GLOSSARY OF TERMS
Abstract of Title - A summary of the public records relating to the ownership of a particular piece of land. Represents a short legal history of an individual piece of property and traces the ownership of the property from the time of the first recorded transfer to present. Acceleration Clause - The provision in a mortgage that allows the lender to demand payment of the entire principal balance if a monthly payment is missed or some other default occurs. Additional Principal Payment - A way to reduce the remaining balance on a loan by paying more than the schedule principal amount due. Adjustable Rate Mortgage (ARM) - A mortgage with an interest rate that changes during the life of the loan according to the movements in an index rate. Sometimes referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate-mortgages) Adjusted Basis - The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken. Adjustment Date - The date that the interest rate changes on an adjustable-rate mortgage (ARM). Adjustment Period - The period elapsing between adjustment dates for an adjustable-rate-mortgage (ARM). Affordability Analysis - An analysis of a buyer’s ability to aord a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase a home and the likely closing costs. Amortization - The gradual repayment of a mortgage loan, both principal and interest, by installments. Amortization Term - The length of time required to amortixe the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage. Annual Percentage Rate (APR) - The cost of credit, expressed as a yearly rate including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans. APR should not be confused with the actual note rate. Appraisal - A written analysis prepared by a qualified appraiser, which estimates the value of a property. Appraised Value - An opinion of a property’s fair market value based on an appraiser’s knowledge, experience, and analysis of the property. Appreciation - Increase in value due to any cause. Asset - Anything owned of monetary value including real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.) Assignment - The transfer of a mortgage from one person to another. Assumability - An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not ne assumed by a new buyer. Assumption Fee - The fee paid to a lender - usually by the purchaser of real property when an assumption takes place. Balance Sheet - A financial statement that shows assets, liabilities, and net worth as of a specific date. Balloon Mortgage - A mortgage with level monthly payments that amortizes over a stated term, but also requires that a lump sum payment be paid at the end of an earlier specified term. Balloon Payment - The final lump sum paid at the maturity date of a balloon mortgage. Before-tax Income - Income before taxes are deducted. Bi-weekly Payment Mortgage - A plan to reduce the debt every two weeks instead of the standard monthly payment schedule. The 26 (or possibly 27) bi-weekly payments are equal to one--half of the monthly payment required if the loan were a standard 3-year fixed-rate mortgage. The result for the borrower is substantial savings in interest. Bridge Loan - A second trust that is collateralized by the borrower’s present home allowing the proceeds to be used to close on a new house before the present home is sold. Also known as “swing loan”.
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