A-C
Additional principal payment
Extra money included in the monthly payment to help reduce the principal and shorten the term of the loan.
Add-on interest
The interest a borrower pays on the principal for the duration of the loan.
Adjustable-rate mortgage (ARM)
A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.
Adjusted cost basis
The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it is sold.
Adjustment period
The amount of time between interest rate adjustments in an adjustable-rate mortgage.
Agent
A person licensed by the state to conduct real estate transactions.
Alienation clause
A provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.
Allowances
Budgets offered by builders of new homes for the purchase of carpeting and fixtures.
Amortization
The process of paying the principal and interest on a loan through regularly scheduled installments.
Annual Percentage Rate (APR)
The cost of the loan expressed as a yearly rate on the balance of the loan.
Application
A document that details a potential borrower’s income, debt and other obligations to determine credit worthiness.
Application fee
The fee that a lender charges to process a loan application.
Appraisal
An opinion of the value of a property at a given point in time.
Appreciation
An increase in the value of a home or other property.
Assessed value
A tax assessor’s determination of the value of a home in order to calculate a tax base.
Assumable mortgage
A mortgage that can be transferred to another borrower.
Average price
The price of a home determined by totaling the sales prices of all houses sold in an area and dividing that number by the number of homes.
Balloon Mortgage
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.
Balloon payment
The final lump sum payment due at the end of a balloon mortgage.
Basis Point
A basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points.
Bill of sale
A document that transfers ownership of personal property.
Binder
A report issued by a title insurance company that details the condition of a home’s title. and provides guidelines for a title insurance policy.
Biweekly mortgage
A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.
Blanket insurance policy
A policy that covers more than one person or piece of property.
Blanket mortgage
A mortgage that covers more than one property owned by the same borrower.
Broker
A person licensed by the state to deal in real estate.
Cap
A limit on the amount the interest rate or monthly payment can increase in an adjustable-rate mortgage.
Capital expenditure
The cost of making improvements on a property.
Cash-out refinance
The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the extra funds in any manner.
Closing
The final procedure in which documents are signed and recorded, and the property is transferred.
Closing costs
Expenses incidental to the sale of real estate, including loan, title and appraisal fees.
Closing statement
A document which details the final financial settlement between a buyer and seller and the costs paid by each party.
Commercial property
An area that is zoned for businesses.
Commission
The negotiable percentage of the sales price of a home that is paid to the agents of the buyer and seller.
Community Reinvestment Act
A federal law that encourages financial institutions to loan money in the neighborhoods where minority depositors live.
Compound interest
The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.
Condominium
Individual units in a building or development in which owners hold title to the interior space while common areas such as parking lots, community rooms and recreational areas are owned by all the residents.
Construction loan
Short-term loans a lender makes for the construction of homes and buildings. The lender disburses the funds in stages.
Construction to permanent loan
The conversion of a construction loan to a longer-term traditional mortgage after construction has been completed.
Contingency
A condition specified in a purchase contract, such as a satisfactory home inspection.
Conventional loan
A long-term loan a lender makes for the purchase of a home.
Convertible adjustable-rate mortgage
A mortgage which starts as an adjustable-rate loan, but allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.
Cooperative project
A project in which a corporation holds title and sells shares representing individual units to buyers who then receive a proprietary lease as their title.
Cost-plus contract
A construction contract that determines the builder’s profit based on a percentage of the cost of labor and materials.
Credit
The money a lender extends to a buyer for a commitment to repay the loan within a certain time frame.
Credit rating
The degree of credit worthiness assigned to a person based on credit history and financial status.
Credit report
A credit bureau report that shows a loan applicant’s history of payments made on previous debts. Several companies issue credit reports, but the three largest are Trans Union Corp., Equifax and Experian (formerly TRW ).
