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| GLOSSARY: A-C |
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Adjustable-Rate Mortgage (ARM) - A loan with an interest rate that changes with market conditions on pre-determined dates.
Annual Percentage Rate (APR) - A term used to represent the percentage relationship of the total finance charge to the amount of the loan, over the term of the loan. Do not confuse the APR with your quoted interest rate, which is used to determine your monthly principal and interest payment. The APR reflects the cost of your mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes (in addition to the interest rate) loan discount points, fees and mortgage insurance.
Appraisal - A report written by a qualified expert that states an opinion on the value of a property based on its characteristics and the selling prices of similar properties or comparable properties in the area.
Automated Underwriting - A computerized method of reviewing home mortgage applications for loan approval.
Bridge Loan - A loan which enables homebuyers to get financing to make a down payment and pay closing costs on a new home before selling the home they currently own.
Closing - The final step after a lender approves an application. The homebuyer and lender sign the security-agreement note for the mortgage loan, which states all the terms and conditions of the loan and the funds for the loan are turned over to the homebuyer's closing agent.
Closing Agent - Usually an attorney or title agency representative who oversees the closing and witnesses the signing of the closing documents.
Closing Costs - The costs paid by the mortgage borrower (and sometimes the seller) in addition to the purchase price of the property. These include the lender's fees, title fees and appraisal costs.
Commitment Letter - A binding, written pledge, by the lender to a mortgage applicant, to make a loan, usually under certain stated conditions.
Conventional Loan - A mortgage that is not insured or guaranteed by a government agency such as FHA, VA or Farmers Home Administration.
Credit Report - A report issued by an independent agency that contains certain information concerning a mortgage applicant's credit history and current credit standing.
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