Abstract (Of Title) - A summary of the public records relating to the title to a particular piece of land. If there are any title defects they must be cleared before a buyer can purchase clear, marketable, and insurable title.
Acceleration Clause - Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire balance of the loan should you default on you loan.
Adjustable Rate Mortgage (ARM) - A mortgage in which the interest rate is adjusted periodically based on an index. Also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
Adjustment Interval - On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, usually one, three or five years.
Agreement of Sale - Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under specific terms spelled out in writing and signed by both parties.
Amortization - Loan payment calculated to pay off the debt at the end of a fixed period, including interest on the outstanding balance.
Annual Percentage Rate (APR) - The cost of credit as a yearly rate. The percentage results from an equation considering the total amount financed, the finance charges, and the term of the loan. Usually not the same as the interest rate.
Appraisal - An estimate of the value of property, made by a professional appraiser.
Appraisal Fee - The charge for estimating the value of property.
Asset - Property that can be used to repay debt, such as stocks and bonds or a car.
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.
Automated Teller Machines (ATMs) - Electronic terminals through which customers may make deposits, withdrawals, or other transactions as they would through a bank teller.
Balloon (Payment) Mortgage - Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a specific time.
Binder or "Offer to Purchase" - A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.
Billing Error - Any mistake in your monthly statement as defined by the Fair Credit Billing Act.
Broker - An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself.
Building Line or Setback - Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be set by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.
Business Days - Find out from your institution to find out what days it counts as business days under the Truth in Lending and Electronic Fund Transfer Acts.
Buydown - When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
Caps (Interest) - Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.
Caps (Payment) - Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.
Certificate of Title - A certificate issued by a title company or a written opinion by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence.
Closing - The meeting between the buyer, seller and lender where the property and funds legally change hands. Also called settlement.
Closing Costs - Includes a loan origination fee, points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The closing costs usually are about 2 percent to 6 percent of the mortgage amount.
Closing Day - The day on which the formalities of a real estate sale are finished. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely reiterates the original agreement reached in the agreement of sale.
Cloud (On Title) - An outstanding claim which negatively affects the marketability of title.
Collateral - Property offered to support a loan that can be seized if you default.
Commission - Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale.
Commitment - An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the stated conditions.
Condemnation - A determination by a governmental agency that a particular building is unsafe or unfit for use.
Condominium - Individual ownership of a unit and an individual interest in the common areas and facilities which serve the project.
Contractor - A person who contracts to erect buildings. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building and others.
Conventional Loan - A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FmHA).
Cosigner - Another person who signs your loan and assumes equal responsibility for it.
Credit - The right granted by a creditor to pay in the future in order to buy or borrow in the present; also, a sum of money owed to a person or business.
Credit Bureau - An agency that keeps your credit record.
Credit Card - Any card used from time to time to borrow money or buy goods or services on credit.
Credit History - The record of how you've borrowed and repaid debts.
Credit Ratio - The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net income (FHA/VA loans) or gross monthly income (Conventional loans). See Housing Expenses-to-Income Ratio.
Credit-related Insurance - Health, life, or accident insurance designed to pay the outstanding balance of debt.
Credit Scoring System - A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.
Creditor - A person or business from whom you borrow or to whom you owe money.
Creditworthiness - Past and future ability to repay debts.
