Mortgage Terms and Definitions
When you first apply for a mortgage loan, it can seem as though there is a whole new language to learn. Below are some of the common mortgage terms, aloong with a plain-English explanation of what each term means.

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Amortization
The periodic principal pay down of a loan.
APR (Annual Percentage Rate
The actual cost of a mortgage expressed as a yearly rate. This is usually HIGHER than the advertised rate for the mortgage because it takes into account the points paid, and other costs of credit.
ARM (Adjustable Rate Mortgage
A mortgage in which the interest rate is adjusted, usually annually, based on a preselcted index.
Balloon Payment Mortgage
A mortgage which involves small payments, usually monthly, for a set period, with the entire remaining principal balance of the loan coming due at a specified time.
Caps on interest
Consumer safeguards which limit the amount the interest on an adjustable rate mortgage can increase in a given year, or over the lifetime of the loan.
Certificate of Eligibility
A document provided to qualified veterans that entitles them to a VA loan.
Closing
The meeting at which the property and funds actually change hands
Construction Loan
A short-term loan for financing the cost of construction for a newly built home.
Conventional Loan
A mortgage not insured by FHA or guaranteed by the VA.
Credit Report
A report documenting the borrower's credit standing.
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