A mortgage is a written pledge for the repayment of a loan using real property as security. The property you purchase is the collateral for the mortgage. If you fail to make payments on the loan, the lender can repossess your home. Mortgage loans are usually fully amortizing, which means that the monthly principal and interest payemnt will pay off the loan in the number of payments stipulated on the note.  Mortgage loans are also described by the length of time for repayment - 15, 30, and whether the interest rate is fixed or adjustable.  With amortization, your monthly payments are largely interest during the early years and principal later.

In addition to your principal and interest, your mortgage payment could include money that's deposited in an escrow or trust account to pay certain taxes and insurance.

Down Payment - Before the principal is financed you can give the lender a sum of cash called a down payment to reduce the amount of money that will be financed. If your down payment is less than 20 percent, your lender considers your loan riskier than those with larger down payments.

Principal - The principal is simply the sum of money you borrowed to buy your home.

Interest - Usually expressed as a percentage called the interest rate. Interest is what the lender charges you to use the money you borrowed. As well as the given rate, the lender could also charge you points, and additional loan costs.

Taxes - The taxes are property taxes your community levies based on a percentage of the value of your home. The tax is generally used to help finance the cost of running your community; for instance, to build schools, roads, infrastructure, and other needs. You must pay property taxes even if you don't need an escrow account and even after your mortgage is paid off.

Insurance - This is the hazard insurance you will carry in case of fire, theft, flood, and other catastrophic events.

Point - Each point is one percent of the financed amount and is financed along with the principal.

Mortgage lenders will use this terminology often when discussing financing your new home.  Don't feel afraid to ask questions if you have them.  Most people do not purchase homes that often and things change in the financial world.  Make sure you find a lender that can help you to feel comfortable throughout the process.