Glossary

A mortgage or home equity loan in which your interest rate and monthly payments may change periodically during the life of the loan, based on the fluctuation of an index. Lenders may charge a lower interest rate for the initial period of the loan. Most ARMs have a rate cap that limits the amount the interest rate can change, both in an adjustment period, and over the life of the loan. Also called a variable-rate mortgage.

The annual cost of a loan to a borrower. Like an interest rate, the APR is expressed as a percentage of the loan amount. Unlike an interest rate, however, it includes other charges or fees to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing certain costs of loans.

The act of preparing a report by a qualified appraiser setting forth an opinion or estimate of value. The most common type of appraisal for residential properties is the Comparable Sales Approach. An appraisal is typically ordered by the lender or mortgage broker.

Property or a possession of value that a lender may be willing to accept as collateral to secure repayment of debt. For example, real estate, stocks, mutual funds, cash and automobiles are all assets.

The time and place at which all documents for your loan are signed, dated and notarized. Also called a settlement.

An additional person who assumes equal responsibility for repayment of a loan and is fully obligated under the terms of the loan. This person also has equal rights to the proceeds of the loan.

A mortgage loan that has the standard features as defined by and is eligible for sale to Fannie Mae and Freddie Mac.

A number, rating the quality of an individual's credit. Lenders calculate this number, often with the assistance of computer systems, as part of the process of assigning rates and terms to the loans they make.

A document that legally transfers ownership of real estate from a seller to a buyer. It's delivered to the buyer at closing. Before making a loan, a lender will usually require a title search or a title report to make sure the real estate that is to secure the loan is legally owned by the borrower.

A tax by the Florida Department of Revenue on deeds of conveyance and mortgage notes.

The process of placing an amount of money and documents with a neutral third party, called an escrow agent, who's given the authority to deposit, disburse and distribute to the proper parties all the money and documents involved in a real estate transaction. The purpose is to protect both the buyer and seller in the transaction from the other side's unauthorized use of funds and ensures an arm's-length transaction between both sides. Also commonly used to mean an escrow account or impound account, required by many lenders and held by the lender during the term of the loan. This deposit is used to hold the borrower's advance payments toward insurance and property taxes until they become due.

A determination by a reputable source about whether property is located within a special flood hazard zone.

A private corporation authorized by Congress in 1970 to provide secondary mortgage market support for conventional mortgages originated by Savings and Loan Associations.