Lending
Dictionary
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Abstract (of Title)
A historical summary of all the recorded transactions that affect the title to the property. An attorney or a title company will review an abstract of title to determine if there are any problems affecting the title to the property. All such problems must be cleared before the buyer can be issued a clear and insurable title.
Acceleration Clause
A loan provision giving the lender the power to declare all sums owing lender immediately due and payable upon the violation of a specific loan provision, such as the sale of the property, or the failure to make loan payments on time.
Accretion
The addition to land through natural forces like wind or water.
Acknowledgment
Formal declaration before a public official (typically a Notary Public) that one has signed a document. Required before recording real estate legal documents, such as a deeds of trust.
Acre
A measure of land equal to 43,560 square feet.
Adjustable Rate Mortgage (ARM)
Also known as a variable rate mortgage. The interest rate on these mortgages changes periodically.
Adjustment Period
This is the length of time for which the interest rate is fixed on an adjustable. Therefore if the adjustment period is six months, then the interest rate will remain fixed for six months, after which time it will adjust.
Agreement of Sale
A written signed agreement between the seller and the purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms of the agreement. Also known as contract of purchase, purchase agreement, offer and acceptance, earnest money contract or sales agreement.
Amortization
A gradual paying off of a debt by periodic installments which pay principal and interest.
Annual Percentage Rate - APR
The effective rate of interest for a loan per year. This rate is typically higher than the note rate because it takes into account closing costs. This is one way to compare loan programs offered by different lenders.
Appraisal
An opinion or estimate of the value of a property at a given date.
Arm's length transaction
A transaction among parties each of who acts in his or her own best interest.
Assessment
A local tax levied against a property for a specific purpose such as street lights.
Assumable Mortgage
A mortgage loan which allows a new home buyer to take over the obligation of making loan payments with no change in the terms of the loan. Assumable loans do not have a due-on-sale clause. The lender has to be notified and agree to the assumption. The lender may require the buyer to qualify for the loan and may charge an assumption fee. The seller should obtain a written release from the lender stating clearly that he/she is no longer liable to make mortgage payments.