Mortgage Glossary

Good Faith Estimate: An estimate of all the costs associated with a purchase, or refinance. This may include points, closing costs, escrow.

Government National Mortgage Association (GNMA) : Also known as Fannie Mae, provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Graduated Payment Mortgage (GPM): A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Gross Monthly Income: The amount of consistent and stable income that an individual receives each month, averaged over a period of time. This amount includes overtime pay, bonuses, commissions and income from dividends or interest, provided that the individual can show a consistent history of receiving such income.

Hazard Insurance: A contract that pays for loss on a home from certain hazards, such as fire.

Homeowners Association: An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.

Impound: That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due (also known as reserves).

Index: The measure of interest rate changes that the lender uses to decide how much the interest rate on an ARM will change over time.

Interest: Money paid for the use of money -- that is, money paid for a loan.

Investor: A money source for a lender.

Jumbo Loan: A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate. These loans involve amounts between $214,600 to $650,000.

Lender: Any person or institution that provide money to a borrower.

Lien: A claim on the property of another as security against the payment of a just debt.

Loan: An amount of money a borrower will take out from a lender to pay for a purchase.

Loan-to-Value Ratio: The relationship between the amount of a home loan and the total value of the property. For example, if you receive a loan of $80,000 on a home that costs $100,000, the loan-to value ratio is 80%.

Lock-In Rate: A commitment from a lender to make a loan at a preset interest rate at some future date, usually for not more than 90 days.

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 willing buyer would pay and the lowest a willing seller would accept.

Mortgage: An interest in real property given as security for the payment of an obligation.

Mortgage Insurance: A policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to full repay a loan. Mortgage insurance makes it possible to buy a home with as little as 5% down.

Mortgage Investor: Any person or institution that invests in mortgages. By buying mortgage loans from lenders, the mortgage investor gives the lender funds that can be used for more lending.

Mortgage Life Insurance: A type of term life insurance. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds.

Mortgagee: A lender to whom property is conveyed as security for a loan.

Mortgagor: One who borrows money, giving as security a mortgage or deed of trust on real property.