Adjustable-Rate Mortgage- ARM- The interest rate changes periodically. The rate increase has a cap in most cases.
Balloon loan- due at a predetermined date and pays off the remaining principal.
Closing costs- When transfer of ownership occurs between a buyer and seller expenses are incurred. These costs include prepaid items, lender fees, recording fees, title charges and escrow.
Escrow- money that is added to an account each time a mortgage payment is made and is then used to pay insurance and property taxes.
Mortgage- property is used as collateral to guarantee payment of a debt. This is a legal agreement.
Mortgage Refinancing-Paying off a mortgage with the money from a new mortgage which is secured by the same property. This is usually done to secure a lower interest rate.
Origination fee- what a lender charges to process a loan.
PITI- Principal, interest, taxes and insurance.
Principal- amount of money that is owed, does not include interest.
Rate lock- When a lender guarantees, for a specified time frame, that the mortgage rate quoted will not increase.
Title- ownership right to a property that is recorded in the deed.