Acceleration clause: A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

Appraisal: The process of valuing property. What would a willing buyer pay a willing seller for the property?

Balloon mortgage: A mortgage in which the scheduled payments of principal and interest do not fully cover the loan so that a lump sum is due at a specified date, usually at the end of the loan's term.

Biweekly mortgage: A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

Bridge loan: For people who must buy a new home before selling their old one. “Home Buying for Dummies" calls this an “inadvisable situation." A bridge loan lets you borrow against the equity in your old home until it sells; but the fees for these loans can be steep because you only need the money for a few months.

Capital gains: The amount of net profit made on the sale of a property.

Cash-out refinance When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."

Cash reserve: A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two mortgage payments.

Commitment letter: A former offer by a lender stating the terms under which it agrees to loan money to a borrower.

Condominium: Some people may mistakenly think that a condominium must be an apartment building, but that‘s not the case. Condominium refers to the way the property ownership is structured. When you buy a condo, you own the interior of your unit and share ownership of the property‘s exterior with the rest of the condo owners.

Cosignor: If you have a spotty credit record, you may need help landing a mortgage. A friend or relative could help your chances by cosigning on your mortgage. Cosignors do not improve your credit rating. However, the arrangement may not work out so well for the cosignor, because it will adversely affect their credit rating since the mortgage becomes a liability against their borrowing power.

Deed: A legal document that transfers ownership of property from one person to another.

Delinquency and default: At first you are delinquent; then you are in default. Delinquency occurs when a monthly mortgage payment is not received by the due date. Default is the failure to make your monthly mortgage payments on time. You are officially in default when you have missed two or more monthly payments. Default also refers to other violations of the mortgage terms. Default can lead to foreclosure on your home.

Depreciation: A decline in the value of a home as a result of time, changes in the housing market, wear and tear, adverse changes in the neighborhood and its patterns, or for any other reason.

Effective age: An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Equity: The interest or value that the owner has in a piece of real estate over and above the liens against it. For example, if a property owner owes $60,000 on a mortgage for a home valued at $100,000, she has $40,000 in equity.

Escrow: Escrow is a legal arrangement in which an asset (often money, but sometimes other property such as art, a deed of title) is delivered to a third party to be held in trust until a contingency or conditions of the sale are fulfilled. After the terms of the deal are met, the escrow agent will deliver the asset to the proper recipient.

Escrow account: Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.

Exclusive listing agreements: There are several types of listing agreements that a homeowner can enter with a broker to arrange a real estate sale. The most common in Massachusetts is an “exclusive right to sell" agreement. Under this arrangement, the listing broker is given the right to earn a fee for professional services if the property is sold to anyone, including to a buyer located through the homeowner‘s efforts.

Federal National Mortgage Association: Better known as Fannie Mae, the organization is one of the best-known institutions in the secondary mortgage market. Fannie Mae buys mortgages from banks and other lending institutions, then sells them to investors. The Federal Home Loan Mortgage Corp., or Freddie Mac, is in the same field. Both are publicly traded companies.

FICO score: Fair, Isaac & Company credit-scoring system used by many lenders to determine a borrower‘s ability to repay a mortgage. FICO scores range from 300 to 850 - the lower the score, the higher risk. You can check your FICO score through the three major credit rating agencies - Equifax, Trans Union and Experian.

First mortgage: The mortgage that has the first claim in the event of default.

Flip: To buy and sell a property almost immediately, within days or hours, for a quick profit.

Home Equity Conversion Mortgage (HECM): Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

Homeowner's warranty: A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

Implied agency: Occurs when the words and actions of the parties involved in a deal indicate that there is an agency relationship. For example, a homeowner creates implied agency when he asks a broker to sell his home, even if there is no written listing.

Lease option: An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

Lien: A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

Loan-to-value ratio: A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased. The higher the loan-to-value ratio, the less cash a borrower is required to pay as a down payment.

Marketable title: The form of title generally required to be delivered at the sale of property. It demonstrates that property is free from liens and there are no defects in the title, other than those noted or agreed upon.

Master deed: Used by condominium developers, or person converting a building to condominium ownership, for recording a condo development. It divides a single property into individually owned units, includes restrictions on their use and provides for ownership of common areas.

Mortgagee: The bank or lender who loans money to someone to buy a home is the mortgagee. Meanwhile, the homeowner who is repaying the loan is a mortgagor.

Multiple listing service: A central database of most, if not all, of the homes listed for sale by all members of the multiple listing service, or MLS, within a certain geographic region. For example, the Cape Cod & Islands Multiple Listing Service serves local real estate agents and their clients.

Negative amortization: Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

Nonconforming use: In zoned areas, a use that does not comply with the area‘s zoning rules, but that existed before the zoning regulation took effect.

Offer: An expression of willingness to purchase a property at a specified price or of willingness to sell. In real estate an offer is made by either party to the other.

Origination fee: A term commonly used in real estate financing. It refers to a fee or charge for work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

Overage: In leases for retail stores, the over is the amount to be paid, based on gross sales, over the base rent. This comes into play with a percentage lease, in which the rental fee is based on a percentage of the volume of sales made upon the leased property. It usually stipulates a minimum rent.

Owner‘s affidavit: This is a document that you may see during the mortgage closing process. In this document the seller swears that there are no unpaid liens, assessments, or other encumbrances against the property. The affidavit protects the buyer, lender, and title company. If the seller is lying, he or she can be sued for damages.

PITI: Stands for principal, interest, taxes and insurance - all the components of a monthly mortgage payment.

Predatory lending: A practice attributed to certain mortgage lenders that seeks to take advantage of the ignorance or gullibility of borrowers. Often associated with refinancing, home equity lending or home improvement lending, these practices take on several forms: saddling borrowers with more debt than they can handle, tricking a borrower into a loan with high rates and junk fees, and overcharging or charging twice for required services.

Prepayment penalty: A fee charged to a borrow who pays off a loan before it is due.

Private mortgage insurance: Commonly referred to as PMI, private mortgage insurance protects the bank, or mortgage lender, in the event that a buyer defaults on mortgage payments. PMI is required if the buyer is not making a down payment of at least 20 percent of the sale price. It is not a permanent cost, however. The Homeowner‘s Protection Act of 1998 stipulates that PMI should be canceled once the debt is less than 80 percent of the home‘s value.

Promissory note: A promise to pay a specified sum to a specified person under specified terms.

Quitclaim deed: This is a device often used to deal with title problems. Anyone with a potential claim against the property can sign it, thereby releasing rights he or she might have had, although this alone isn‘t enough to ensure a clear title for the new owner.

Real estate owned: Property acquired by a lender through foreclosure and held in inventory. Commonly referred to as REO.

Real Estate Settlement Procedures Act, or RESPA: A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real property: Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Replacement cost: The cost of erecting a building to replace or serve the functions of a previous structure. Consumers will typically encounter this phrase when buying homeowner‘s insurance.

Right of first refusal: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Sweat equity: Value added to a property due to improvements as a result of work performed personally by the owner.

Tenancy in common: This arrangement allows each owner in a joint purchase to have separate legal title to an undivided interest in the property, and each is allowed to independently sell, mortgage, or give away his interest. The agreement should specify the percentage of ownership interest each person has.

Title insurance: Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

Underwriter: One who insures another or takes certain risks. In mortgage lending, it refers to the person who reviews the mortgage application for the bank or lending institution, then decides if the applicant is a suitable risk.