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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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