Escrow account: a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

Experian: One of the three largest credit bureaus in the United States.

Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

Federal Housing Administration (FHA) Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers.

Good faith estimate: an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

HUD1 Statement: A standard form which itemizes the closing costs associated with purchasing a home or refinancing a loan.

LIBOR (London Interbank Offered Rate): The interest rate charged among banks in the foreign market for short-term loans to one another. A common index for ARM loans.

Loan Application: An initial statement of personal and financial information required to apply for a loan.

Loan-to-value (LTV) ratio.- a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock or Lock-in: A lender's guarantee of an interest rate for a set period of time. The time period is usually that between loan application approval and loan closing. The lock-in protects you against rate increases during that time.

Margin: an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.

Mortgage broker: a firm that originates and processes loans for a number of lenders.

Negative Amortization: A loan payment schedule in which the outstanding principal balance of a loan goes up rather than down because the payments do not cover the full amount of interest due. The monthly shortfall in payment is added to the unpaid principal balance of the loan.

Note: Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

Origination fee: the charge for originating a loan; is usually calculated in the form of points and paid at closing.

PITI: Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Power of Attorney: Legal document authorizing one person to act on behalf of another.

Prepaid Interest: Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date and the first payment date.

Prepayment Penalty: Fee charged by a lender for a loan paid off in advance of the contractual due date.

Private Mortgage Insurance (PMI): Insurance to protect the lender in case you default on your loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's purchase price. (Note, however, that FHA and VA loans have different insurance guidelines.)

Purchase Agreement: Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Reconveyance: The transfer of property back to the owner when a mortgage loan is fully repaid.

Recording: The act of entering documents concerning title to a property into the public records.

Refinancing: The process of paying off one loan with the proceeds from a new loan secured by the same property.

RESPA: Real Estate Settlement Procedures Act. RESPA is a federal law that gives consumers the right to review information about loan settlement costs. The law gives you the right to review this information after you apply for a loan, and again at loan settlement. The law only obliges lenders to provide these settlement costs after application.

Right to Rescission: Under the provisions of the Truth-in-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing a mortgage.

Second Mortgage: An additional mortgage placed on a property that has rights that are subordinate to the first mortgage.

Settlement (or Closing): The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).

Title: Document which gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property.

Title Company: A company that insures title to property.

Title insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.

Title search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

Trans Union: One of the three largest credit bureaus in the United States.

Truth-in-Lending: a federal law obligating a lender to give fuII written disclosure of aII fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.

Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

Verification of Deposit (VOD): Document signed by the borrower's bank or other financial institution verifying the borrower's account balance and history.

Verification of Employment (VOE): Document signed by the borrower's employer verifying the borrower's position and salary.