NEGATIVE AMORTIZATION – The loan balance increasing over time (often due to monthly payments being less than the interest owned).

PARTY-HAT MORTGAGE – Michael made this up to be funny.

PITI – An acronym for payments to a lender that cover principle, interest, taxes and insurance on a property.

PMI – PRIVATE MORTGAGE INSURANCE –     Insurance protecting the bank against foreclosure covering a percentage of property value. This is required on most loans with an LTV of 80% or greater.

POINTS – Up-front charge for making the loan (1 point = 1% of loan amount).

PREPAYMENT PENALTY – A fee paid by the borrower if they pay their loan before it is due.

PRINCIPAL – The balance still owed or the amount of money borrowed on a loan.

PROMISSORY NOTE – This document is signed and given to the lender by the borrower. It will explain what is owed and how it will be paid.

RATE CAP – A limit on how much the variable-interest rate can increase during the life of the loan.

REFINANCING – This process involves getting a new mortgage, usually with a lower rate to pay off your existing loan.

REVERSE MORTGAGE – The lender makes payments to the borrower (a form of negative amortization). Certain restrictions apply.

SECONDARY MARKET – The buying and selling of mortgages after closing.

SONYMA (STATE OF NEW YORK MORTGAGE ASSOCIATION) – This is a state-funded program for first-time home buyers who may be eligible for special mortgage rates. Check with your lender to see if you can qualify.

TITLE – A document showing ownership of property.

TITLE INSURANCE – Insurance against defects in title.

TITLE SEARCH – This report offers the present condition of property and reviews a specific piece of real estate to guarantee there are no liens, encumbrances, ownership concerns, etc.

TRANSFER TAX – City, county, or state taxes imposed when property passes from one person to another.

VA (VETERAN’S ADMINISTRATION) – A government agency that insures loans for those involved in the armed services (service persons/veterans).

VARIABLE RATE MORTGAGE – A mortgage loan in which the interest rate may increase or decrease at specified intervals within certain limits based upon an economic indicator.