Negative Amortization - 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 balance of the loan. The danger of negative amortization is that the buyer ends up owing more than the original amount of the loan.

Net Effective Income - The borrower's gross income minus federal income tax.

Net Pay - The amount of salary left or clear after taxes and other deductions are taken. Different than gross pay, which is the amount of salary earned before income is taxed and other deductions are taken. Lenders look at your gross and net pay to help decide how much money to lend you.

No Cash-Out Refinancing - A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a 'rate and term refinance.'

No-Cost Loan - Many lenders offer loans that you can obtain at 'no cost.' You should inquire whether this means there are no 'lender' costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a 'no-point' loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

No-Doc Mortgage - A no-documentation or 'no-doc' mortgage is a product that certain lenders offer to borrowers which generally requires a down payment of at least 5% to 30% or more of the home purchase price or who generally have at least 25% equity in their home. Loan programs featuring lower down payments (5-24%) are also available to borrowers with excellent credit. No-doc mortgages are generally a wise choice for self-employed people, those who do not wish to verify their income, and those with a brief or blemished credit history, or no credit. The benefits of a no-doc mortgage include a shorter application process since you are not required to provide income, employment or asset documentation, as well as a streamlined approval process through the lender because there is little subsequent verification. However, no doc mortgages generally will be at slightly higher interest rates and are offered by fewer lenders.

Non-Assumption Clause - A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Non-Conforming Loan - A conventional home mortgage that does not meet the criteria of Fannie Mae or Freddie Mac for various reasons including loan amount, loan characteristics or underwriting guidelines. Non-Conforming loans usually incur a higher rate and/or points.

Notary (Notorized Documents) - A person sanctioned by the state in which they work that certifies in writing with a state stamp that the person or persons signing the documents presented for a loan or realty transaction are who they say they are. Typically they provide copies of their drivers licences and sign a registry book on the date the transaction is signed.

Note - A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note Rate - The interest rate stated on a mortgage note.

Notice of Default - A formal written notice to a borrower that a default has occurred and that legal action may be taken.