Glossary

Adjustable-Rate Mortgage (ARM). A mortgage that has an interest rate that can go up or down periodically, usually once or twice a year.

Annual Percentage Rate (APR). The total yearly cost of a mortgage stated as a percentage of the loan amount. This rate includes the interest rate plus points and mortgage insurance.

Asking Price. The advertised amount of money the seller wants for a home. Sometimes the seller will accept an offer that is less than the asking price.

Budget. A plan that lists all your monthly income and expenses.

Closing Costs. The expenses of transfering ownership of a property above and beyond the sales price. Closing costs can include the loan application fee, title fee, points, and attorney fees.

Commission. The percentage of the sales price that the real estate agent earns.

Common Areas. The areas in a condominium, cooperative, or planned unit development that buyers own together. These areas can include hallways, elevators, laundry room, swimming pool, and recreation rooms.

Condominium. A type of property ownership in which the buyers own their own homes, usually single units in a multi-unit building. However, all the buyers share the individual ownership of the common areas and pay a monthly maintenance charge.

Contract. See Purchase and Sale Agreement.

Cooperative. A type of property ownership in which the buyers own a share of the corporation that owns the building, giving the owner the right to occupy the apartments in which they live. The share is equal to the cost of a single apartment. The owner pays a monthly maintenance charge and a portion of the mortgage payment for the whole building.

Credit History. A list of your debts and regular monthly expenses, including how much you owe and how timely your payments are made.

Credit Report. A report of your credit history. The mortgage lender gets this report from a credit reporting agency when you apply for a loan.

Debts. The money you owe on long-term loans, for example, car loans, student loans, and mortgage loans. This may also include the payments you owe on credit cards.

Down Payment. The part of the purchase price of the house that the buyer pays in cash.

Down Payment Requirement. The minimum down payment allowed by the lender.

Fixed-Rate Mortgage. A mortgage in which the interest rate does not change during the entire term of the loan.

Floor Plan. The plan for a home showing the location and measurements of rooms, windows, doors, and major appliances.

Gross Monthly Income. Your total monthly income from all sources before taxes are taken out.

Home Shoppers’ Guides. Small magazines that have pictures and descriptions of homes that are for sale. You can usually find these free magazines at the supermarket or newsstands.

Interest Rate. The charge for using the lender’s money.

Job History. A list of the places you have worked, your job title, the dates of employment, and your salary.

Loan. A method for borrowing money, often from a bank or credit union. Loans are usually repaid with interest.

Maintenance. The work you must do to keep your home in good condition.

Maintenance Costs. The expense of keeping your home in good condition.

Market Value. The expected value of the home for sale based on recent sale prices for similar homes that are nearby.

Monthly Mortgage Payment. A monthly payment that repays a part of the principal and the interest on a mortgage loan.

Mortgage Insurance. Insurance that protects lenders against loss if the borrower does not repay the loan.

Mortgage Lender. The financial institution that makes the mortgage loan. Financial institutions include mortgage companies, banks, credit unions, and savings and loans.

Mortgage Loan. The type of loan you get to buy a home. You must repay the loan with interest in a specific amount of time.

Net Monthly Income. Your total monthly income after taxes are taken out.

Nontraditional Credit History. A credit history you can prepare if you do not have credit cards or have never had a loan. It can include receipts and cancelled checks for your monthly payments for rent, utilities, and other bills.

Offer. The amount of money the buyer is willing to pay for a home. This may be lower or higher than the asking price.

Planned Unit Development. A type of property ownership in which homeowners own their own homes and usually the land upon which they are built, but pay a monthly charge for maintenance of the common areas.

Points. A type of fee that lenders may charge at closing. Each point equals 1 percent of the loan amount. The more points you pay, the lower your interest rate will be.

Principal. The amount of money that you actually borrow.

Purchase and Sale Agreement. A written contract that the buyer and seller sign. It includes all of the terms and conditions of the sale.

Real Estate Agent. A person who helps you find a home to buy. The real estate agent receives a commission from the sale of the home, usually paid by the seller.

Term. The amount of time you have to repay the loan. The term for mortgage loans is often 15, 20, or 30 years.

Terms of a Mortgage Loan. The conditions of a loan, including the type of mortgage, the size of the down payment, the amount you can borrow, the interest rate, and the length of time you have to repay.

Utilities. Public services such as the supply of water, electricity, and gas. You usually pay for using utilities at your home on a monthly basis.