Home Loan Glossary – A

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Acceptance

An acceptance is an agreement by a home buyer or seller to enter into a contract, and to be legally bound by the contract's terms and conditions.

Account Termination Fee

An account termination fee is often charged if a homeowner terminates or closes a home equity line of credit within its first five years. This fee can also apply to those who have paid their line of credit in full, even though payment towards a zero balance is not regarded as termination. Ask your Loan Consultant under what conditions you may be charged an account termination fee. See prepayment penalty.

Additional Principal Payment

Principal means the amount you owe, not including interest. An additional principal payment is an amount paid by the borrower, over and above the agreed-upon scheduled principal amount due, to decrease the remaining balance of a loan. By making additional principal payments, the interest charged on the loan is also reduced and the loan can be repaid ahead of schedule.

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage is a home loan option where the interest rate changes from time to time. ARM interest rates are linked to a published financial index, such as the Prime Rate, and change at specific timeframes throughout the loan period—for example, once a year, on the loan anniversary date.

Adjustment Date

The adjustment date is the day when the interest rate on an adjustable rate mortgage loan is changed (See ARM).

Adjustment Period

An adjustment period is the amount of time between adjustment dates for an adjustable rate mortgage loan (ARM). For Countrywide Home Loans' Full Spectrum Lending Division's most popular ARMs, this period is usually 6 or 12 months.

Affordability Analysis (pre-qualification)

An affordability analysis or pre-qualification is done by a lender to find out how big a home loan a borrower could comfortably afford and qualify for in order to buy a home. This analysis looks at factors such as income, expenses and available funds, as well as the particular home loan option that the borrower is considering. Lenders may also look at expected property taxes and insurance expenses, as well as estimated closing costs.

Amenity

An amenity is a secondary feature of a home or property that enhances its attractiveness (pool, patio area, etc.), but is not essential. Natural amenities include being near water and panoramic views, while recreational facilities, tennis courts and swimming pools are man-made amenities that increase the property's appeal and potential selling price.

Amortization

Amortization refers to the process of gradually paying off a loan (such as a home mortgage) over a defined period of time.

Amortization Schedule

An amortization schedule is a timetable for payment of a mortgage loan. This timetable reflects the amount of each interest and principal payment, as well as the remaining balance following each payment being made.

Amortization Period (Term)

This is the length of time that it takes to repay the loan in full. The amortization period is expressed in months. The amortization term for a 30-year fixed rate loan, for example, is 360 months.

Amortize

Amortize means to pay off a loan by means of regular monthly or bimonthly payments that include both principal and interest.

Annual Maintenance Fee

An annual maintenance fee is charged by most lenders for making a line of credit available to a borrower. This fee is charged whether or not the line of credit is used. Certain programs and states don't charge this fee, and Countrywide automatically waives the fee during the first year of the loan.

Annual Percentage Rate (APR)

The Annual Percentage Rate, or APR, is the cost of borrowing expressed as an annual interest rate. It includes both the interest rate and other loan costs, factoring items such as the cost of mortgage insurance, discount points, closing costs, and loan creation fees. Borrowers compare the APRs of different lenders to determine which loan will cost the least. Disclosure of APR is for the protection of consumers and required by the Truth-In-Lending Law.

Application (or 1003)

This is a form that must be completed by a home loan applicant, with the assistance of the lender, in order to provide important information regarding a prospective borrower's employment, assets, earnings, debts and other factors describing the applicant's financial situation. The reason for the loan, as well as information regarding the property securing the loan, must be provided in this document. Lenders may refer to the application as a 1003 – the Fannie Mae form number that is standard across the home loan industry.

Application Fee

An application fee is paid by the prospective borrower to the lender at the time they apply for the loan. Certain lenders collect fees for a property appraisal and a credit report, rather than charging application fees.

Appraisal

An appraisal is an analysis of the approximate value of a property as judged by a qualified real estate appraiser. Appraisals are typically determined, in part, by comparing recent sales prices of similar properties in the area. An appraisal is not the same as a home inspection.

Appraised Value

Appraised value refers to a property's estimated fair market value. This estimate, carried out by an experienced real estate appraiser, is based on an analysis of the property and comparable properties nearby.

Appraiser

A person qualified by education, skills and expertise to assess a property's value following standard techniques used by the appraisal industry.

Appreciation

Appreciation refers to a property's increase in value due to changes in market or property conditions. Factors contributing to appreciation include inflation, a surge in demand, "sweat equity" and home improvements. Appreciation is the opposite of depreciation, or a drop in value.

Assessed Value

The assessed value of real estate is a set value used to calculate the taxes payable on the property. The value is determined by a public tax assessor. Assessed value is not the same as appraised value.

Assessment

An assessment calculates how much tax is owed to the local government, or to the common owners of real estate (such as a homeowner's association). This tax may be used by local government or property owners to pay for improvements or maintenance, such as road work or installing new sewers, for example.

Assessment Rolls

Assessment rolls are public records of the established assessed value of real estate in the taxing jurisdiction.

Assessor

An assessor is a public official trained to set the value of a property for tax purposes.

Asset

An asset is any item of value that is owned by a person. Examples of assets include personal property such as cars, real estate, and investments in the form of bank accounts, mutual funds, stocks, etc.

Assignment

An assignment is the transfer of rights, ownership or a contract, such as the terms of a loan, from one person to another.

Assumable Loan

This is a type of home loan that permits the new buyer of a home to take over ("assume") the loan of the seller when ownership of the home changes hands. In times when home financing is hard to qualify for, assumable loans give home sellers a competitive advantage.

Assumption

Assumption refers to the buyer's acceptance of responsibility for the seller's existing assumable mortgage. Also see assumable loan.

Assumption Clause

An assumption clause is a provision in an assumable loan contract that permits a buyer to accept legal and financial responsibility for the seller's home loan. The seller, or original owner of the loan, need not pay the loan in full when the property is sold or transferred.

Assumption Fee

An assumption fee is charged by a lender when an assumable loan transfers to a new borrower. The fee is usually paid by the buyer, for the lender's agreement to begin collecting loan instalments from the buyer instead of the seller (the original borrower).