payments on time. The balloon mortgage program with the conversion option is often called a 7/23 Convertible or 5/2     5 Convertible.

Combined Loan to Value - The ratio of loan to value. The LTV and CLTV will be the same when there is one lien on a property. The CLTV ratio will change when there is both a first and a second mortgage on the subject property.

A loan that does not have government insurance or a government guarantee to back it should it default. However, loans with LTV ratios greater than 80% may have private mortgage insurance. Normally conventional loans require higher down payments (minimum 10%) and allow for higher loan limits than FHA or VA loans.

The US government insures loans (but the VA guarantees loans) against default, therefore requiring a small down payment (usually 5% minimum).

A loan that allows for fixed or level payments over the life of the loan, which is normally 15 to 30 years. Each payment contributes toward reducing principal until the loan is fully amortized. Payments can be monthly or bi-weekly.

Loan-to-Value - The percentage of the appraised value (or the sales price, whichever is less) to the loan amount of the property. Determines if an impound account is required, the term of mortgage insurance, the down payment and qualifying debt ratios.

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. The margin is one of the most important aspects of ARMs because it is added to the index to determine the interest rate that you pay. The margin added to the index is known as the fully indexed rate. As an example if the current index value is 5.50% and your loan has a margin of 2.5%, your fully indexed rate is 8.00%. Margins on loans range from 1.75% to 3.5% depending on the index and the amount financed in relation to the property value.

The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often bought by the purchaser and/or seller. Policies are also available to protect the lender's interest.

A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements. The U.S. government guarantees these loans against default; therefore, they do not require a down payment.