ADJUSTABLE RATE MORTGAGE: A loan that allows the lender to adjust the borrower's interest rate and payments at prescribed times and sometimes with prescribed limits.

AMORTIZED LOAN: A loan which is paid off in equal installments during its terms.

ASSUMABLE MORTGAGE: Purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.

CLOSING COSTS: Expenses incurred in the closing of a real estate or mortgage transaction. Purchaser's expenses normally include: cost of examinations, premiums for title policies, survey, attorney fee, lender's service fees, and recording charges. In addition, the purchaser may have to place in escrow a sum of money to cover accrued real estate taxes and insurance.

CONVENTIONAL MORTGAGE: A loan neither insured by the FHA nor guaranteed by the VA.

EQUITY: The difference between the market value of property and the homeowner's indebtedness (mortgage).

ESCROW PAYMENT: That portion of a mortgagor's monthly payment held in trust by the lender to pay for fire, hazard insurance, mortgage insurance, lease payments and other items as they become due.

FIXED RATE MORTGAGE: A loan that fixes the interest rate at a prescribed rate for the duration of the loan.

GRADUATED PAYMENT MORTGAGE: An FHA, VA or Conventional loan where the borrower pays a portion of the interest due each month during the first few years of the loan. The payment increases gradually during the first few years to the amount necessary to fully amortized the loan during its life.

LEASE PURCHASE AGREEMENT: Buyer make a deposit for the future purchase of a property with the right to lease the property in the interim.

LOAN TO VALUE RATIO: The ration of the mortgage loan principal (amount borrowed) to the property's apprised value (selling price). On a $100,000 home, with a mortgage loan principal of $80,000, the loan to value ration is 80%.

MORTGAGE/DEED OF TRUST: Pledge of real property to secure a debt by a written instrument given by the mortgagor. Should be recorded in the County Recorder's Office.

MORTGAGEE: The lender of money or the receiver of the mortgage document.

MORTGAGOR: The borrower of money or the giver of the mortgage document.

NOTE: A written promise to pay a certain amount of money.

ORIGINATION FEE: A fee charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.

POINT: One percent of loan amount.

PREPAYMENT PENALTY: A fee paid to the mortgagee for paying the mortgage before it becomes due. Also known as prepayment fee or reinvestment fee.

PRIVATE MORTGAGE INSURANCE (PMI): Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.

RENT WITH OPTION: A Contract which gives one the right to lease property at a certain sum with the option to purchase at a future date.

TITLE: Often used interchageablely with the word ownership. It indicates the accumulation of all rights in property; the owners and others.

TITLE INSURANCE: An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title.