General Finance Terms - Mortgage Loan Terms A-D

Acceleration Clause
The right of the lender to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor, or by using the right vested in the Due-on-Sale Clause.
Adjustable rate mortgage aka ARM.

Adjustment Intervals
The time between changes in the interest rate and/or monthly payment on an ARM, usually the adustment will be one, three or five years, depending on the index.

Amortization
A payment with equal periodic payments calculated to pay off the mortgage by the end of a fixed period.

Appraisal
An estimate of a properties value which is made by a qualified professional called an appraiser.

Assessment
A local tax levied against a property for a specific purpose, such as a sewer or street lights.

Assumption
An agreement between seller and buyer where the buyer will take over the payments on an existing mortgage from the seller. Assuming a loan in this manner usually saves the buyer money since this is an existing loan.

Balloon Payment
A large payment that is due after several small payments. After making a prespecified number of payments you will a one large (ballon payment) due at the end of the term which is the balance of the loan.

Borrower AKA Mortgagor
One who receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Broker
An individual who assists in arranging financing or negotiating contracts for a client. Brokers usually charge a fee or receive a commission for their services. A Broker is not actually the lender.

Buy-down
When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Cash Flow
Refers to money coming in from a property. The cash flow should be enough to cover the expenses of the property so that it is not negative cash flow.

Cap
A limit or cap on an adjustable rate mortgage which may change per year over the life of the loan.

Closing
The meeting between the buyer, seller and lender or agents where the property and funds legally change hands. The closing of a deal.

Commitment
A promise by a lender to make a loan on specific terms or conditions to a borrower if all terms and/or conditions are met by the borrower.

Construction Loan
Provides periodic monetary dispursements to the builder of a home as the home construction progresses.

Contract sale or deed:
A contract between purchaser and a seller to convey title after certain terms and/or conditions have been met.

Conventional Loan
A mortgage which is not insured by FHA or guaranteed by the VA.

Credit Report
A document which reports the credit payment history and current status of a borrower's credit standing.

Debt-to-Income Ratio
The ratio is expressed as a percentage, which is the result of a persons total monthly income and monthly debt obligations to determine a ratio of debt to income.

Deed of Trust
In some states, this document is used in place of a mortgage to secure the payment of a debt.

Default
Failure to meet obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Interest
I interest is deferred or delayed by adding it to the loan balance.

Delinquency
Failure to make payments on time. this can lead to foreclosure.

Department of Veterans Affairs (VA)
An independent agency of the federal government which has long-term, low down payment mortgages to eligible veterans.

Down Payment
Money which is paid by the borrower to make up the difference between the purchase price and the mortgage amount.

Due-on-Sale-Clause
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgaged home is sold.