11th District Cost of Funds - A monthly cost-of-funds index (COFI) reflecting the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts. The 11th district covers Arizona, California and Nevada. The index is published on the last day of the month and reflects the cost of funds for the prior month.

Acceleration clause - The clause in a morgage or trust deed that stipulates the entire debt is due immediately if the morgagee defaults under the terms of the contract.

Adjustable Rate Morgage (ARM) - A morgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate morgage.

Adjustment_date - The date the interest rate changes on an ARM (adjustable rate morgage).

Adjustment Interval - For an adjustable rate morgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

Amortization - the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.

Annual Percentage Rate (APR) - A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add-on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years. Appraisal - The determination of property value based on recent sales information of similar properties.

Assumable Loan - These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

Assumable Morgage - A morgage that provides for a buyer to "assume" all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan.

Balloon Mortgage - Behaves like a fixed-rate morgage for a set number of years (usually five or seven) and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.

Balloon Payment - The final lump sum that is paid at the end of the balloon morgage.

Biweekly Mortgage - Morgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.

Bridge Loan - An equity loan secured to solve short-term financing problem.

Budget Morgage - A morgage that includes a portion for taxes and insurance as well as principal and interest.

Buydown - Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In oder to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. After the discount period, the payment is calculated as the note rate.

Caps - A set percentage amount by which an adjustable rate morgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.

Closing Costs - Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid." Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre-paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate.

Conforming Morgage - A loan for up to and including $417,000 in the continental United States (Alaska and Hawaii limits are higher).

Construction Morgage - A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Conventional Morgage - A mortgage loan that is obtained without any additional guarantees for repayment, such as FHA insurance, VA guarantees, or private insurance. This is usually given at an 80% loan-to-value ratio.

Debt-to-Income Ratio (DTI) - The ratio of aggregate monthly debt to aggregate monthly income.

Default - The failure to make payments on a morgage.

Delinquency - Late- or non-payments of principal, interest, taxes, or insurance.

Discount Points - A term used in government subsidized loans, such as FHA and VA loans. Refers to any "points" (one percent of the loan amount) paid in addition to the one percent loan origination fee.

FHA Morgage - A government-backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD).

First Morgage - A morgage that has priority over other mortgages.

Fixed-Rate Morgage - A morgage where the interest rate does not change for the life of the loan.

Float - Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures.

Good Faith Estimate - An estimate of charges which a borrower is likely to incur in connection with a loan closing.

Grace Period - A time allowed, usually 15 days, for making late payments without a penalty.

Hard-Money Morgage - Cash loan to a borrower.

home equity line of credit - A morgage loan in second position that allows a borrower to obtain cash drawn against home equity, up to a certain amount.

Index - A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate morgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable morgage up or down.

Interest - Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share, or title in property.

Interest Only Morgage - A term loan arrangement calling for payments of interest only, not to include any amount for principal.

Interest Rate - The percentage of an amount of money that's paid for its use over a specified time period.

Jumbo Morgage - A loan for $417,001 or more in the continental United States (Alaska and Hawaii limits are higher). These limits are 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.

Lender - The bank, mortgage company, or morgage broker offering the loan. Many institutions only "originate" loans and then resell the obligation to third parties.

LIBOR - The London Interbank Offered Rate Index (LIBOR) is an average of the interest rates that major international banks charge each other to borrow U.S. dollars in the London money market. Like the U.S. treasury the CD indexes, LIBOR tends to move and adjust quite rapidly to changes in interest rates.

Lien - A legal claim by one party against the property of another as security for a debt. Must be paid off when property is sold. A morgage or a first trust deed is a lien.

Life of Loan Cap - The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25+6.0).

Loan Origination - What the process of obtaining new loans is called.

Loan Servicing - A service performed by a lender to protect a morgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.

Loan-To-Value Ratio - The relationship between the amount of the morgage loan and the appraised value of the property expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is assumed to be the purchase price, for refinances the value is determined by an appraisal.

Margin - The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate.

Morgage Insurance - Insurance that covers the lender against losses incurred as a result of a default on a home loan. This is usually required on all loans that have a loan-to-value higher than eighty percent. Morgages that have an 80% LTV that do not require morgage insurance have higher interest rates. The lenders then pay the morgage insurance themselves. In addition, FHA loans and some first-time homebuyer programs require morgage insurance regardless of the loan-to-value.

Negative Amortization - Essentially occurs when a borrower makes a minimum payment that may not cover the interest that is due. Loan balance then increases as a result.

No-Cost Morgage - A no-cost morgage can either be: 1) a loan that has no "lender costs" associated with it or, 2) a loan that also covers purchases or refinancing costs, which may be incurred in buying a home, obtaining and/or refinancing a loan, but are not directly charged by the lender. The interest rate on this type of loan is higher.

Origination Fee - The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.

Payment Change Date - The date when a new monthly payment amount takes effect on an adjustable rate morgage (ARM) or a graduated payment morgage (GPM). The payment change date occurs the month immediately after the interest rate adjustment date.

Periodic Payment Cap - The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable-rate morgage (ARM) where the interest rate and principal fluctuate independently of one another.

Periodic Rate Cap - The limit on the amount that payments can increase or decrease during any one adjustment period in an ARM (adjustable rate morgage), regardless of how high or low the index fluctuates.

PITI - PITI stands for principal, interest, taxes, and insurance. An "impounded" loan means that the monthly payment covers all of these, and perhaps morgage insurance, if your loan so calls for it. If one does not have an "impounded" account, then the lender still calculates these amounts separately and uses it as part of determining one's debt-to-income ratio.

PITI Reserves - A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI (principal, interest, taxes, and insurance) must equal the amount that the borrower would have to pay for PITI for a determined number of months.

Pledge Account Morgage (PAM) - Combines GPM (graduated payment morgage) with a subsidizing savings account to provide the borrower with a low payment plan, the lender with amortizing payments and the seller with cash.

Points - The site allows lenders to post rates via point ranges. Points are broken out on the site for Discount and Origination. The definitions for each are as follows: Discount Points = Interest Charges paid up-front when a borrower closes a loan. A point is equal to 1 percent of the loan amount (e.g. 1.5 points on a $100,000 mortgage would cost the borrower $1,500). Generally, by paying more points at closing, the borrower reduces the interest rate of his loan and thus future monthly payments.

Origination Points = A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.

Pre-Payment - Any amount paid so as to reduce the principal before the due date.

Prepayment Penalty - Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule.

Prime Rate - Interest charged by financial institutions to top-rate borrowers.

Principal - The amount of debt, not counting interest, left on a loan.

Private Morgage Insurance (PMI) - Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-to-Value Ratio is greater than 80%.

Prorations - The allocation of charges and credits to the appropriate parties at a real estate sale and/or loan closing at a real-estate sale and/or loan closing.

Promissory Note - A written promise to repay a specified amount over a specified period of time.

Rate Lock - A commitment issued by a lender to a borrower or other morgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

Recast - To redesign an existing loan balance into a new loan for the same period or longer, to reduce payments and help a distressed borrower.

Second Morgage - A morgage that has a lien position subordinate to the first morgage.

VA Loan - A government-backed morgage loan supported by the US Veterans Administration.

Variable Rate Morgage - Same as an Adjustable Rate Morgage.