Home Buyer and House Plan Terms and Definitions

Adjustable Rate Mortgage (ARM) – A loan whose interest rate is adjusted according to movements in the financial market.

Amortization – A payment plan by which a borrower reduces a debt gradually through monthly payments of principal and interest.

Annual Percentage Rate (APR) – The annual cost off credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance, and other items.

Appraisal – An evaluation to determine what a piece of property would sell for in the marketplace.

Appreciation – The increase in the value of a property.

Assessment – A tax levied on a property or a value placed on the worth of property by a taxing authority.

Assumption – A transaction allowing the buyer of a home to assume responsibility for an existing loan on the home instead of getting a new loan.

Balloon – A loan which has a series of monthly payments (often for 5 years or less) with the remaining balance due in a large lump sum payment at the end.

Binder – A receipt for a deposit paid to secureĀ https://payday-loan-bad-credit.info/ the right to purchase a home at terms agreed upon by the buyer and seller.

Buydown – A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a mortgage loan.

Cap – A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan.

Certificate of Occupancy – A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations.

Closing – A meeting to sign documents which transfer property from a seller to a buyer. (Also called settlement)

Closing Costs – Charges paid at settlement for obtaining a mortgage loan and transferring real estate title.