Mortgage Glossary



HELP: Homebuyer Education Learning Program; an educational program from the FHA that counsels people about the homebuying process; HELP covers topics like budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price.

Home inspection: an examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.

Home warranty: offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; ,overage extends over a specific time period and does not cover the home's structure. For more information, see our guide explaining how new home warranties work.

Homeowner's insurance: an insurance policy that combines protection against damage to a dwelling and Is contents with protection against claims of negligence )r inappropriate action that result in someone's injury or )property damage.

Housing counseling agency: provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and homebuying. Find a HUD-approved housing counseling agency near you.

HUD: the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws. For more information, see the HUD website.

HUD1 Statement: also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing.

HVAC: Heating, Ventilation and Air Conditioning; a home's heating and cooling system.


Index: the measure of interest-rate changes that a lender uses to decide how much the interest rate on an adjustable-rate mortgage (ARM) will change over time. No one can be sure when an index rate will go up or down. To help you get an idea of how to compare different indexes, the following chart shows a few common indexes over an eleven-year period (1994-2004). As you can see, some index rates tend to be higher than others, and some more volatile (if a lender bases interest-rate adjustments on the average value of an index over time, however, your interest rate would not be as volatile). You should ask your lender how the index for any ARM you are considering has changed in recent years, and where the index is reported. For more information, see our guide explaining how indexes are used in adjustable-rate-mortgages.

ARM Index Rates This graph shows interest rates from 1994 to 2004, including the national average mortgage contract interest rate (from 7.3% in 1994 to 5.6% in 2004), the interest rate on one year Treasury securities (from 5.3% in 1994 to 2.7% in 2004), and the cost of funds for savings and loan associations (from 4.3% in 1994 to 2.1% in 2004).

Inflation: the number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.

Interest: a fee charged for the use of money .

Interest rate: the amount of interest charged on a monthly loan payment; usually expressed as a percentage.

Insurance: protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.

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