Mortgage Glossary

Earnest Money:

Money put down by a potential buyer to show that he or she is serious about purchasing the home.  It becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

Equity:

An owner’s financial interest in a property.  Calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.

Escrow Account:

A separate account into which the lender puts a portion of each monthly mortgage payment.  An escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.