Glossary of Lending Terms

ADJUSTABLE-RATE MORTGAGE (ARM) – Mortgage with an interest rate that can change up or down at set intervals depending on current market conditions.

CREDIT SCORE – Number used to evaluate the likely future performance of a borrower. Credit scores are an attempt to quantify scientifically and mathematically the borrowing and loan-paying habits of individuals.

DEFAULT – Failure to perform to the terms and conditions of a mortgage agreement. Typically when a person is in default of a mortgage the lender seeks to foreclose on the property to protect his or her investment.

DELIQUENCY – State of being late with a mortgage payment. When a payment is not made by the payment due date then the borrower is said to be delinquent in his or her payments.

FIXED-RATE MORTGAGE (FRM) – Mortgage with an interest rate and with monthly payments which do not vary during the entire duration of the loan. FRMs are also often called fully-amortized loans.

FORECLOSURE – When a lender takes legal possession of a piece of property with the intent of selling the property in order to recoup a loan made against the property. A foreclosure generally takes place after a borrower has defaulted on a loan. The borrower generally receives nothing out of a foreclosure sale.

LOAN-TO-VALUE RATIO – Relationship of the value of a property as compared to the loan used to purchase the property. The higher the loan-to-value ratio, the more difficult for which a loan is to qualify.

MORTGAGE – Legal document that pledges a property to a lender in the event that the borrower cannot make payments or does not live up to other terms of the sales agreement. The loan itself is also sometimes referred to as a mortgage.