A

Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

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

Amortization: Literally to "kill off" the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.

Annual Percentage Rate (APR): A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add-on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.

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

Application: A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more.

Appraisal: The determination of property value based on recent sales information of similar properties.

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

Appreciation: Increases in property value due to fluctuations in the market, inflation, et al.

Asset: Valuable items, encumbered or not, owned by a person, corporation, or entity.

Automated Valuation Model (AVM): Abbreviated appraisal reports used by lending institutions to estimate property values.

 B

Bankruptcy (BK): A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loans until after two years after declaration and a re-establishment of credit.

Biweekly Mortgage: Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.

Broker: An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Buydown: Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In order to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. After the discount period, the payment is calculated as the note rate.