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Glossary of
FinanciaI & Real Estate Terms

Index of Terms | Complete List of Terms

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A-Credit : The ideal credit rating for a consumer. Having a good credit score lowers the prices which the lenders usually offer you. Usually a FICO score above 720 fetches you the best deal.

Acceleration Clause : This clause allows the lender to speed up the rate of your loan. In such cases the lender can also demand immediate payment of the entire balance of the loan you owe. This happens if you fail to satisfy the legal obligations in the contract.

Accrued Interest : When you fail to pay your interests within a given period, the interest increases and adds to the debt amount you owe. Adjustment Interval: This is the span of time in between the alteration in the interest rate or monthly payment on an ARM loan.

Acquisition Cost : Under an FHA loan, the appraised value or purchase price of the property plus the estimated closing costs.

Adjustable Rate Mortgage (ARM) : A mortgage in which the interest rate may be adjusted periodically based on an index. For example, a 1 Year Adjustable Mortgage is a loan with a fixed rate for the first 1 year after which the rate changes once each year for the remaining life of the loan. Because the interest rate can change after the first 1 year, the monthly payment may also change. The same is applicable in case of 2, 3, 7 and 10 year of adjustable (ARM).

Adjustment Date : The date the interest rate changes on an adjustable rate mortgage.

Adjustment Interval : The time between changes in the interest rate charged on an adjustable rate mortgage. For example, one, three or five years.

Adjusted Book Basis : The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale.

Administration Order : An order made in a county court to arrange and administer the payment of debts by an individual

Adverse Credit History : Also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history and bad credit history, is a negative credit rating. A negative credit rating is often considered undesirable to lenders and other extenders of credit for the purposes of loaning money or capital.

Affordability : This is a general evaluation of the amount of money you can afford while purchasing a home. The affordability factor gives the consumer a probable price which can be allotted against their affordability factor. It also mentions about the mortgage required to pay that amount.

Agency Debt : A type of bond issued by a corporation that is nominally independent of the government - though ownership may be public or private - but considered to be backed by the government, usually on a de facto basis.

Agreement of Sale : A contract signed by buyer and seller mentioning the terms and conditions during the sale of a property.

Alternative Documentation : This is a document related to a loan file which is dependent on information such as pay-stubs, W-2 forms, and bank stubs. This is done without depending on verifications sent to third parties for confirmation of statements made on the application.

Amortization : This deals with the periodic repayment of a loan considering payments of both principal amount and interest rates calculated to payoff the loan at the end of a fixed period of time. The loan balance lessens by the amount of the scheduled payment, or with the deposit of any extra payment. The scheduled payment minus the interest amount equals amortization.

Amount Financed : This figure is used to calculate your APR. It represents your loan amount minus any prepaid finance charges and assumes you will keep the loan to maturity and make only the required monthly payments.

Annual Debt Service : Total yearly amount a company pays out in principal and interest for a loan.

Annual Fee : A credit card issuer may charge you a fee each year for your account.

Annual Percentage Rate (APR) : There are two interest rates applied to your loan: the Actual Interest Rate and the Annual Percentage Rate. The Actual Rate is the annual interest rate you pay on your loan (sometimes referred to as the "note rate"), and is the rate used to calculate your monthly payments. The amount of interest you pay, as determined by your Actual Rate, is only one of the costs associated with your loan; there may be others. The Annual Percentage Rate (APR) includes both your interest and any additional costs or prepaid finance charges you might pay such as prepaid interest, private mortgage insurance, closing fees, points, etc. Your APR represents the total cost of credit on a yearly basis after all charges are taken into consideration. It will usually be slightly higher than your Actual Rate because it includes these additional items and assumes you will keep the loan to maturity.

Annuity : A series of income payments of receipts over a period of years.

Application : An initial statement of personal and financial information required to apply for a loan.

Application Fee : Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.

Appraisal : A written analysis of the estimated value of a property, as prepared by a qualified appraiser. A fee is typically charged for a real estate appraisal because a home appraisal is time-consuming. An appraisal of an auto is usually not necessary because auto dealers, sellers and buyers all have quick access to the market value of autos.

Appraisal Fee : The charge for estimating the value of property offered as security.

Appreciation : The Increase in property value due to fluctuations in the market, inflation, etc.

Arrears : Arrears occur when you fail to meet the contractual payments to your household bills. Missing payments to your mortgage, rent or council tax etc can lead to serious arrears, which must be paid immediately. You can also be in arrears if you don't maintain your payments on unsecured debts. Arrears will accumulate if you continue to miss payments
and you will be required to pay an additional amount on top of the regular payments until
the arrears are cleared.

Asset : Anything that has monetary or exchange value that is owned by an individual, business or institution. Assets include real estate property, personal property, vehicles and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on). A lender is very interested in the amount and value of any assets you may have because assets can be used as collateral against a loan. Along with other factors such a borrower's credit rating, assets are also used to help determine the amount of the loan.

Assessment : A determenation of a property's value for the purpose of taxation.

Assignment : The transfer of ownership, rights, or interests in property by one person, the assignor, to another, the assignee.

Assignment Recording Fee : In many instances, after closing the lender transfers your loan to a specialized loan "service" who handles the collection of your monthly payments. The Assignment Fee covers the cost of recording this transfer at the local recording office.

Assumable Loan : A loan that may be passed on from a seller of a home to the new home owner. The buyer "assumes" all outstanding payments.

Assumable Mortgage : A mortgage that provides for a buyer to "assume" all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan.

Assumption : The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt.

Assumed Debt : A debt obligation of an acquired company that becomes an obligation of the acquirer.

Auto Refinance : A refinance auto loan is a loan secured by a car that is paid off at a time.

Automatic Stay : An injunction that automatically stops lawsuits, foreclosure, garnishments and all collection activity against the debtor once a bankruptcy petition has been filed.

Average Daily Balance : The average daily balance is a method used to calculate finance charges. It is calculated by adding the outstanding balance on each day in the billing period, and dividing that total by the number of days in the billing period. The calculation includes new purchases and payments.

Automated Teller Machine (ATM) : Electronic terminals located on bank premises or elsewhere, through which customers of financial institutions may make deposits, withdrawals, or other transactions as they would through a bank teller.

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Index of Terms | Complete List of Terms

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