Mortgage Glossary

Amortization:

Repayment of a mortgage loan 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, 20, 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.

ARM (Adjustable Rate Mortgage):

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.

Assumable Mortgage:

A mortgage that can be transferred from a seller to a buyer.  Once the buyer assumes the loan, 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.