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Acceleration clause Annual Percentage Rate (APR)
Acceptable debt Application
Acceptance Appraisal/Appraiser
Adjustable Rate Mortgage (ARM) Appreciation
Adjusted cost basis Assessed value
Adjusted gross income Assessment
Adjustment date Asset
Adjustment period Assumable mortgage
Amortization Assumption
Amortization schedule Assumption clause
Amortization term Assumption fee

Acceleration clause
An agreement that gives a lender the right to demand payment in full on a loan due to certain circumstances, such as lateness on monthly payments, change of ownership with in the residence without the lender's consent, destruction of the property, or any other circumstance that may make the loan not as secure.

Most loans have an acceleration clause and it usually takes effect when a buyer assumes a seller's mortgage or when a home owner misses payments or breaks a term that was agreed to in the contract.

See: Assumption clause, Due-on-sale clause

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Acceptable debt
The limit of debt that the lender believes the borrower can handle prior to approving the mortgage loan.

Mortgage lenders set a certain percentage of your monthly gross salary that they prefer go to paying off debt, such as credit cards, car or student loans. Usually the percentage is somewhere between 7-9%. They need to know that you will be able to comfortably pay your monthly mortgage payments without other overwhelming bills.

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Acceptance
When a seller agrees to a home buyer's offer.

Acceptance is the first stage in negotiating to buy a home. It can be either (1) a written or verbal "yes"; or (2) a conditional answer that needs further negotiation, such as "I'll accept if you pay $2,000 more." Since a verbal acceptance is difficult to enforce, make sure to also ask for it in writing.

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Adjustable Rate Mortgage (ARM)
A mortgage loan, in which, the interest rate is periodically adjusted to meet the current rates.

The monthly payment also changes occasionally due to any rate changes.

ARMs start off with a fixed interest rate and monthly payment, but then adjust to reflect changes in the market interest rate according to an agreed upon schedule. Your initial rate is lower, but you take a risk that the rate may increase at a later date. Usually there is a cap on how high the interest rate can rise.

See: Delayed ARM
Compare: Fixed rate mortgage

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Adjusted cost basis
A tax figure that tells you if you will make a profit in selling your house.

Formula: Purchase Price + Any Improvements - Any Damage(Depreciation) = Adjusted Cost Basis

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Adjusted gross income
Your total income including your salary and bonuses, as well as any seasonal or rental income minus an adjustment for vacancies or unpaid rent on rental property.

Your lender or broker will look at your adjusted gross income to find out if you make enough money to qualify for a loan. You can find your adjusted gross income on line 32 of your 1040 income tax statement.

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Adjustment date
The date on which the interest rate changes on an adjustable rate mortgage (ARM).

After an initial period where an ARM's interest rate remains the same, the rate changes on the adjustment date to more closely reflect the current market rate. It will continue to adjust according to the guidelines that were set at the beginning of the loan.

See: Adjustable rate mortgage

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Adjustment period
How frequently the interest changes on an adjustable rate mortgage.

The adjustment period will be set at the onset of the loan. While most adjustment rate mortgages (ARMs) change annually, others fluctuate monthly or semi-annually. Usually, the longer the adjustment period, the higher the initial fixed interest rate will be.

See: Adjustable rate mortgage

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Amortization
When you reduce the size of your debt through regular, periodic payments.

When you make monthly payments that cover both the principal and interest, you are amortizing the loan. On the other hand, interest-only payments delay amortization because you do not pay down the principal.

Compare: Negative amortization

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Amortization schedule
A schedule of mortgage payments over the course of a loan showing how much is applied to the principal and the interest.

An amortization schedule gives a breakdown of your monthly payments in principal and interest. During the early years of your mortgage, the bulk of your payments go to interest.

You can use an amortization schedule to figure out the equity you gain during your mortgage term. The longer you own a house, the more equity you gain. Even over a short period of time, the equity can still increase due to other factors, such as appreciation and capital improvements.

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Amortization term
How long it will take to pay off a mortgage completely.

The amortization term on a 30-year fixed or a 30-year adjustable rate mortgage is 30 years. Balloon mortgages are amortized over 30 years, but are usually due in full in 5 to 7 years.

See: Balloon mortgage

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Annual Percentage Rate (APR)
A measurement used to compare rates offered by competing lenders. The APR takes into account both the interest rate and closing fees.

Unlike an interest rate, an APR gives you a better picture when shopping for the best deal on a loan. An APR lets you see the total cost of a mortgage not just the interest due. Lenders are required by law to show the APR of a loan. Always check to make sure that the APRs you are comparing include similar fees.

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Application
A paper form used to apply for a loan.

Filling out an application is the first step in applying for a loan. Even if you don't have a house in mind, you can still apply to be preapproved. The application, also referred to as a 1003, asks for personal and financial information, such as your current bills, present salary and bank account balances.

See: Preapproval

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Appraisal/Appraiser
When a certified professional looks over the property and estimates its value.

An appraisal of the property is required before the loan can be approved. To make an accurate estimate, an appraiser collects data about the property, such as the number and size of the bedrooms, which the appraiser uses to compare the property to similar properties recently sold in the area. Appraisal costs are included in the closing costs.

See: Comparable sale (Comp)

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Appreciation
An increase in a the value of a property.

A home usually increases in value over time. Appreciation increases your net worth as well as your equity. Three main factors affect the future value of your home. These factors are its location, condition, and the selling price of similar properties in the area.

See: Comparable sale (Comp)

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Assessed value
The value placed upon a property by a tax assessor for property tax purposes.

Normally the county or state calculates property taxes by multiplying the assessed value by the local tax rate. The assessed value isn't always equal to the actual value of a property.

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Assessment
A tax paid to support repairs and improvements in the neighborhood.

Some counties charge home owners an assessment tax for fixing the sewer, street lighting and sidewalks. In many cases, the assessment tax only applies to properties on certain streets or areas within a county.

See: Home Owners' Association dues

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Asset
Anything of value that can be converted into cash for payment of debt.

Some assets are land, investments and personal property. An asset is anything that can be turned into cash. If an asset can easily be converted into cash, like stocks, it is called a liquid asset.

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Assumable mortgage
When a home buyer takes over a seller's mortgage to purchase a home.

When you assume a mortgage you inherit both its interest rate and monthly payment schedule. It can mean big savings if the interest rate on the existing mortgage is lower than the current rate on new loans. You will need to qualify for the loan and you may have to pay closing fees, such appraisal and title insurance fees.

The lender may also hold the seller liable for the loan. For example, if you default and the lender forecloses, but the property sells for less than the loan's balance, the lender may be able to sue the seller for the difference.

See: Acceleration clause

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Assumption
When a buyer assumes (takes responsibility for) the seller's mortgage upon purchasing a home.

Assumptions happen with an assumable mortgage and allow a buyer to take over an existing mortgage pending the lender's approval.

See: Assumable mortgage

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Assumption Clause
The clause in a loan contract saying that a buyer can take over an existing mortgage.

See: Assumable mortgage

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Assumption fee
Lender's fees associated with the paper work for processing an assumption request.

Such fees are the appraisal fees, title insurance, etc.

See: Assumable mortgage

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