Home Loan Glossary

80/20 LOAN - This is a type of loan where 80% of the loan is taken out with one lender and 20% is taken out with a different lender so that the risk of the mortgage for the house is split between them.

ARM - Adjustable Rate Mortgage - this is a mortgage without a fixed interest rate that can change over time.

CLOSING - This is the final process for selling a home from one entity to another. It usually involves several fees and paperwork.

EQUITY - The value of a house compared to how much is owed on it to the mortgage company. For example a house that is valued at $200,000 but only has $160,000 left on the mortgage is said to have $40,000 worth of equity.

ESCROW - This is the period between the sale of a home from one person (entity) to another. When a home is in the middle of negotiations, and paperwork it is said to be in escrow. Escrow is usually managed by an independent 3rd party business.

FINANCE COMPANY - This is the bank or lending institution that is giving money for the purchase of the home.

FIXED INTEREST - The interest rate that is paid on the home can be fixed or variable (ARM). A fixed interest rate is set at the time of the purchase of the home and does not change over the life of the mortgage.

MORTGAGE - A loan used to purchase a house or land.

VA LOAN - A loan available to military veterans and active-duty servicepersons. The loan is guaranteed by the federal government and therefore easier to obtain on less-than-perfect credit.