Mortgage Glossary
- A-Credit
- A consumer with the best credit rating, deserving of the lowest prices that lenders offer. Most lenders require a FICO score above 720 (see Credit Issues). There is seldom any payoff for being above the A-credit threshold (see Does the Mortgage Market Reward Virtue?), but you pay a penalty for being below it.
- ABA routing number
- A series of numbers located at the bottom of an account holder's checks or deposit slips. These numbers identify a particular account at a financial institution.
- Abandonment
- The voluntary surrender of property, owned or leased, without naming a successor as owner or tenant.
- Absentee Owner
- An owner who does not personally manage or reside at property owned.
- Absolute Auction
- An auction in which the subject property is sold to the highest bidder regardless of the amount of the winning bid.
- Absorption Rate
- An estimate of the expected annual sales or new occupancy of a particular type of land use.
- Abstract Exam
- Acceleration Clause
- A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
- Acceptance
- A party's consent to enter into a contract and be bound by the terms of the offer.
- Accepted Contract
- Accrued Interest
- Interest that is earned but not paid, adding to the amount owed. Same as Negative amortization.
- Additional Principal Payment
- A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
- Adjustable Rate Mortgage
- Adjusted Basis
- The original cost of a property, plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.
- Adjustment Date
- The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
- Adjustment Interval
- On an ARM, the time between changes in the interest rate or monthly payment. The rate adjustment interval is often displayed in x/y format, where "x" is the period until the first adjustment, and "y" is the adjustment period thereafter. For example, a 5/1 ARM is one on which the initial rate holds for 5 years, after which it is adjusted every year. The rate adjustment interval and the payment adjustment interval are the same on a fully amortizing ARM, but may not be on a negative amortization ARM.
- Adjustment Period
- The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM).
- Administrative Fee
- A fee charged by a lender to cover the administrative costs of processing your loan request. For our comparison purposes, this fee is typically a lender fee.
- Administrator
- A person appointed by a probate court to administer the estate of a person who died intestate.
- Affordability Analysis
- A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home and the closing costs that you might expect to pay.
- Agreement of Sale
- A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
- Alt-A
- A mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. Also referred to as "A minus".
- Alternative Documentation
- Expedited 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 real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Man-made amenities include swimming pools, tennis courts, community buildings and other recreational facilities.
- Amortization
- A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.
- Amortization Schedule
- A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principals and shows the remaining balance after each payment is made.
- Amortization Term
- The amount of time required to amortize the mortgage loan. The amortization is expressed as a number of months. For example, for a 30 year fixed rate mortgage, the amortization term is 360 months.
- Amortize
- To repay a mortgage with regular payments that cover both principal and interest.
- Annual Fee
- An annual fee for a line of credit is sometimes required. If an annual fee is shown you will be billed for that amount, annually, until the loan is paid in full.
- Annual Mortgagor Statement
- A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
- Annual Percentage Rate (APR)
- Annual Percentage Yield (APY)
- The rate of interest earned by an account owner in a year, if no withdrawals occur. All financial institutions must calculate the APY in the same way.
- Annuity
- A specified income paid yearly or at other regular intervals, often on a guaranteed dollar basis.
- Application
- The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.
- Application Deposit
- Funds required by a lender in advance of processing a loan request. Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.
- Appraisal
- A written analysis of the estimated value of a property prepared by a qualified appraiser.
- Appraisal Fee
- In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third party fee.
- Appraised Value
- An opinion of a property's fair market value, based on an appraiser's knowledge, experience and analysis of the property.
- Appraiser
- A person qualified by education, training, and experience to estimate the value of real property and personal property.
- Appreciation
- An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
- 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.
- Assessed Value
- The valuation placed on property by a public tax assessor for purposes of taxation.
- Assessment
- The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
- Assessment Rolls
- The public record of taxable property.
- Assessor
- A public official who establishes the value of a property for taxation purposes.
- Asset
- Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
- Assignment
- The transfer of a mortgage from one person to another.
- Assumable Mortgage
- Assumption
- The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.
- Assumption Clause
- A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
- Assumption fee
- The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
- Attorney Opinion
- Attorney Witness
- Attorney-in-fact
- One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
- Automated Clearing House (ACH)
- ACH securely and efficiently transfers funds electronically through participating financial institutions.
