Adjustable-rate Mortgage (ARM) loans: Also known as variable-rate loans. Usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered.

Annual percentage rate (APR): The cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay.

Credit scoring: A process that uses recorded information about individuals and their loan requests to assess - in a quantifiable, objective, and consistent manner - their future performance regarding debt repayment.

Conventional loans: Mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA).

Default: Failure of a borrower to comply with the terms of a note or the provisions of a mortgage.

Delinquency: A mortgage loan on which a payment has not been made by the due date.

Escrow: Money or documents held by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Fixed-rate loans: Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan. Generally have repayment terms of 15, 20, or 30 years.

Forbearance: The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.

Foreclosure: Legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower's loan.

Interest rate: Cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.

Loan origination fees: Fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.

Loan servicing: Tasks a lender performs to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.

Loan-to-value (LTV) ratio: Relationship between the dollar amount of a borrower's mortgage loan and the value of the property.

Lock-in: Written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.

Modification: Any change to the original terms of a mortgage.

Mortgage: Document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off the loan.

Points: Fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs.

Private mortgage insurance (PMI): Protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.

Secondary mortgage market: Market in which residential mortgages or mortgage securities are bought and sold.

Thrift institution: General term for savings banks and savings and loan associations.

Transaction, settlement, or closing costs: May include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys' fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.

Underwriting: Process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's ability and willingness to repay the debt and the value of the property.

Zero-Point: Lowers the required funds needed to close

RESPA - Real Estate Settlement Procedures Act

RESPA is about closing costs and settlement procedures. RESPA is a HUD consumer protection statute designed to help home buyers be better shoppers in the home buying process, and is enforced by HUD.

This site explains RESPA, offers FAQ's for home buyers, explains borrower's rights, provides letters for formal complaints, explains the rights and responsibilities of the Mortgage Servicer and provides other resources to review to become an educated home buyer.

INCOME ITEMS
•Pay Stubs for the most recent 30 days.
•Names and Addresses of each employer in the previous 2 years.
•W-2 Forms for the previous 2 years.
•Federal Tax Returns (include all schedules) for the previous 2 years with original signatures.
•Year-to-date Profit and Loss Statement with original signatures.(self-employed only)
•Corporate/Partnership Tax Returns(all schedules) for previous 2 years with original signatures.
•Bank Statements for the most recent 3 months.
•Stocks and Securities Account Statements for the most recent 3 months.
•Verification of:
Commission Income
Child Support
Bonus Income
Overtime Income
Other
Final Divorce papers
Separation papers
Copy of Bankruptcy Petition, Discharge, and a written explanation.
Rental/Lease Agreements
Copy of Notes due you

CREDIT ITEMS
•Name and Address of present mortgage holder or land contract holder.
•Name and Address of landlord and a 12-month rental payment history.
•Rent receipts or canceled checks are acceptable
•Explanation letter for any of the following:
Slow pay on credit
Judgment/Liens
Default, Foreclosure
Bankruptcy

OTHER ITEMS
•Copy of original Purchase Contract or Escrow Papers
•Closing Statement from sale of present property
•Gift letter. Must include amount, relationship of donor,
no repayment required and verification of source of gift.
•Construction/Permanent Loan.
•Signed Construction Contract with cost breakdown, builder plans and paid receipts.