GLOSSARY

Acceleration The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.
Adjustable Rate Mortgage An Adjustable Rate Mortgage (ARM) is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Sometimes known as the re-negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
Adjustment Date The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
Adjustment Interval On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.
Adjustment Period The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
Affordable Housing Loans For households of modest means, the greatest barriers to home ownership are coming up with the down payment and closing costs that often are higher than those of the qualifying guidelines allowed in traditional mortgage lending. Fannie Mae, in cooperation with housing providers, offers low- and moderate-income households mortgage loan options that help overcome common barriers to home ownership.
Alternative Documentation Expedited and simpler documentation requirements designed to speed up the loan approval process. The documentation modifications can range from the modest, such as substituting payroll stubs for tax returns, to no documentation whatever.
Amortization Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. Over time, you will repay your mortgage through regular monthly payments of principal and interest. During the first few years, most of your payments will be applied toward the interest you owe. During the final years of your loan, your payment amounts will be applied primarily to the remaining principal.
Amortization Schedule A table showing the mortgage payment, broken down by interest and amortization, the loan balance, and perhaps other data.
Amortization Term The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Annual Percentage Rate The Annual Percentage Rate (A.P.R.) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.
Application A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.
Application Fee A fee that some lenders charge to accept an application. It may or may not be refundable if the lender declines the loan or the borrower cancels.
Appraisal An estimate of the value of property, made by a qualified professional called an "Appraiser".
Appraiser A person qualified by education, training, and experience to estimate the value of real property and personal property.
Appreciation An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Approval Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.
APR The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. It is a comprehensive measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges. It is also adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid ten years down the road.
Assessment A local tax levied against a property for a specific purpose, such as a sewer or street lights.
Asset Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
Assignment The transfer of a mortgage from one person to another.
Assumable Mortgage A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller. Assuming a loan will save the buyer money if the rate on the existing loan is below the current market rate, and closing costs are avoided as well. A loan with a "due-on-sale" clause stipulating that the mortgage must be repaid upon sale of the property, is not assumable.
Assumption The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, probably higher, market-rate interest charges will apply.
Assumption Clause A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
Assumption Fee The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Automated Underwriting A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the applicant will be approved, rejected, or asked for additional information. The quick decision is based on information provided by the applicant, which is subject to later verification, and other information retrieved electronically including information about the borrower's credit history and the subject property.
Balance The amount of the original loan remaining to be paid. It is equal to the loan amount less the sum of all prior payments of principal.
Balance Sheet A financial statement that shows assets, liabilities, and net worth as of a specific date.
Balloon Loans Balloon loans offer lower interest rates for shorter term financing, usually five, seven, or ten years. At the end of this term, they require refinancing or paying off the outstanding balance with a lump-sum payment. Balloon mortgages may be suitable if you plan to sell or refinance your home within a few years and want a fixed, low monthly payment.
Balloon Mortgage A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term. It therefore has a balloon that must be repaid or refinanced. On a 7-year balloon loan, for example, the payment is usually calculated over a 30-year period, and the balance at the end of the 7th year must be repaid or refinanced at that time.
Balloon Payment The final lump sum payment of the remaining loan balance that is made at the maturity date of a balloon mortgage.
Bankrupt A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
Bankruptcy A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.
Before-tax Income Income before taxes are deducted.
Beneficiary The person designated to receive the income from a trust, estate, or a deed of trust.
Binder A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Biweekly Payment Mortgage A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
Blanket Mortgage A mortgage covering at least two pieces of real estate as security for the same mortgage.
Bond An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
Borrower (Mortgagor) One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.
Breach A violation of any legal obligation.
Bridge Loan A short-term loan, usually from a bank, that "bridges" the period between the closing date of a home purchase and the closing date of a home sale. To qualify for a bridge loan, the borrower must have a contract to sell the existing house. Also known as a "swing loan".
Broker An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.
Buy-Down When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
Buy-down Mortgage A temporary buy-down is a mortgage on which an initial lump sum payment is made by lender and/or the home builder to reduce a borrower's monthly payments during the first few years of a mortgage. While the payments are initially low, they will increase when the subsidy expires. A permanent buy-down reduces the interest rate over the entire life of a mortgage.