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Loanfactz DefinitionsGlossary of Legal Terms, Loan Terms and Home Construction, Repair and Maintenance Definitions. Some words have more than one meaning. Only those meanings relating to this site will be used.
Abstract Of Title A summary of the public records relating to the title to a particular piece of land showing conveyances, liens, and charges affecting the property. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase a clear, marketable, and insurable title. Accrued Interest Interest that has increased or accumulated, but not credited or paid. One example, the interest that accumulates on the unpaid principal balance of a loan that has not been paid by you. Adjustable Interest Rate An interest rate that can change during the life of a loan. Also known as a variable rate. Adjustable Rate Mortgage (ARM) Also known as a variable rate loan, usually offers a lower initial rate than fixed rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR (London Interbank Offered Rate) index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, your monthly payments will increase and when the interest rate on an ARM decreases, your monthly payments will be lower. Most ARMs have caps. Adjustment Period The amount of time between changes in the interest rate in an adjustable rate mortgage. This period can be any length of time as set forth by the lender, common periods are 1, 2, 3, and 5 years. 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. Amenity A feature of a home or property that serves as a benefit to the buyer and/or increases the property's value, but is not necessary to its use. It may be natural like location, scenic views, woods, on or near a lake, or it may be man made like a swimming pool, garden or tennis court. Another example would be a complimentary item at a hotel or motel that adds to a traveler's comfort and/or convenience such as complimentary breakfast, use of a fitness center or a coffee maker in your room. American Homeownership and Economic Opportunity Act of 2000 Aims to promote homeownership among lower income families who might otherwise not be able to afford it. More about the American Homeownership and Economic Opportunity Act Amortization A term used to describe the process of paying off a loan over a predetermined period of time at a specific interest rate. The amortization of a loan includes payment of interest and a portion of the outstanding principal balance during each payment cycle. (When you make monthly payments that cover both the principal and interest, you are amortizing the loan) Amortization Schedule Provided by mortgage lenders, the schedule shows how over the term of your mortgage the principal portion of the mortgage payment increases and the interest portion of the mortgage payment decreases. Annual Fees A yearly charge you pay to a lender or credit card company for having a line of credit available such as a credit card or a home equity line of credit, charged to you regardless of whether you use the line of credit or not. Not all credit cards have an annual fee. Annual Membership or Maintenance Fee 1) An annual (yearly) charge you pay for having a line of credit available, such as a credit card or a home equity line of credit. The fee is charged regardless of whether or not the line is used. Not all credit cards have an annual fee. 2) A fee you pay to a homeowner's association for maintenance and repairs of common areas in the community you live in. 3) A fee to maintain certain types of bank accounts such as an IRA. Annual Percentage Rate (APR) A term representing the total cost of credit, expressed as a yearly rate. The APR of a loan is the total finance charge, including interest, points, broker fees and certain other credit charges that the borrower is required to pay. Annuity An amount paid yearly or at other regular intervals, often at a guaranteed minimum amount. An annuity is a type of insurance policy in which the policy holder makes payments for a fixed period or until a stated age, and then receives annuity payments from the insurance company. Application The first step in the official loan approval process. The application form is used to record important information about the potential borrower, such as a borrower's job, income, savings, assets, debts and more. This is necessary for the underwriting process. Application Fee The fee that a mortgage lender charges to apply for a mortgage to cover processing costs. 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. Appreciation An increase in the market value of a home due to changing market conditions and/or home improvements. Arbitration A process where disputes are settled, without going to court, by referring them to a fair and neutral third party, call an arbitrator. The disputing parties agree in advance to agree with the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision. Assessed Value The value placed on property by the county assessor for the purpose of taxation. Assessor A government official who is responsible for determining the value of a property for the purpose of taxation. Asset Everything of value an individual owns, cash, securities, investments, real estate, etc. Assumable Mortgage An assumable mortgage is a mortgage that can be transferred from a seller to a buyer where the buyer takes over the payments on an existing mortgage from the seller. 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. An assumable mortgage usually has a lower interest rate than current rates, and you avoid high closing costs. Assumption A homebuyer's agreement to take over the payments on an existing mortgage from the seller. Assumption Fee A fee a lender charges a buyer who will assume the seller's existing mortgage. |
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