(ARM) Adjustable-Rate Mortgage

An adjustable-rate mortgage, often referred to as ARM, is a type of home loan with an interest rate that can change during the course of the loan. This means that the monthly payments can go down or up depending on the conditions of the markets.  It is common for the initial interest rate to be lower than comparable fixed-rate mortgages.  Additionally, the initial interest rate will often remain fixed for a set amount of time.  After that period ends, interest rates as well as the monthly payments can fluctuate.

 (APR) Annual Percentage Rate

The APR also known as the Annual Percentage Rate measures the cost the loan as a percentage rate.  The APR is often higher than the Interest rate because it factors in any points, broker fees, and other and other costs as a percentage of the loan.


In real estate an appraisal is unbiased professional opinion of the market value of the property being bought/sold.


In real estate closing refers to the last step in buying and financing a home.  It includes the reviewing and signing of all documents, and is not complete until the title is delivered to the buyer, the title is transferred, all financing documents and signed and delivered, title insurance policies are exchanged, and the agreed-on costs are paid.

Closing Costs

In real estate closing costs are the overhead costs associated with the finance purchase of a home.  This includes all costs beyond the property cost that buyers and sellers pay to finalize the purchase/sell of a home.

Closing Disclosure (CD)

Formerly called a good faith estimate, the closing disclosure is a five-page form that provides you with all of the details of the loan.  It will be provided to you 3 days before closing on your mortgage.  It is the final loan estimate and includes: projected monthly payments, and closing costs.

Debt-To-Income (DTI) Ratio

The debt-to-income ratio compares the debt payment of a borrower to his/ her overall income.  It is used to determine if a borrower’s ability to manage their monthly debt expenses successfully.

Discount Points

Discount points are prepaid interest /fees that can be purchased paid at the time of closing to lower the interest rate of the loan.


Equity is the difference between the home’s fair market value and any the outstanding loan balance on the home.


Escrow refers to money and documents held by a third party on behalf of buyer, seller, and lender in order to assure that no funds or property will change hands until ALL parts of the agreement have been completed.

Fixed Rate Mortgage

A home loan with a fixed rate has an interest rate that remains unchanged for the entire duration of the loan. A fixed rate mortgage will ensure that your monthly payments do not rise or fall with market conditions and changing interest rates.

Homeowner’s Insurance

Homeowner’s or hazard insurance is often required by lenders to protect the property against the costs associated damaged or destroyed property, and also provides liability coverage for the homeowner and lender.

Loan Estimate (LE)

Within three business days of receiving your application the lender must provide you a Loan Estimate.  It is a three-page form that states all of the important details about the mortgage.

Loan to Value Ratio (LTVR)

The loan-to-value ratio (LTV ratio) is amount of the loan divided by the value of the property, commonly expressed as a percentage.  It is used to assess the lending risk of a potential borrower. 


A point is a fee equal to 1 percent of the mortgage amount.  They are paid to the lender as part of the mortgages closing costs. Points can also be purchased and negotiated.


An initial evaluation of the credit worthiness. Used to determine an approximate loan amount for which the individual would qualify.  Prequalification is not the same a Preapproved which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.

Principal, Interest, Taxes, and Insurance (PITI)

PITI refers to the components of a mortgage payment it is an abbreviation for Principal, Interest, Taxes, and Insurance.

Private Mortgage Insurance (PMI)

Private mortgage insurance is also known as lenders mortgage insurance, default insurance, or mortgage guaranty insurance protects the lender if the buyer fails to pay. This is not the same as hazard or homeowner’s insurance.  Private mortgage insurance is normally compulsory on all home loans when the down payment is less than 20 percent

Origination Fee

Fee paid to the lender at closing that represents their fee for making the loan; generally no more than 1% of the loan amount.

Right of Rescission

This part of the Truth in Lending Act the right of rescission is a federal law requiring a “cooling-off period” of 3 days between the closing a refinance or equity and it’s funding by the lender.   It gives the borrower right and opportunity to rescind on the loan.

Title Insurance

Title insurance protects borrowers and lenders against any property loss or damage against defects in the title to the property.


Underwriting is the process a lender uses to determine the credit risk of a borrower by reviewing their credit and income, as well as the property when they are trying to receive financing.