Home Loan Glossary
Additional Principal Payment - A payment made by a borrower of more than the scheduled principal amount due, in order to reduce the outstanding balance on the loan, to save on interest over the life of the loan and/or pay off the loan early.
Adjustable Rate Mortgage (ARM) - A home loan that permits the lender to adjust its interest rate periodically during the life of the loan on the basis of changes in a specified financial index.
Bridge Loan - A type of mortgage financing between the termination of one loan and the start of another loan. For example, a mortgage secured by the borrower's present home (which is usually up for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as a "swing loan".
Broker - A person, who is normally licensed by the state and who, for a commission or a fee, assists in negotiating a real estate transaction or negotiating the terms of a home loan.
Fixed Period ARM - Provides a fixed rate for 3, 5, 7 or 10 years then adjusts annually based on financial index for the remaining loan term.
Homeowner Insurance (Hazard Insurance) - Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards. The policy typically combines personal liability insurance and property hazard insurance coverage for a dwellilng and its contents.
Home Equity Line of Credit (HELOC) - A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
Lock-In - A written agreement in which the lender guarantees a specified loan program interest rate and points if a mortgage goes to closing within a set period of time.
Mortgage Insurance Premium (MIP) - The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
Origination Fee - A fee paid to a lender for processing a loan application, making a home loan, and recording a mortgage against the borrower's real property as security for repayment of the loan. The origination fee is stated in the form of points. One point is 1% of the mortgage amount (e.g. 1,000 on a $100,000 loan).