Buy-down:
A mortgage subsidy that is sometimes offered by a homebuilder to help buyers afford the property. The builder pays a portion of the interest payment for a few months (or sometimes a few years), thereby lowering the initial monthly payment for the buyer.

Close of Escrow:
The end of the Escrow Period, or the date that a homebuyer takes possession of their new home. At the close of escrow, the Escrow Company prepares several documents which are signed by the builder and the buyer. The Escrow Company then makes all final payments to the builder, and the homebuyer receives the keys to their brand new home.

Closing Costs:
All upfront fees and charges related to the home purchase, excluding the down payment. Closing costs may include points or other origination fees, any pre-paid interest, pro-rated property taxes (if any), etc. For most loans, the closing costs are paid by the buyer at the close of escrow.

Credit Report:
A report from an independent credit rating service (such as TRW or Equifax) listing all of your current obligations to various creditors, including credit card companies, car payments, student loans, etc. The report shows how much is owed, as well as whether your payments are generally on time. A credit report is a required document when applying for a home loan.

Deed of Trust:
The document that pledges the subject property as collateral for the repayment of the loan.

Deposit/Earnest Money:
Money paid by the buyer in "good faith" to assure performance of contract.

Down Payment:
The portion of the purchase price which a buyer pays before moving in. Often, the down payment is expressed as a percentage of the total purchase price, typically between 3% and 20%. If you have never owned a home before, your down payment often comes from personal savings, an employer-sponsored 401K program, or other source. If you are selling one home in order to buy another, then your down payment usually comes from the equity in your current home. In addition to the down payment, there are usually other costs and fees called closing costs which a buyer needs to pay before moving in.

Equity:
The portion of a home's total current value that is "owned" by the homeowner. To calculate the amount of equity you have in your home, take the current value and subtract the amount still outstanding on your mortgage loan.

Escrow Period:
The period between the time you sign a purchase contract and you actually take possession of the home. During this period, a buyer deposits a series of payments to a neutral third party (called the Escrow Company), covering the down payment and closing costs. At the end of the process, the Escrow Company gives the payments to the builder, and the buyer gets possession of the house. Depending on circumstances, this process typically takes from one week to 45 days.

FHA Mortgage:
A mortgage that is insured by the Federal Housing Administration which offers low rate, low down payment mortgages to buyers (terms vary county by county).

Good-Faith Estimate:
A line item estimate from a lender of total closing costs.

Homeowner's Insurance:
Insurance including hazard coverage that insures for damages that may affect the value of a house, in addition to personal liability and theft coverage. Available through the KB HOME Insurance Agency, Inc..

Interest:
The amount that is added onto your loan (in dollars) to cover the cost of borrowing money to finance your home. The "interest payment" is the portion of your monthly payment that is applied against the interest owed. At the beginning of your loan period, the majority of your monthly payment is applied against the interest. But over time, more and more of the payment is used to reduce the amount of principal owed.

For most people, a portion of their annual mortgage interest payment is tax-deductible. Consult your tax advisor for details.

Interest Rate:
The cost of borrowing, expressed as an annual percentage of the principal. Many factors influence the interest rate you will be charged, including the overall state of the economy, the cost the lender is charged to borrow the funds, etc.

Loan-to-Value (LTV) Ratio:
The ratio of the amount of money owed on a home to the home's value. The difference between these two figures initially is the down payment.

Mortgage Analysis:
A calculation of how much home you can afford, based on your income, your current credit obligations, etc. KB HOME offers a free Mortgage Analysis on-line or by calling 1-800-34-HOMES.

Origination Fee:
See points.

PITI (Principal, Interest, Taxes and Insurance):
The total amount of your monthly payment. Principal and interest (P&I) are due on every loan. Taxes and insurance (T&I) are also included if the lender requires an impound account.

Pre-Qualification:
Another name for a Mortgage Analysis.

Principal:
The amount of your loan (in dollars), excluding interest. The "principal payment" is the portion of your monthly payment that is applied against the principal. In the first several years of your loan, only a small amount of the payment is applied to the principal. As time goes on, more and more of the payment is used to reduce the amount of principal owed.

Title Company:
Firm that ensures that the title, or actual legal document of ownership, on a property is clear and provides title insurance.

VA Loan:
VA loans are available to active members of the armed forces, as well as to veterans and unremarried surviving widows of veterans. VA loans are backed by the Veterans Administration, which offers several benefits to buyers:

Variable Interest Rate Loan:
Another name for an Adjustable Rate Mortgage (ARM).