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Mortgage Terms

Acceleration: The right of the mortgagee to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor, or by using the right vested in due on sale clause.

Adjustable Rate Mortgage (ARM): a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as a renegotiable rate mortgage, variable rate mortgage.

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 afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage, the location where you want to purchase a home, and the closing costs that are likely.

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: 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)

Annual Percentage Rate (APR): calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

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 document that gives an estimate of a property's fair market value; 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.

Appraised value: the fair market value of a property based on the opinion of the appraiser, his or her knowledge, experience and analysis of the property.

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

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.

Assessment: a local tax levied against a property for a specific purpose.

Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.

Assignment: transfer of a mortgage from one person to another.

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: see Assumable mortgage

Assumption fee: a fee paid to a lender when an assumption takes place.