The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down payment. Down payment is the difference between the sales price and maximum mortgage amount. The down payment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the down payment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down payment and to pay interest and expenses incurred by the purchaser.

A State tax, in the forms of stamps, required on deeds and mortgages when Real Estate title passes from one owner to another. The amount of stamps required varies with each State.

When the note rate on a loan is less than the market rate, the lender requires additional points to raise the yield on the loan to the market rate.

The amount by which the sales price of a note (or financial instrument) is below or less than its face value. The purpose of a discount is to adjust the yield upward either in lieu of interest or in addition to interest. Discount points are payable to the lender by the borrower or seller to increase the lender’s effective yield. One point is equal to 1% of the loan.

The U.S. government agency that administers FHA , GNMA and other housing programs.

Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

A sum of money given to bind a sale of Real Estate. Also known as earnest money.

Failure to make payments on time. This can lead to foreclosure.

Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid principal balance of the loan. Also called negative amortization. The danger of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor’s responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.