This glossary is Alphabetical please choose your letter below.
A score making consumers eligible for the lowest prices that lenders offer. Most lenders require a FICO score above 720 to be recognized as having "A-Credit".
A-Paper A industry term used to describe a mortgage applicant having "A-Credit" and solid financials.
AccelerationThe right of the lender to demand immediate repayment of the remaining mortgage loan balance upon default by borrower, or by using the rights vested in the contracts Due-on-Sale clause.
Accrued interest Interest that is earned but not paid, adding to the amount owed. Same as Negative amortization.
Actual Cash ValueAn amount equal to the replacement value of damaged property minus depreciation.
Adjustable Rate Mortgage (ARM)A mortgage with an interest rate and payment that change periodically over the life of the loan based on changes in a specified index. An ARM may also have a period where the monthly payment is based on simple interest-only. This interest-only period is followed by a fully amortizing period. ARM's are also known as as a renegotiable rate mortgages, variable mortgages, variable rate mortgages or Canadian roll-over mortgages.
Adjustment Interval On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.
Affordability A consumer's capacity to afford a residence. Affordability is usually expressed in terms of the maximum price the consumer could pay for a house, and be approved for the mortgage required to pay that amount.
Agreement of sale A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
Allonge A piece of paper attached to a contract, a cheque or any promissory note on which signatures are added because there is not enough room on the main document.
Alternative documentationExpedited and simpler documentation requirements designed to speed up the loan approval process. Instead of verifying employment with the applicant's employer and bank deposits with the applicant's bank, the lender will accept paycheck stubs, W-2s and the borrower's original bank statements. Alternative documentation remains full documentation, as opposed to the other documentation options.
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).
AmortizationMeans 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. Comes from the French word, "mort", literally to kill the loan owing.
Amortization schedule A table showing the mortgage payment, broken down by interest and amortization, the loan balance, tax and insurance payments if made by the lender, and the balance of the tax/insurance escrow account.
Amount financed On the Truth in Lending form, the loan amount less "prepaid finance charges", which are lender fees paid at closing. For example, if the loan is for $100,000 and the borrower pays the lender $5,000 in fees, the amount financed is $95,000.
Annual Percentage Rate (APR) Is a interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit cost. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.
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.
Application fee A fee charged by some lenders to accept an application.
Appraisal An estimate of the value of property, made by a qualified professional called an "appraiser". There are different types of qualified appraisers. The highest qualification is considered to be the MAI.
Appraisal fee A fee charged by an appraiser for the appraisal of a particular property.
Appraiser A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate. The highest qualification is considered to be the MAI.
APR The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. It is a comprehensive measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges. It is also adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid ten years down the road.
Approval Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.
Arbitration A process where disputes are settled by referring them to an impartial third party (arbitrator) chosen by the disputing parties who agree in advance to abide by the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator issues the decision.
ARM Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.
Arrears A debt that is not paid on the due date adds up and accumulates as "arrears".
Asbestos A toxic material that was once used to make insulation, flooring and fireproofing material in homes and buildings. Some forms of asbestos have been linked to certain lung diseases and are no longer used in new construction. Older homes and buildings may still have asbestos in these materials. The seller of a property should disclose knowledge of asbestos on the property.
Assessment A local tax levied the County usually against a property for a specific purpose, such as a sewer or street lights. Also can mean the assessed value of the property. Similar, but not the same as an "appraisal" see above.
Assessor A government official who is responsible for determining the value of a property for the purpose of taxation.
Assumable loan 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.
Assumption The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply. Most mortgages today are unassumable as Lenders have found that assumed loans tend to have a far higher rate of default. FHA loans closed before 12/15/89 and VA loans closed before 3/1/88 are freely assumable with no qualifying. Note that the original borrower is still just as liable for the loan as the new home buyer unless the previous borrower gets a release from the Lender. This is called "novation".
Automated underwriting A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the applicant will be approved, or whether the application will be forwarded to an underwriter. The quick decision is based on information provided by the applicant, which is subject to later verification, and other information retrieved electronically including information about the borrower's credit history and the subject property.