Consumer Credit

Mortgage Terms Page 1

203(b): FHA's single family mortgage insurance program which protects lenders against borrowers defaulting; 203(b) financing generally requires a low down payment, however there is also a limit on the total loan amount.

80/20/0, 80/15/5 and 80/10/10 loan plans: Plans whereby the full purchase price of a property is financed by combination loans. For example, in a 80/20/0 loan plan, a first mortgage is secured for 80 percent of the sale price, a second mortgage or a personal loan is then contracted for the remaining twenty percent. The purpose of 100% financing is to avoid mortgage insurance, which most lenders require from borrowers that are unable to pay at least 20% of the purchase price as a down payment. This type of financing is also called piggyback mortgages.

Follow easycrosswords on Twitter

"A" Loan: To lenders, "A Credit" is considered the best credit rating. The FICO score is above 700 and the consumer has no late payments on their credit record for the previous 12-month period. There are rarely rewards for having a high FICO score, but there are penalties in the form of higher interest rates for lower scores. (See also: B Loan and C Loan.

Abstract of title: A summary recording the details of ownership of a piece of real estate throughout its history. In the United States this information is part of our public records.

Acceleration (or acceleration clause): A distinct part in a loan or mortgage contract that provides for the lender to be able to demand payment in full of the outstanding loan balance under certain circumstances. Situations in which acceleration may be activated include if the home is sold or if the buyer misses a scheduled payment.

Acceptance: The written approval from a seller of a buyer's formal offer.

Accrued interest: Interest that is earned but not paid, adding to the amount owed; accrued interest accumulates in between payments. Same as negative amortization.

Acquisition cost: The total of the purchase price of a property plus the estimated closing cost required to purchase that property. (Acquisitions costs are commonly used in reference to FHA loans.)

Additional principal payment: Money paid on a loan to the in addition to the required payment amount that is then applied directly to the principal of the loan in order to shorten the life of the loan.

Adjustable-rate mortgage (ARM): Same as variable-rate mortgage, a mortgage loan with a variable interest rate that can be changed by the lender after a specified period, usually by a predetermined formula, based on the prime interest rate and/or other indices. In the US most ARMs are "indexed ARMs" meaning there is a certain high ceiling above which the interest rate can not be adjusted. The less common discretionary ARM is a variable.rate mortgage in which the lender can change interest rates over a wider spectrum. ARMs are also known as AMLs or "adjustable mortgage loans". See also: cap; convertible ARM; discretionary ARM; indexed ARM; life cap; payment change date; prime rate; treasury index; two step mortgage.

Back to Economics Home

Mortgage Terminology Pages: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29.

Back to Economics Home