Glossary of Words & Terms:
"A" Loan or "A" Paper: a credit rating where the FICO score is 660 or above. There have been no late mortgage payments within a 12-month period. This is the best credit rating to have when entering into a new loan.
Acceleration:The right of the lender to demand payment on the outstanding balance of a loan.
Acceptance: The seller's written approval of a buyer's offer.
Acre: A measurement of land equal to 43,560 square feet.
Addendum: an addition or change to a contract.
Adjusted Cost Basis:The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it is sold.
Adjustment Date: the actual date that the interest rate is changed for an ARM (Adjustable Rate Mortgage).
Adjustment Index: the published market index used to calculate the interest rate of an ARM at the time of origination or adjustment.
Adjustment Interval: the time between the interest rate change and the monthly payment for an ARM. The interval is usually every one, three or five years depending on the index.
Administrator: A person given authority to manage and distribute the estate of someone who died without leaving a will.
Affidavit: a signed, sworn statement made by the buyer or seller regarding the truth of information provided.
Amenity: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, woods, water) or man-made (like a swimming pool or garden).
Amortization: a payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest-only. The monthly amount is based on the schedule for the entire term or length of the loan.
Annual Percentage Rate (APR): a measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.
Application Fee: a fee charged by lenders to process a loan application.
Appraisal: a document from an educated professional appraiser that gives an estimate of a property's fair market value based on the sales of comparable homes in the area and the features of a property; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
Appreciation: an increase in property value.
ARM:Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap. "As is" Condition: a term used to suggests the buyer is accepting the property in it present state and without repairs being done.
Asking Price: a seller's stated price for a property.
Assessed Value: the value that a public official has placed on any asset (used to determine taxes).
Assessments: the method of placing value on an asset for taxation purposes.
Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.
Assets: any item with measurable value.
Assumable Mortgage: when a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. An assumable mortgage can help you attract buyers if you sell your home.
Assumption Clause: a provision in the terms of a loan that allows the buyer to take legal responsibility for the mortgage from the seller.
Automated Underwriting: loan processing completed through a computer-based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer.
Average Price: determining the cost of a home by totaling the cost of all houses sold in one area and dividing by the number of homes sold.