Mortgage Glossary Part 1

2/1 Buy Down Mortgage

The 2/1 Buy Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long term rates; however, even keeping the loan in place for three full years or more will keep their average interest rate in line with the original market conditions.

Acceleration Clause

A provision that allows a lender to demand payment of the total outstanding balance or demand additional collateral under certain circumstances, such as failure to make payments, bankruptcy, nonpayment of taxes on mortgaged property, or the breaking of loan covenants.


Adjusted Basis

The base price of an asset or security that reflects any deductions taken on or improvements to the asset or security, used to compute the gain or loss when sold.

Affordability Analysis

An analysis of a buyers ability to afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that are likely.

Amortization

The gradual repayment of a mortgage loan, both principal and interest, by installments.


Annual Percentage Rate (APR)

Annual Percentage Rate. The yearly cost of a loan, including interest, insurance, and the origination fee (points), expressed as a percentage. Often applied to mortgages, credit cards, and automobile financing.
Appraisal

A written analysis prepared by a qualified appraiser and estimating the value of a property.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.


Assumability

A mortgage that can be transfered with no change in terms. If an assumable mortgage is transferred, the buyer assumes all responsibility for repayment. The original lender must agree to the transfer of an assumable mortgage.


All these terms may seem confusing! Let Center State Mortgage help you regain control and allow them to make your home loan process easy, fast, and affordable! Choose Center State Mortgage for buying your next home and give yourself peace of mind.