Housing Services Resources

Buying a Home...1, 2, 3: Glossary of Homeownership Terms

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acceleration clause - a clause that allows a lender to declare the entire outstanding balance of a loan immediately due and payable should a borrower violate specific loan provisions or default on the loan.

adjustable rate mortgage (ARM) - a variable or flexible rate mortgage with an interest rate that varies according to a specific financial index. To limit a borrower's risk, an ARM may have a payment or rate cap.

amenities - features of a home that fits personal preferences and can increase the value of the property. Some examples include the number of bedrooms and bathrooms or proximity to public transportation.

amortization - the liquidation of a debt by regular, usually monthly, installments of principal and interest. An amortization schedule is a table showing the payment amount, interest, principal and unpaid balance for the entire term of the loan.

annual cap - a limit to how much an adjustable rate mortgage's monthly payment or interest rate can increase. A cap is meant to protect the borrower from large or indefinite increases. An annual cap limits the amount an interest rate can increase over a twelve-month period.

annual percentage rate (A.P.R.) - the actual interest rate by taking into account discount points and other finance charges over the projected life of a mortgage. Disclosure of the APR is required by the federal Truth-in-Lending Law and allows borrowers to compare the actual costs of different mortgage loans.

appraisal - an estimate of a real property's value as of a given date, as determined by a qualified professional appraiser. The value may be based on replacement cost, the sales of comparable properties or the property's income-producing ability.

appreciation - a real property's increase in value due to inflation or other economic factors.

A.P.R. - see annual percentage rate.

ARM - see adjustable rate mortgage.

assessment - charges levied against real property for tax purposes or to pay for municipal or association improvements such as curbs, sewers, or grounds maintenance.

assignment - the transfer of a contract or a right to buy real property at given rates and terms from a mortgagee to another person.

assumption - an agreement between a buyer and a seller, requiring a lender’s consent and approval, whereby the buyer takes over the payments for a mortgage and accepts all liability. Assuming a loan can be advantageous for a buyer; the closing costs may be reduced, and the loan's interest rate may be lower than current market rates. However, the lender could increase the interest rate, require the buyer to qualify for the mortgage, or not permit the buyer to assume the loan at all.

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