Mortgage Glossary

An overview of a few key mortgage-related terms:

Amortization
The continuous and systematic repayment of an obligation through regular installments until the debt has been paid off.

Appraisal
A report prepared by a professional appraiser giving an opinion on the value or estimated value.

Buydown
Money paid to the lender during closing to reduce the borrower’s out-of-pocket monthly payment.

Closing Costs
Fees, in addition to the price of the property itself, that must be paid at the time the property closes. May include, but are not limited to: origination fees, discount points, attorney’s fees, costs for title insurance, surveys, recording documents, and prepayment of real estate taxes and insurance.

Earnest Money
A deposit given to either bind the sale of real estate or assure payment; or an advance of funds in the processing of a loan.

Escrow Account
An account managed by the lender to which the borrower pays monthly installments for property taxes, hazard insurance, and special assessments, and from which the lender disburses these sums as they become due.

Federal Housing Administration (FHA)
A federal agency within the U.S. Department of Housing and Urban Development (HUD) that uses loan insurance programs to insure mortgages for lenders, and stimulate the availability of housing for low- and moderate-income families.

HUD-1 Settlement Statement
A statement of the funds received and spent at the closing of a real estate transaction—furnished by the real estate closing agent and given to the buyer and seller separately.

Origination Fee
Fee charged to the borrower by the lender that covers the cost of issuing a loan commitment. It pays for the processing of the loan and is usually calculated as a percentage of the mortgage loan, and does not include fees for appraisals, credit reports, inspections, and loan document preparation.

Points
An amount equal to one percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments.