Know how to speak their language:

Loan officers, brokers and finance institutions representatives use their own "language" while negotiating with you, they rarely bother to explain all terms. If you intend to interact with them, make sure all the financial terms below are clear to you, it will save you time and money:

Amortization the process of paying off debt, usually by making monthly payments throughout the term of the loan. During the early yearly payments of the mortgage most of the payment amount made towards interest and little is paid towards the principal (the loan amount itself)

Acceleration clause If you miss a monthly payment, sell your property or fail to perform as agreed in your loan terms - the lender has the right to demand payment of the entire loan balance. The acceleration clause is a mortgage contract provision.

Appraisal a professional analysis or opinion made by a qualified appraiser of the estimated market value of the property. the lender use the appraisal to get an estimate of how much the property is worth, because he uses the property as a security against the money he lends.

Adjustable rate mortgage (ARM) a mortgage loan with interest rate and payments that vary throughout the loan life. The interest rate usually start with a low percentage and gradually increases. The percentage rate is determined by various known indexes.

Annual percentage rate (APR) the annual cost of a loan to the borrower. the APR includes the base interest rate of the loan, points (if any) and other fees. Lenders must disclose the APR on a loan by law. The APR is used to compare loans.

Application is the actual process of filing information for loan request. At this point the borrower should get an itemized estimate of the various fees, costs and down payments.

Application fees are the initial costs that the lender usually charges to process the loan and make a credit report inquiry.  

Balloon loans a fixed rate short term loan that requires monthly payments for a period of time and then (usually between 3-10 years) one large payment of the principal.

Closing is the finial act in which the lender transfers funds to the seller in exchange to the property's title. At this point the loan process is done and the property is bought by the borrower.    

Closing costs the total costs involved with home purchase - usually 2-5% from the purchase price. Closing costs are in addition to the down payment amount. The closing costs may vary depending on the lender's requirements and the type of the property. Closing costs may include: Points, Appraisal fee, Credit report fee, Homeowners insurance premium, Title insurance, Property taxes, recording and transferring charges.

Conforming loans mortgage loans that mach to the minimum amount determined by Freddie Mac and Fannie Mae. 

Credit report is a report provided by known reporting agencies such as "Experian" and "Equifax" that determines creditworthiness and ability to repay any type of debt in time. A fee is usually applies to obtain.  

Debt to income ratio measures how much you can borrow based on your proposed mortgage payments, property taxes and insurance in relation to your total monthly income. Lenders experience shows that you may borrow from 33% to 40% of your monthly income.

Deed a document that transfers title from one owner to another. the title is transferred to the new home owner as soon as the the escrow holder receives the payoff for the old loan, the new mortgage financing and payments and closing costs.

Default a status caused by the failure to make loan monthly payments on time. Default occurs after missing 2 or more payments and may lead to foreclosure.

Delinquency in payments is when the lenders does not receive monthly mortgage payments, it's a step before default status.

Down payment is an up front cash payment made for property purchase. With a 20% of the property value you can usually get the best mortgage programs, however, the larger the down payment the better the program.  

Equity is the difference between the market value of a real property and the amount the borrower owes.

Escrow a neutral third party that holds important documents and money prior to the close of the transaction.

Federal Home Loan Mortgage Corporation (Freddie Mac) A known institution that buys mortgages from banks and other lending institutions and sells these mortgages to investors.

Federal Housing Administration mortgage (FHA) Mortgages that usually offers low interest rates and small down payment for low income borrowers. FHA mortgages usually requires the purchase of mortgage default insurance.

Federal National Mortgage Association (Fannie Mae) A known institution that buys mortgages from banks and other lending institutions and sells these mortgages to investors.

Fixed rate mortgage a mortgage loan that allows to lock in the interest rate throughout the life of the loan, the monthly payment stays always the same.

Foreclosure A legal procedure by which the lender repossess and sells property of a default borrower.

Homeowners insurance an insurance policy that protects homes. Most lenders will require that you purchase homeowners insurance before funding your loan.

Home equity loan  is when you borrow against the equity of your home. Home equity loans are usually taken in order to consolidate high interest debts, get cash for remodeling projects or other short term necessities.

Interest rate interest charges taken as a percentage of the borrowed amount, this is the money lenders charge to use their money.

Jumbo loans Mortgages that exceed the maximum possible amount  of conforming loan by Freddie Mac and Fannie Mae. These nonconforming loans may carry higher interest rate and at least 25% down payment.

Lock-in a guaranteed specified interest rate to the borrower provided that the loan is paid within a period of time. You might end up paying higher interest rate to obtain a lock-in.

Mortgage  is legal document pledges a real property to a lender or a creditor to be used as a security for repayment. We usually refer to a home loan as a Mortgage.

Mortgage broker a qualified person who buys wholesale mortgages from lenders and mark their price up to sale them to buyers that prefer to get professional help rather than shop around by themselves.

Mortgage insurance in some cases lenders may require you to purchase an insurance police that will protect them in the event that the borrower defaults on it's loan. You might want to compare your mortgage insurance with a high quality term life insurance. 

Points are an up front payment based on percentage of the total loan amount. one percent of the loan amount equals to one point. these charges are paid up front. Points are sometimes referred to as loan origination fees.  

Pre-qualified is the first step in which the lender collects income, debts and repayment capability information from the borrower to determine the suitable type of loan.

Prepayment penalty some mortgages carry extra fees from the borrower whenever he makes a large payment or a one time payment agents the loan's principal.

Principal the base amount borrowed for a loan.

Property tax is the annual tax paid by the owner to the local authority.

Refinance Obtaining a new mortgage loan with lower interest rate and terms for the purpose of paying off the existing mortgage using the same property as a security. 

Tax deductible are payments that may be deducted against federal and state taxable income, the interest portion of your mortgage payments, points and property taxes are tax deductible.

Title insurance covers the expenses necessary to protect your title against the ownership of the property.    

Underwriting process determines whether the mortgage program is acceptable by the lender. Sometimes additional information is required from the borrower.

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