Glossary of Mortgage Loan Related Terms

Earnest Money

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Effective Interest Rate

The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

Encumbrance

A claim against a property by another party which usually affects the ability to transfer ownership of the property.

Entitlement

The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity

The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

Escrow

An account held by the lender into which the home buyer pays money for tax or insurance payments. Also earnest deposits held pending loan closing.