Abstract of Title
A summary of recorded transactions concerning a property. (An attorney or title insurance company examines an abstract of title for any title defects that must be cleared before a buyer can purchase clear, marketable, and insurable title.)
Acceleration Clause
Condition in a mortgage that gives the lender the right to require immediate repayment of the loan balance if regular mortgage payments are not made, or for breach of other conditions of the mortgage.
Accrued Interest
Interest earned but not yet paid.
Adjustable Rate
An interest rate that changes periodically according to an index.
Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes over time in line with movements in the index. ARMS are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).
Adjustment Period
The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.
Agreement of Sale
Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
Alternative Documentation
A method of documenting a loan that relies on information the borrower is likely able to provide instead of waiting as a substitute for verification sent to third parties to confirm statements made in the loan application. For example, traditional full documentation calls for the lender to get a written verification of bank balance directly from the borrower’s bank. Under alternative documentation, the lender instead relies upon copies of bank statements provided by the borrower.
Amortization
Repayment of a loan in installments of principal and interest, rather than interest-only payments.
Annual Percentage Rate (APR)
The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.
Application
An initial statement of personal and financial information required to approve a loan, provided by the borrower and necessary to initiate the approval process for a loan.
Application Fee
Fees charged by lender at loan closing to cover the initial cost of processing a loan application.
Appraisal
A written estimate of a property’s current market value, based on recent sales information for similar properties, the condition of the property and the neighborhood’s impact on future property value.
Appraisal Fee
A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date.
APR
See Annual Percentage Rate.
ARM
See Adjustable Rate Mortgage.
Assessment
A local tax levied against a property for a specific purpose, such as road or sidewalk construction or sewer or street light installation.
Assignment
The transfer of property rights by one person, the assignor, to another, the assignee.
Assumablility
A loan feature that allows the loan to be transferred to the new purchaser of a home. Assumable mortgages can help attract buyers since assumption of a loan requires fees and/or qualifying standards lower than a new loan.
Assumption of Mortgage
A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.