Mortgage Glossary, Loan Terms, Real Estate and Economic Terms for Interest Only Loans

Mortgage Glossary - A Terms

203(b): FHA program which provides mortgage insurance to protect lenders from default; used to finance the purchase of new or existing one- to four family housing; characterized by low down payment, flexible qualifying guidelines, limited fees, and a limit on maximum loan amount.

203(k): this FHA mortgage insurance program enables homebuyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan.

Abstract of Title: Is the condensed history of title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances including loans affecting the property and a certification by the abstractor that the history is complete and accurate. In the United States, the abstract of title furnishes the raw data for the preparation of a policy of title insurance for the parcel of land in question. An abstract of title should be distinguished from an opinion of title. While an abstract states that all of the public record documents concerning the property in question are contained therein, an opinion states the professional judgment of the person giving the opinion as to the vesting of the title and other matters concerning the status of the chain of title. Many jurisdictions define the giving of an opinion of title as the practice of law, thus making it unlawful for a non-attorney to do so.

Adverse possession: is a means of acquiring title to another's real property without compensation, by, as the name suggests, holding the property in a manner that conflicts with the true owner's rights. Adverse possession requires the actual, visible, hostile, notorious, exclusive, and continuous possession of the property, and some jurisdictions further require the possession to be made under a claim of title or a claim of right. In simple terms, this means that those attempting to claim the property are occupying it exclusively and openly as if it were their own. Some jurisdictions permit accidental adverse possession as might occur with a surveying error. Generally, the openly hostile possession must be continuous without challenge or permission from the lawful owner, for a fixed statutory period in order to acquire title. Where the property is of a type ordinarily only occupied during certain times the adverse possessor may only need to be in exclusive, open, hostile possession during those successive useful periods. Fundamentally, adverse possession is an application of traditional statute of limititation. Once the cause of action for trespass arises, the landowner has a certain number of years to bring an action. Once that time has passed, the trespasser can no longer be evicted from the property, since the trespass action is time-barred.

Ad-Valorem tax: Is a tax based on the assessed value of real estate or personal property. Ad-valorem taxes can be property tax or even duty on imported items. Property ad-valorem taxes are the major source of revenues for state and municipal governments. An ad-valorem tax is typically imposed at the time of a transaction in connection with another significant event. The alternative to ad-valorem taxation is a fixed-rate tax, where the tax base is the quantity of something, regardless of its price: for example, in the United Kingdom a tax is collected on the sale of alcoholic drinks that is calculated on the quantity of alcohol contained rather than the price of the drink.

Allodial Title: Is a concept in some systems of property law. It describes a situation where real estate is owned free and clear of any encumbrances, including liens, mortgages, loans and tax obligations. Allodial title is inalienable, in that it cannot be taken by any operation of law for any reason whatsoever. True allodial title is rare, with most property ownership in the common law world.  In particular, in the nations recognising Elizabeth II as sovereign, land is said to be "held of the Crown." In common legal use, allodial title is used to distinguish absolute ownership of land by individuals from feudal ownership, where property ownership is dependent on relationship to a lord or the sovereign. Webster's first dictionary says allodium is "land which is absolute property of the owner, real estate held in absolute independence, without being subject to any rent, service, or acknowledgement to a superior. It is thus opposed to feud. In England, there is no allodial land, all land being held of the king; but in the United States most lands are allodial."

Amenity: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, Woods, water) or man-made (like a swimming pool or garden).

American Land Title Association: Also knonw as ALTA: Is a national trade association representing the interests of the abstract of title and title insurance industries. In addition to active members engaged in the title industry, associate members cover a wide range of businesses and occupations relating to real estate law, sales, development, design, construction, and financing. The organization's best known function is the promulgation of standardized forms for the terms and conditions of title insurance policies: these forms are adopted by all major title insurers except where state law requires the issuance of different terms, although most of the state-regulated forms are similar or identical to the ALTA forms.

Amortization: repayment of mortgage loans through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

Annual Percentage Rate (APR): calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

Application: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

Appraisal: a document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Appraiser: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appreciation: is a term used in accounting relating to the increase in value of an asset. In this sense it is the reverse of depreciation, which measures the fall in value of assets over their normal life-time. Generally, the term is reserved for real estate, land and buildings. In any viable modern economy, such property tends to increase in value over the years. Needless to say there are considerable difficulties in assessing the increase in value of any particular asset. This is principally because of the variety of interpretations that can be attached to the word value itself and due to the various instruments and methods used in the valuation process.

ARM: Adjustable Rate Mortgage; Interest only ARMs is a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.

Assignment: A right under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if party A contracts to wash party B's car for $10, party A can later assign the benefits of the contract - the right to be paid $10 - to party C. In this scenario, party A has become the assignor, party B has become an obligor, and party C is the assignee. Such an assignment may be donative, or it may be contractually exchanged for consideration. It is important to note, however, that party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefitting party C.

Assumable mortgage: a mortgage loan that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.