Know the Lingo

For most people, getting a mortgage is an integral part of purchasing a home. But if you are new to the process, you are likely to encounter industry-specific words you may not know.

Here are the basics:

• Deposit - The amount you agree to give the seller at the time the sales contract is signed.
• Principal – The amount of money a borrower owes on a mortgage. In other words, how much you will owe the bank or lender once the loan is assumed.
• Down Payment - The difference between the purchase price, the initial deposit and the mortgage principal balance. It's the amount of cash you bring to the closing table that is not financed.
• Private Mortgage Insurance (PMI) – Many lenders will make provisions for those who cannot afford the standard down payment of 20 percent of the purchase price. Instead, they will drop the required down payment, but charge a fee called PMI. This may require an initial up-front payment followed by monthly fees.
•Principal, Interest, Taxes and Insurance (PITI) – This acronym stands for the four parts of the monthly mortgage payment.
• Point – Some buyers are able to reduce their principal by buying mortgage points. This is prepaid interest given to the lender at the closing. Each point is equal to 1 percent of the loan amount.

Visit Century21.com for more mortgage terms and definitions. The online glossary contains more than 900 entries.