Mortgage Glossary
203(b): FHA program which provides mortgage insurance to protect
lenders from default; used to finance the purchase of new or existing
one- to four family housing; characterized by low down payment,
flexible qualifying guidelines, limited fees, and a limit on maximum
loan amount.
203(k): this FHA
mortgage insurance program enables homebuyers to finance both the
purchase of a house and the cost of its rehabilitation through
a single mortgage loan. For more information, see our guide explaining
how 203k rehab
loans work.
A
Adjustable-Rate-Mortgage (ARM):
a mortgage for which the interest rate is not fixed, but changes
during the life of the loan in line with movements in an index rate.
When rates
change, ARM monthly payments increase or decrease at intervals
determined by the lender; however, the change in the monthly payment amount is usually subject to a Cap. You may also see ARMs referred to as AMLs (adjustable-mortgage loans)
or VRMs (variable-rate mortgages). For more information, see
our guide explaining how
adjustable-rate-mortgages work.
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): a measure of the cost of credit, expressed as a yearly interest rate. It
includes interest as well as points, mortgage insurance, and
other fees associated with the loan. Because all lenders
follow the same rules when calculating the APR, it provides consumers
with a good basis for comparing the cost of loans, including mortgages.
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.
Appraiser: a qualified individual who uses his or her experience
and knowledge to prepare the appraisal estimate.
ARM: a mortgage for which the interest rate is not fixed, but changes
during the life of the loan in line with movements in an index rate.
When rates
change, ARM monthly payments increase or decrease at intervals
determined by the lender; however, the change in the monthly payment amount is usually subject to a Cap. You may also see ARMs referred to as AMLs (adjustable-mortgage loans)
or VRMs (variable-rate mortgages). For more information, see
our guide explaining how
ARMs work.
Assessor: a government official who is responsible for determining
the value of a property for the purpose of taxation.
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.
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not legal advice and should not be interpreted as legal advice.
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information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
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