Mortgage Glossary



Abstract of Title

Written summary of all useful documents discovered ina title search.

Acceleration Clause

A clause in a loan document describing certain events that would cause the entire loan to become due. Possible events include sale of the property or failure to repay the debt.

Adjustable Rate Mortgage (ARM)

A loan whose interest rate is periodically adjusted to more closely coincide with current interest rates. The adjustment amounts and times are agreed upon when the loan is created.

Allienation Clause

A clause in a contract giving the lender certain rights in the event of the sale or transfer of a mortgaged property.

Amortization

Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

Amortization Schedule

A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero at the end of the loan term.

Amortized

The reduction of a debt through regular payments of both interest and principal.

Annual Percentage Rate (APR)

The cost of a mortgage stated as a yearly rate; includes such items as interst, mortgage insurance and loan origination fee (points). Use of the APR permits a standard expression of credit costs, which faciliates easy comparison of lenders.

Application

The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

Appraisal

A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

Appraiser

A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appreciation

An increase in value as a result of economic or other related changes. The increase may be temporary or permanent.

APR

Annual Percentage Rate. The interest rate reflected as a yearly rate, taking into account points and other fees.

Assessed Value

The valuation placed on property by a public tax assessor for purposes of taxation.

Assessment

The placing of a value on property for the purpose of taxation.

Assessor

A public official who is responsible for determining the value of a property for taxation purposes.

Assumable mortgage

A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.

Assumption

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. The lender has to be notified and agree to the assumption.