Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.

A measure of interest rate changes used to determine changes in an ARM's interest rate over the term of the loan.

The introductory interest rate on a loan; signals that there may be rate adjustments later in the loan.

An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.

Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbos must be packaged and sold differently to investors and therefore have separate underwriting guidelines.

A legal hold or claim on property as security for a debt or charge.

A written promise to make a loan for a specified amount on specified terms.

The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period of time, such as 60 days, and may require a fee or premium in the form of a higher interest rate.

The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

The mortgage insurance required on FHA loans for the life of said loans; MIP can either be paid in cash at closing or financed in its entirety in the loan. The premium varies depending on the method of payment.

A type of term life insurance often bought by home buyers. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.

Occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid principal balance, which means that even after several payments the borrowers could owe more than they did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren't high enough to cover the interest.

A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent for FHA and VA loans.

The maximum amount the payment can adjust in any given time frame.

Principal, Interest, Taxes and Insurance.

A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Use may be residential, commercial or industrial.

An amount equal to one percent of the principal amount of the investment or note. Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans.

Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.