Amortization: The process by which a mortgage loan is repaid in monthly installments of principal and interest, allowing you to own your home at the end of a specific period of time.
ARM: An ARM is an Adjustable Rate Mortgage, or a mortgage with interest rates that are subject to change. The monthly payments you make on an ARM will increase or decrease depending on the intervals determined by your lender. Usually the rate is capped.
Bankruptcy: A federal law stating that a person's assets will be turned over to a trustee who will pay off any outstanding debts. Bankruptcy usually happens when an individual, family, or business owes more money than can be repaid.
Credit history: Your personal history of debt payment, used as a gauge for lenders to determine a borrower's ability to repay loans.
Debt-to-income ratio (DTI): The comparison of gross income to expenses, both housing and non-housing.
Deed-in-lieu: In lieu of, (or instead of), foreclosure, a deed is issued to the lender to fulfill the obligation of repaying the particular debt. Deed-in-lieu does not mean that the borrower can stay in the house. It does, however, aid in avoiding the costs associated with foreclosure.
Delinquency: The failure of someone who has borrowed money to make mortgage payments on time according to the loan agreement.
Equity: The financial interest the owner of property has in said property. This amount is calculated by subtracting what is still owed on the mortgage from the fair market value of the property.
Fixed-rate mortgage: A mortgage with payments that will not change over the years the loan is being repaid. The terms of the mortgage are "fixed" in order for the interest rate to remain the same.
Government Sponsored Enterprises (GSE): A group of financial services corportations created by the United States Congress whose function is to increase the amount of credit issued to targeted sectors of the economy. The goal of the increased credit flow is to make those parts of the market more efficient and more transparent. The goal of the GSEs is to make credit cheaper and more available to the agricultural, home finance, and educational sectors of the economy.
Interest rate: How much interest, measured in a percentage, is charged on a monthly loan payment.
Lien: A legal claim against a particular piece of property. A lien must be satisfied whenever the property is sold.
Refinancing: The method by which one loan is paid off through securing a second loan. Generally done in order to secure a lower interest rate.
Short Sale: When the proceeds from the sale of a home are less than what the homeowner sill owes on the mortgage. A lender may agree to accept the money from a short sale and forgive the remainder of the loan if the owner is unable to make monthly payments.
Teaser Rate: When the rate of a loan is lowered temporarily at the inset.
