Abstract (of Title)
A summary of the public records affecting the title to a particular piece of land, created by examining all recorded instruments (documents) relating to a specific piece of property, such as easements, liens, mortgages, etc. <<back

Acceleration Clause
A provision in a loan agreement that allows the lender to require the balance of the loan to become due immediately if mortgage payments are not made or there is a breach in your obligation under your mortgage. <<back

Addendum
Any addition to, or modification of, a contract. Also called an amendment or rider. <<back

Administrator
One who has charge of the estate of a deceased person who died without a will, or one who did not appoint an executor. Appointed by court order. <<back

Adverse Possession
When someone, other than the owner, takes physical possession of property, without the owner's consent. <<back

Adjustable-Rate Mortgage (ARM)
A type of loan whose prevailing interest rate is tied to an economic index, which fluctuates with the market. There are three types of ARMs, including one-year ARMs, which adjust every year; three- year ARMs, which adjust every three years; and five-year ARMs, which adjust every five years. When the loan adjusts, the lender tacks a margin onto the economic index rate to come up with your loan's new rate. ARMs are considered far riskier than fixed-rate mortgages, but their starting interest rates are extremely low. <<back

Agency
A term used to describe the relationship between a seller and a broker, or a buyer and a broker. <<back

Agent
One who legally represents an individual or corporate body. <<back

Agreement of Purchase and Sale
Written agreement whereby one agrees to buy, and another agrees to sell, according to the terms of the agreement. It contains all the provisions and conditions for the purchase, must be signed by both parties. <<back

Amortization
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal and interest. Amortization tables allow you to see exactly how much you would pay each month in interest and how much you repay in principal, depending on the amount of money borrowed at a specific interest rate. <<back

Annual Percentage Rate (APR)
The total cost of your loan, expressed as a percentage rate of interest, which includes not only the loan's interest rate, but factors in all the costs associated with making that loan, including closing costs and fees. The costs are then amortized over the life of the loan. <<back

Application
A series of documents you must fill out when you apply for a loan. <<back

Application Fee
A one-time fee charged by the mortgage company for processing your application for a loan. Sometimes the application fee is applied toward certain costs, including the appraisal and credit report, sometimes is waved. <<back

Appraisal
The opinion of an appraiser, who estimates the value of a home at a specific point in time. <<back

Appreciation
Increased market value of real property. <<back

Assessed Value
Value of real property set by a municipality for taxation purposes. <<back

Assumption of Mortgage
If you assume a mortgage when you purchase a home, you undertake to fulfil the obligations of the existing loan agreement the seller made with the lender. The obligations are similar to those that you would incur if you took out a new mortgage. When assuming a mortgage, you become personally liable for the payment of principal and interest. The seller, or original mortgagor, is released from the liability, and should get that release in writing. Otherwise, he or she could be liable if you don't make the monthly payments. <<back