Deed

The document which transfers ownership of real property

Mortgage

An interest in land created by a document providing security for the performance of an obligation.

Truth-in-Lending

A federally mandated form for disclosure of the effects of accepting the loan as offered; it shows the total amount paid over the life of the loan, and the effect of any prepaid financing charges. It is not, in itself, an obligation being agreed to by the borrower, it is a disclosure from the lender.

HUD

A federally mandated form, showing the sources and uses of funds in the transaction. Also sometimes referred to as the “settlement statement”.

Closing Cost

Generally, these are amounts charged by people involved in the transaction, other than the Seller. Some are unavoidable, even in cash transactions between Buyer and Seller, without attorneys or Realtors. Costs can include recording of the deed, conveyance taxes, surveys and appraisals, realtor commissions, attorney’s fees, and lender’s fees.

Note

A written promise to pay a sum of money on terms specified.

Variable Interest

An interest rate in a Note which can change over the life of the loan; the note will specify when the interest can change, the effect of the change on payments, and limitations on increase or decrease.

Amortization

The schedule of payments on the note; in an amortized loan, the borrower makes equal periodic payments, which reduce the principal balance over time, such that the interest portion of each successive payment decreases, which means the principal portion increases, while the total payment does not change. A shorter amortization period will require higher periodic payments, but often result in the payment of a lower amount of total interest over the loan period. In addition, lenders often offer a lower interest rate for shorter amortization periods.

Balloon Payment

A required payment which is different from and/or in addition to the regularly scheduled payment. For example, a loan may be amortized on a thirty year repayment schedule, but call for payment of the entire balance after fifteen years.

Prepayment penalty

Many loans require an additional payment of interest if the loan is repaid earlier than a specific date. For example, if more than 20% of the original balance is paid within the first year, the penalty may be six months interest on the amount of repayment that exceeds 20% of the original balance. Loans with this penalty sometimes exclude repayment of the entire loan connected with a sale of the property.

Escrow

A bank account established for an agent to pay obligations of the depositor. Most home mortgage payments include an amount in addition to the principal and interest for the loan, which is collected and used to pay for the taxes and insurance on the property. The property owner is responsible for any deficiency in the account, and is entitled to any excess, or balance remaining when the loan is fully paid.

Default

A failure of the borrower to meet some obligation; default can include paying late, and also include not paying some other liability, such as property insurance or real estate taxes.