Adjustable Rate Mortgage (ARM): A loan whose interest rate is adjusted according to movements in the financial market
Amortization: A payment plan by which a loan is reduced through monthly payments of principal and interest
Annual Percentage Rate (A.P.R.): The total cost of credit as a yearly rate, including the note rate and prepaid finance charges such as the discount and origination fees.
Appraisal: An evaluation to determine what a piece of property would sell for in the current marketplace
Assumption: A transaction allowing the buyer to assume responsibility for an existing loan instead of getting a new loan
Balloon: A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end
Closing: The final procedure in a mortgage transaction. At this time, documents are processed and recorded, and both the sale and the loan are completed.
Closing Costs: Charges paid at settlement for obtaining a mortgage loan and transferring a real estate title
Conventional Loan: A mortgage loan not insured by a government agency (such as FHA or VA)
Default: Breach of a mortgage contract
Earnest Money: A sum paid to the seller to show that a potential purchaser is serious about buying
Equity: The difference between the value of a home and what is owed on it.
Fixed Rate Mortgage: A mortgage with an interest rate that remains constant over the life of the loan
Index: The interest rate or adjustment standard that determines the changes in monthly payments for an adjustable rate loan
Mortgagee: The lender who makes a mortgage loan
Note: A formal document showing the existence of a debt and stating the terms of repayment
Point: A one-time charge assessed by the lender at closing to increase the interest yield on a mortgage loan. Generally, it is one percent of the mortgage amount
Title: Evidence of a person's legal right to ownership of a property. Regulations established by local governments regarding the location, height, and use for any given piece of property within a specific area
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