| Acceleration Clause: | |
| allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan. | |
| Adjustable Rate Mortgage (ARM): | |
| is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage. | |
| Adjustment Interval: | |
| on an adjustable rate, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index. | |
| 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. | |
| Annual Percentage Rate: | |
| 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. This rate or advertised rate on the mortgage, because it takes into account points and other credit costs. This (APR) allows homebuyers to compare different types of mortgages based on the annual cost for each loan. | |
| Appraisal: | |
| an estimate of the value of property, made by a qualified professional called a "appraiser". | |
| Assumption: | |
| the agreement between the buyer and the seller where the buyer takes over the payments on a existing mortgage from the seller. Assuming a loan can save the buyer money since this is a existing mortgage debt, unlike a new mortgage where closing cost and new possibly higher, market rate interest charges will apply. | |
| Balloon Payment Mortgage: | |
| usually a short term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract. | |
| Broker: | |
| an individual in the business of assisting in arranging funding or negotiating contracts for a client but 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 homebuilder subsidizes 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 sudsidy expire. | |
| Caps (Interest): | |
| consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and / or the life of the loan. | |
| Caps (Payment): | |
| consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage can change. | |
| Closing: | |
| the meeting between the buyer, seller and lender or their agents where the property and funds change hands. Also called settlement. | |
| Closing Cost: | |
| usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deeds recording fee, credit report charge and other cost assessed at settlement. The cost of closing usually are about 3-6% of the mortgage amount. | |
| Commitment: | |
| an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions. | |
| Construction Loan: | |
| a short-term loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses. | |
| Conventional Loan: | |
| a mortgage not insured by FHA or guaranteed by the VA or Farmers Home Administration (FMHA). | |
| Credit Report : | |
| a report documenting the credit history and current status of a borrower's credit standing. | |
| Debt-to-income-Ratio : | |
| the ratio, expressed as a percentage, which result when a borrower's monthly payment obligation on long term debts is divided by his or her net effective income (FHA/VA Loans) or gross monthly income (Conventional Loan ) . See housing expenses to income ratio. | |
| Deed of Trust : | |
| in many states, this document is used in place of a mortgage to secure the payment of a note. | |
| Default : | |
| failure to meet legal obligation in a contract, specifically, failure to make the monthly payments on a mortgage. | |
| Deferred Interest : | |
| see Negative Amortization. | |
| Delinquency : | |
| failure to make payments on time. This can lead to foreclosure. | |
| Department Of Veterans Affairs (VA) : | |
| an independent agency of the federal government which guarantees long term or low or no down payment mortgages to eligible veterans. | |
| Discount Points : | |
| see Points. | |
| Down Payment : | |
| money paid to make up the difference between the purchase price and the mortgage amount. Down payment usually are 10 to 20 % of sales price on conventional loans, and no money down up to 5 % on FHA / VA loans. | |
| Due On Sale Clause : | |
| a provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the holder sells the home. | |
| Earnest Money : | |
| money given by the buyer to a seller as part of purchase price to bind a transaction or assure payment. | |
| Equal Credit Opportunity Act (ECOA) : | |
| is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs. | |
| Equity : | |
| the difference between the fair market value and current indebtedness, also referred to as the owner's interest. | |
| Escrow : | |
| refers to a neutral third party who carries out the instructions of both the buyer and seller to handle all the paper work of settlement or "closing ". Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments. |
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