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ADJUSTABLE-RATE MORTGAGE (ARM) interest rates on this type of mortgage are periodically adjusted up or down depending on a specified financial index
AMORTIZATION a method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed
ANNUAL PERCENTAGE RATE the actual finance charge for a loan, including points and fees, in addition to the stated interest rate
APPRAISAL an expert opinion of the value or worth of a property
ASSESSED VALUE the value placed on a property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value
BALLOON PAYMENT a large principal payment due all at once at the end of some loan terms
CAP a limit on how much the interest rate can change in an adjustable-rate mortgage
CERTIFICATE OF TITLE a document, signed by a title examiner, stating that a seller has an insurable title to the property
CLOSING the deed to a property is legally transferred from seller to buyer, and documents are recorded
CLOSING COSTS see "Settlement" or refer to "Settlement--who pays what" in this guide
COMMISSION a fee (usually a percentage of the total transaction) paid to an agent or broker for services performed
COMPARATIVE MARKET ANALYSIS (CMA) a survey of the attributes and selling process of comparable homes on the market or recently sold; used to help determine a correct pricing strategy for a seller's property
CONTINGENCY a condition in a contract that must be met for the contract to be binding
CONTRACT a binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property)
DEED a legal document that formally conveys ownership of a property from seller to buyer
DOWN PAYMENT a percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender
EQUITY the value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens
ESCROW a fund or account held by a third-party custodian until conditions of a contract are met
FIXED-RATE MORTGAGE interest rates on this type of mortgage remain the same over the life of the loan. Compare to "adjustable-rate mortgage"
FIXTURE a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to a property and belongs to the property when it is sold
HAZARD INSURANCE compensates for property damage from specified hazards such as fire and wind
INTEREST the cost of borrowing money, usually expressed as a percentage rate
LIEN a security claim on a property until a debt is satisfied
LISTING CONTRACT an agreement whereby an owner engages a real estate company for a specified period of time to sell a property, for which, upon the sale, the agent receives a commission
MARKET PRICE the actual price at which a property sold
MARKET VALUE the price that is established by present economic conditions, location and general trends
MORTGAGE security claim by a lender against a property until the debt is paid
MULTIPLE LISTING SERVICE (MLS) a system that provides to its members detailed information about properties for sale
ORIGINATION FEE an application fee(s) for processing a proposed mortgage loan
PITI principal, interest, taxes and insurance, forming the basis for monthly mortgage payments
POINT one percent of the loan principal. It's charged in addition to interest and fees
PREPAYMENT PENALTY a fee paid by a borrower who pays off the loan before it is due
PRINCIPAL one of the parties to a contract; or the amount of money borrowed, for which interest is charged
PRORATE divide or assess proportionately
PURCHASE & SALE AGREEMENT a contract between buyer and seller that outlines the details of the property transfer; or refer to "Purchase and sale agreement" in this guide
SETTLEMENT all financial transactions required to make the contract final. See "Settlement--who pays what" in this guide.
TITLE a document that indicates ownership of a specific property
TITLE SEARCH detailed examination of the entire document history of a property title to make sure there are no legal encumbrances
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