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Mortgage Terms Defined

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  • 2/1 Buy Down Mortgage
    The 2/1 Buy Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for(...)
  • Abstract of Title
    A summary of recorded transactions concerning a particular property
  • Acceleration Clause
    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.
  • Accrued Interest
    Interest earned but not yet paid
  • Additional Principal Payment
    A way to reduce the remaining balance on the loan by paying more than the scheduled principal amount due.
  • Adjustable Rate
    An interest rate that adjusts periodically according to an index.
  • Adjustable Rate Mortgage (ARM)
    A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called 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 buyers ability to afford the purchase of 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 closing costs that are likely.
  • Agent
    One that acts for or represents another
  • Agreement of Sale
    aka 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 for verifications sent to third parties for confirmation of statements made on the loan application.
  • Amortization
    The gradual repayment of a mortgage loan, both principle and interest, by installments.
  • Amortization Re-Cast Limitation
    Amortization is most often “capped” at 100 or 125 percent of the original principal balance. Re-amortization typically occurs every 60 months and/or at such time as the balance reaches a pre-determined “cap”.
  • Amortization Re-Cast Period
    Pre-determined period of time (expressed either in number of months and/or 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(...)
  • Amortization Term
    The length of time required to amortize 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, however APR should not be confused with the actual note rate.
  • Application
    An initial statement of personal and financial information. Once six essential items are submitted to the lender the application process begins. These items are 1. Borrower’s name. 2. The borrower’s monthly income. 3. The borrowers Social Security number. 4. The property address. 5. The(...)
  • Application Fee
    A fee charged by a lender to cover initial costs of processing a loan application. It often includes charges for the appraisal and the credit report.
  • Appraisal
    A written analysis prepared by a qualified appraiser and estimating the value of a property.
  • Appraisal Fee
    A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date.
  • Appraised Value
    An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
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