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Mortgage glossary: Letter A |
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Abstract of Title A written record of the historical ownership of the property that helps to determine whether the property can in fact be transferred from one party to another without any previous claims. An abstract of title is used in certain parts of the country when determining if there are any previous claims on the subject property in question.
Acceleration A loan accelerates when it is paid off early, usually at the request or demand of the lender. An acceleration clause within a loan document states what must happen when a loan must be paid immediately, but most usually it applies to nonpayment, late payments, or the transfer of the property without the lender's permission.
Adjustable Rate Mortgage (ARM) A loan program where the interest rate may change throughout the life of the loan. An ARM adjusts based on terms agreed to between the lender and the borrower, but typically it may only change once or twice a year.
Alternate Credit Items you must pay each month but that won't appear on your credit report. Alternate credit accounts might be your telephone bill. In relation to mortgage loans, while such items aren't reported as installment or revolving credit, they can establish your ability and willingness to make consistent payments in a responsible manner. Sometimes called nonstandard credit.
Alt Loans Alternative loans, so-called because they're not conventional or government loans but step outside the lending box and establish their own lending criteria.
Amortization Amortization is the length of time it takes for a loan to be fully paid off, by predetermined agreement. These paymentsare at regular intervals. Sometimes called a fully amortized loan. Amortization terms can vary, but generally accepted terms run in five-year increments, from ten to forty years.
Annual Percentage Rate (APR) The cost of money borrowed, expressed as an annual rate. The APR is a useful consumer tool to compare different lenders, but unfortunately it is often not used correctly. The APR can only work when comparing the same exact loan type from one lender to another.
Appraisable Asset Any item whose value can be determined by a third-party expert. That car you want to sell is an appraisable asset. If the item can be appraised, then you can use those funds to buy a house.
Appraisal A report that helps to determine the market value of a property. An appraisal can be done in various ways, as required by a lender, from simply driving by the property to ordering a full-blown inspection, complete with full-color photographs of the real estate. Appraisals compare similar homes in the area to substantiate the value of the property in question.
Assumable Mortgage Homes sold with assumable mortgages let buyers take over the terms of the loan along with the house being sold. Assumable loans may be fully or nonqualifying assumable, meaning buyers take over the loan without being qualified or otherwise evaluated by the original lender. Qualifying assumable loans mean that while buyers may assume terms of the existing note, they must qualify all over again as if they were applying for a brand-new loan.
Automated Underwriting System (AUS) A software application that electronically issues a preliminary loan approval. An AUS uses a complex approval matrix that reviews credit reports, debt ratios, and other factors that go into a mortgage loan approval.
Automated Valuation Model (AVM) An electronic method of evaluating a property's appraised value, done by scanning public records for recent home sales and other data in the subject property's neighborhood. Although not yet widely accepted as a replacement for fullblown appraisals, many in the industry expect AVMs to eventually replace traditional appraisals altogether.
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