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Glossary of Mortgage Terms


If you’re planning to purchase your first home, there are likely a lot of new words you’ll encounter throughout the buying process. Make your experience a smooth one by becoming familiar with common terms that your buyer agent and financial institution will use when helping you complete the purchase.

Adjustable-Rate Mortgage (ARM)

A type of mortgage in which the interest rate is adjusted periodically to reflect the market rates. Rate caps limit the amount a borrower’s interest rate can change. Also called a Variable-Rate Mortgage.

Annual Percentage Rate (APR)

The APR measures both the interest charged and any other costs associated with the loan, such as discount points or lender origination fees. Because the APR is designed to show the total cost of a loan, it can be useful when comparing loans from different lenders.


A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information about a prospective borrower and the proposed loan. 


A professional assessment of a property’s market value; paid for by the borrower.


Assets include real property, personal property, bank accounts, stocks and mutual funds.

Buyer’s Agent

A real estate professional who represents the buyer in the purchase of a home. There’s typically no cost to buyers in working with a buyer’s agent, since he or she receives part of the commission paid by the seller when the house is sold.


Conclusion of a real estate sale, where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties, including but not limited to: seller, previous lender, real estate broker/agents.

Closing Costs

Costs that typically range from 2% to 6% of the loan amount. They include fees paid to state and local governments, as well as those associated with obtaining a mortgage or purchasing discount points.

Courier Fees

Cost of transporting documents between the escrow service and other parties involved in the loan; paid by the borrower.

Credit Score

A numerical measure of an individual’s past borrowing and repaying behavior that’s determined by various factors, such as how the would-be borrower paid his/her bills, any outstanding debt, how long he/she has had credit and what kind, and how many times he/she applied for credit. This credit rating tells a lender the probability of the borrower being able to pay back a loan.


Occurs when a borrower fails to make his/her mortgage payments. A mortgage default progresses through distinct stages, ultimately resulting in foreclosure and eviction.

Discount Points or Points

Prepaid finance charges tied to the interest rate paid by the borrower. Paying a discount point is essentially paying part of the interest to the lender up front. One discount point is equal to 1% of the loan amount, paid at closing.

Down Payment

The part of the purchase price of a home, which the buyer pays in cash up front. Many lenders require a 20% down payment. The amount of the down payment may also affect the interest rate the borrower pays. Lenders offer a variety of programs that make it possible to buy a home with less than 20% down.


The value of a home calculated by taking the market value of a property and deducting the amount, if any, still owing on a mortgage. Equity can be increased by making extra mortgage payments, improving the property and overall rises in real estate values.


An account held by a third party to keep money safe before a mortgage loan is finalized, or closed. Escrow is also used for holding payments earmarked for the homeowner’s annual expenses, such as taxes or insurance.

Excise Tax

A tax on the transfer of ownership from the seller to the buyer that’s paid at closing and based on the sale price of the home; paid by the seller to the escrow agent or the attorney responsible for closing the deal, who then pays it to the government.

Fixed-Rate Mortgage (FRM)

Fixed-rate mortgages remain the most popular type. They offer a fixed interest rate for the life of the mortgage, meaning the monthly principal and interest payments never change.


A legal process of taking possession of a mortgaged property as a result of the borrower’s failure to make his/her mortgage payments.

Homeowner’s Insurance

Insurance that protects property against loss from theft, liability and most common disasters; usually required by lenders.


Done by an independent home inspector to provide information about the condition of the house; paid for by the borrower. This report is not typically required by the lender and can be used by the buyer as a point of negotiation to have needed repairs made.

Interest Rate

The cost of borrowing, stated as a percentage, charged by a lender on the principal amount of a mortgage.

Loan Officer

Your day-to-day contact with a mortgage lender, such as La Cap. Your loan officer, also known as a “mortgage loan originator,” can help you create a home-shopping budget and complete your mortgage application. He or she can answer questions such as which type of loan may best suit your individual needs and whether you should consider paying discount points.


The originator of mortgage loans, such as a credit union like La Cap, a mortgage banker, commercial bank or a savings-and-loan company. 

Loan Origination Fee

A fee imposed by a lender to cover processing expenses in connection with making a real estate loan; paid by the Borrower.

Mortgage Loan

The low-interest, long-term loans extended to consumers and investors for the purpose of buying a house.


The principal, interest, taxes and insurance paid by a homeowner.


The process of determining how large a loan a prospective home buyer can qualify for. This procedure is done before actually applying for the loan and is not a loan approval or commitment. 

Principal Balance

The outstanding amount of a mortgage loan, not including interest or the amount on the note and minus any principal payments that have been made.

Private Mortgage Insurance (PMI)

Insurance provided by a non-government insurer to protect a lender against loss if a borrower defaults; paid by the borrower.

Rate Lock

The guarantee of a specific interest rate and/or points for a specific period of time. Some lenders may charge a fee for locking in an interest rate.

Recording Fees

Costs to record the transfer ownership of property with the parish; paid by the borrower.


The process of obtaining a new mortgage, usually at a lower rate, to repay and replace an existing mortgage. 

Seller’s Agent

A real estate professional representing the seller. The buyer usually does not have contact with the seller’s agent. The buyer’s agent will work closely with the seller’s agent on the buyer’s behalf.


Map made by a licensed surveyor who measures the land to chart its boundaries, improvements and relationship to the property surrounding it; usually paid for by the borrower.

Title Insurance

A form of indemnity insurance that insures a seller against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans.

Title Search

A review of public records to confirm a property’s legal ownership and find out what claims (liens or other judgments) are on the property that’s usually performed by a title company or an attorney; paid for by the borrower.


The 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.


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