Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).
The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.
Repayment of a loan in installments of principal and interest, rather than interest-only payments.
Annual Percentage Rate (APR)
The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.
An estimate of the property’s value provided by a professional appraiser.
Assumption of Mortgage
A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.
A lump sum principal payment due at the end of some mortgages or other long-term loans.
Sometimes known as an offer to purchase or an earnest money receipt. A binder is the acknowledgement of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.
Permanent – prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary – prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.
The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
The amount of the buyer’s liquid cash remaining after making the down payment and paying all closing costs.
Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.
Certificate of Commitment
The lender’s approval of a VA loan, which is usually good for up to six months.
Certificate of Reasonable Value (CRV)
A document that establishes the maximum value and loan amount of a VA guaranteed mortgage.
The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.
The period during which a loan approval is valid.
A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surface (walls, floor, ceilings) serve as its boundaries.
A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.
A provision in some ARMs that enables home buyers to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.
A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.