Mortgage Glossary of Terms

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Acceleration: The right of the lender to demand the immediate repayment of the mortgage loan balance upon the default of the borrower.

Adjustable Rate: An interest rate that periodically changes in relation to an index. Payments may increase or decrease.

Adjustable-rate mortgage: A mortgage with an interest rate and payment that periodically change over the life of the loan based on changes of the specified index.

Adjustment interval: On an adjustable rate mortgage, the time between changes in the interest rate or monthly payment: typically one, three, or five years.

Alternative Documentation: The use of pay stubs, bank statements, and W-2 forms in lieu of Verifications of Employment and Verifications of Deposit to qualify a borrower for a mortgage.

Amortization: A method of repayment in which the amount one borrows is repaid gradually though regular monthly payments of principal and interest.

Annual Membership: An amount that may be charged every year for having a line of credit available. Often charged regardless of whether or not one uses the line.

Annual Percentage Rate (APR): The cost of credit, expressed as a percentage, on a yearly basis. APR is required to be disclosed by the lender under the federal Truth in Lending Act.

Application: An initial statement, required to approve a loan, of personal and financial information.

Appraisal Amount or Appraised Value: The fair market value of a home as determined by an independent appraisal.

Appreciation: An increase in the value of a property due to market conditions. The opposite of depreciation.

Assessment: A local tax levied against a property for a specific purpose, for example, street lights or a sewer.

Assumption: The agreement between buyer and seller where the buyer takes over the payments from the seller on an existing mortgage.

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