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GLOSSARY
OF
REAL ESTATE
TERMS
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ADJUSTABLE
RATE MORTGAGE (ARM): A mortgage with an interest rate that changes
over time in line with movements in the index. ARMs are also referred
to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).
ADJUSTABLE PERIOD: The length of time between interest rate changes
on an ARM. For example, a loan with adjustment period of one year
is called a one-year ARM, which means that the interest rate can
change once a year.
AMORTIZATION: Repayment of a loan in equal installments of principal
and interest, rather than interest-only payments.
ANNUAL PERCENTAGE RATE (APR): The total finance charges (interest,
loan fees, points) expressed as a percentage of the loan amount.
ASSUMPTION OF MORTGAGE: A buyer's agreement to assume the liability
under an existing note that is secured by a mortgage or deed of
trust. The lender must approve the buyer in order to release the
original borrower (usually the seller) from liability.
BALLOON PAYMENT: A lump sum principal payment due at the end of
some mortgages or other long-term loans.
BINDER: Sometimes known as an offer to purchase or an earnest money
request. A binder is the acknowledgment of a deposit along with
a brief written agreement to enter into a contract for the sale
of real estate.
CAP: The limit on how much an interest rate or monthly payment can
change, either at each adjustment or over the life of the mortgage.
CC&RS: Covenants, Conditions and Restrictions. A document that
controls the use, requirements and restrictions of a property.
CERTIFICATE OF REASONABLE VALUE (CRV): A document that establishes
the maximum value and loan amount for a VA guaranteed mortgage.
CLOSING STATEMENT: The financial disclosure statement that accounts
for all of the funds received and accepted at the closing, including
deposits for taxes, hazard insurance, and mortgage insurance.
CONDOMINIUM: A form of real estate ownership. The owner receives
title to a particular unit and has a proportionate interest in certain
common areas. The unit itself is generally a separately owned space
whose interior surfaces (walls, floors, and ceilings) serve as its
boundaries.
CONTINGENCY: A condition that must be satisfied before a contract
is binding. For instance, a sales agreement may be contingent upon
the buyer obtaining financing.
CONVERSION CLAUSE: A provision in some ARMs that enable you to change
an ARM to a fixed-rate loan, usually after the first adjustment
period. The new fixed rate is generally set at the prevailing interest
rate for fixed-rate mortgages. This conversion feature may cost
extra. |
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