mortgages
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Glossary A - B

Abstract of Title
A summary of recorded transactions concerning a particular property.

Acceleration Clause
Condition in a mortgage that gives the lender the right to require immediate repayment of the loan balance if regular mortgage payments are not made or for breach of other conditions of the mortgage.

Accrued Interest
Interest earned but not yet paid.

Adjustable Rate
An interest rate that changes periodically according to an index.

Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that adjusts periodically based on a preselected index, causing interest rates and payments to rise and fall with the market.

Adjustment Interval
The time between changes in the interest rate and monthly payments on an ARM.

Agent
One that acts for or represents another.

Agreement of Sale
Also known as a "sales contract," a written document in which a purchaser agrees to buy
property under certain given conditions, and the seller agrees to sell under certain given conditions.

Alternative Documentation
A method of documenting a loan file that relies on information the borrower is likely to be able to provide, instead of waiting on verification sent to third parties for confirmation of statements made in the application.

Amortization
A monthly repayment schedule in which a loan is repaid in fixed payments of principal and interest.

Annual percentage rate (APR)
The annual cost of a loan, expressed as a yearly rate. APR takes into account interest, discount points, lender fees and mortgage insurance, so it will be slightly higher than the interest rate on the loan.

Application
Often referred to as a 1003, an initial statement of personal and financial information required to approve your loan.

Application Fee
A fee charged by a lender to cover initial costs of processing a loan application, often including charges for property appraisal and a credit report.

Appraisal
A written estimate of a property's current market value, based on recent sales information for similar properties, the current condition of the property and how the neighborhood might affect future property value.

Appraisal Fee
A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date.

APR
See Annual Percentage Rate.

ARM
See Adjustable-Rate Mortgage.

ARM Assumability
Some ARM products feature "assumability" to a qualified applicant. The assumability of an ARM loan may make it more attractive to an applicant who envisions selling their home at a later date. By incorporating an assumable mortgage product, they may be able to make their home more attractive to potential buyers.

ARM Disclosure
An additional disclosure specific to adjustable-rate mortgages that must be prepared and presented to the consumer within three days of application whenever an adjustable-rate mortgage transaction is contemplated (Note: home equity lines have their own unique disclosure).

ARM Handbook
The Consumer Handbook to Adjustable-Rate Mortgages ("CHARM" booklet) must be presented to the consumer within three days of applying for an ARM loan (in addition to the ARM disclosure referenced above).

Amortization Re-cast Period
Pre-determined period of time (expressed either in a number of months and/or a percent of increase from original principal balance) after which any/all accumulated "negative amortization" (aka "deferred interest") is accounted for in a re-amortization of the loan balance over the remaining term of the mortgage at the then prevailing rate of interest. Amortization is also re-casted at each adjustment even if no negative amortization. Typically, any payment cap that would otherwise factor in is disregarded in the event of re-casting.

Amortization Re-cast Limitation
Amortization is most often "capped" at 110 or 125 percent of the original principal balance. Re-amortization typically occurs every 60 months and/or at such time as the balance reaches the pre-determined "cap."

Assessment
A local tax levied against properties that have benefited from civil improvements such as road or sidewalk construction, a sewer or street lights.

Asset
Anything of monetary value that a person owns. Assets include real property, personal property and enforceable claims against others (including bank accounts, stocks, mutual funds and so on).

Assignment
The transfer of property rights from one person to another.

Assumability
A feature of a loan allowing it to be transferred to the new purchaser of a home. Assumable mortgages can help attract buyers because assumption of a loan requires lower fees and/or qualifying standards than a new loan.

Assumption
Agreement between buyer and seller for the buyer to take over the payments on an existing mortgage.

Balance Sheet
A document showing the financial situation-assets, liabilities and net worth of a person at a specific point in time.

Bankruptcy
Proclamation by a court of an individual's (or organization's) state of insolvency, or inability, to pay debts. Petition may be brought by an individual or his creditors, with a goal of orderly and equitable settlement of obligations.

Basis Point
A unit of measure: 1/100th of one percent. For example, the difference between a 9.0 percent loan and a 9.5 percent loan is 50 basis points.

Bearer
The legal owner of a piece of property.

Bequest
A gift of personal property by will.

Bill of Sale
A document that transfers ownership of goods from one person to another.

Biweekly Mortgage
A payment plan under which a mortgagor pays one-half of a monthly payment every two weeks, saving interest substantially over the life of the loan.

Bona Fide
In good faith.

Bond
A document representing a right to certain payments on underlying collateral.

Borrower (Mortgagor)
An individual who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Broker
An individual who assists in arranging funding or negotiating contracts for a client, but does not loan money himself.

Buy-down
A situation in which the seller contributes money that allows the lender to give the buyer a lower rate and payment, usually in exchange for an increase in sales price. With a refinance, this could be paid by the borrower.

Buyer's Broker
An agent hired by a buyer to locate a property for purchase and to represent the buyer in negotiations with the seller's broker for the best possible deal for the buyer.

Buyer's Market
Market conditions that favor buyers. With more sellers than buyers in the market, buyers have ample choice of properties and can negotiate lower prices.

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