Adjustable Rate Mortgage (ARM): Available on FHA, VA, Conventional and Jumbo Loans. An Adjustable Rate Mortgage (ARM) features a variable interest rate, which is periodically adjusted. ARMS may provide the security, flexibility and affordability prospective homebuyers desire. These loans are especially attractive to homebuyers who plan to "trade up" in future years. Generally, initial interest rates are lower than on fixed rate mortgages.

Amortization: The reduction of the principal balance of a mortgage as each principal and interest payment is applied.

Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate, taking into account interest, points, and other finance charges. Disclosure of the APR is required by the federal Truth-in-Lending Act and allows borrowers to compare the costs of different mortgage loans.

Appraisal: An estimate of a property's value as of a given date, determined by a qualified professional appraiser. The value may be based on replacement cost, the sales of comparable properties or the property's ability to produce income.

Assessment: Charges levied against a property for tax purposes or to pay for municipality or association improvements such as curbs, sewers, or grounds maintenance.

Balloon Note: A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principle sum known as a "Balloon" is due at maturity.

Buy-down: An upfront payment to the lender to reduce the interest rate on a mortgage.

Cap: The maximum increase an Adjustable Rate Mortgage (ARM) can change, either at each adjustment or during the life of the mortgage. Example: If the original loan was made at 10% with a 5% cap, the interest on the loan may not exceed 15% regardless of market conditions.

Comparables: Properties used as comparisons to determine the value of a specified property.

Convertible Mortgage: An adjustable rate mortgage where the mortgagor can convert the mortgage to a fixed rate mortgage during a predetermined time period.

Index Rate: An index used to adjust the interest rate of an adjustable mortgage loan.

Loan to Value (LTV): The relationship between the amount of a mortgage loan and the appraised value of the security expressed as a percentage of the appraised value.

Margin: The number of percentage points the lender adds to the Index rate to calculate the ARM interest rate at each adjustment.

Market Value: The highest price that a buyer, willing but no compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Maturity: The termination or due date of a note, time, draft, acceptance, bill of exchange, or bond. The date a time instrument or indebtedness becomes due and payable.

PITI (principal, interest, taxes, and insurance): The principal and interest payment on most loans is fixed for the term of the loan; the tax and insurance portion may be adjusted to reflect changes in taxes or insurance costs.

Principal: Amount of debt, not including interest. The face value of a note, mortgage, etc.

Principal balance: The outstanding balance of a mortgage, exclusive of interest and any other charges.

Points: A point is equal to one percent of the loan.

Secondary Mortgage Market: The buying and selling of first mortgages or trust deeds by banks, insurance companies, government agencies, and other mortgages.  This enables lenders to keep an adequate supply of money for new loans.  The mortgages may be sold at full value  (par) or above, but are usually sold at a discount.  The secondary mortgage market should not be confused with second mortgage.

Title: Often used interchangeably with the word ownership. It indicates the accumulation of all rights in property, the owner and others.

Title Insurance: An insurance policy that protects the insured (purchaser and lender) against loss arising from defects in title.