A Flashcards
Ability to Repay
A potential borrower’s ability to afford the purchase of a home. Consideration of a borrower’s ability to repay involves the review of income, assets, liabilities, the type of product, and other factors. The federal Ability to Repay Rule sets forth the specific underwriting factors that mortgage professionals must examine when determining a borrower’s ability to repay.
Absolute Title
A title that is clear of any liens, judgments, or other encumbrances.
Abstractor
A professional in the title industry (sometimes an attorney) who conducts a title search and produces an abstract.
Acceleration Clause
A clause in a mortgage or deed of trust that allows the lender to demand immediate repayment of the balance of a loan under certain conditions, such as default by the borrower.
ADJUSTABLE-RATE MORTGAGE (ARM)
A mortgage in which the interest rate is adjusted periodically based on a pre-determined margin, index, and adjustment interval.
a.k.a.: Variable-rate mortgage
ADJUSTED BASIS
The cost of a property, plus the value of any capital expenditures for improvements to the property and minus any depreciation.
ADJUSTMENT DATE
The date on which the interest rate for an ARM may change.
ADJUSTMENT INTERVAL
and is typically one, three, or five years.
a.k.a.: Adjustment period, change frequency
ADJUSTMENTS (IN APPRAISAL)
The dollar value that is added to or subtracted from the sale price of a comparable property used to provide an indication of value of the subject property.
ADVANCE
A partial disbursement of funds under a note, usually made as part of a construction loan or a reverse mortgage.
ADVERSE ACTION
A refusal to grant credit as requested; a termination of an account or an unfavorable change in the terms of an account; or a refusal to increase the amount of credit available to a person who has applied for an increase.
AIR LOAN
An instance where a fictitious borrower obtains a mortgage loan “secured” by fictitious property.
AMORTIZATION
Scheduling the periodic payments on a loan so that each installment requires enough principal and interest to ensure complete repayment of the loan by the end of its term.
AMORTIZATION SCHEDULE
A table showing the portion of each payment that will be applied to interest and to principal, and the balance remaining after each payment has been applied.
AMORTIZATION TERM
The length of time required to amortize a mortgage loan, expressed as a number of months.
ANNUAL MORTGAGE INSURANCE PREMIUM (ANNUAL MIP)
A fee paid for mortgage insurance on an FHA-insured loan. Annual MIP is paid on a monthly basis. See also Mortgage Insurance Premium.
ANNUAL PERCENTAGE RATE (APR)
A uniform measurement of the cost of a loan, including interest and financed costs of closing, expressed as a yearly percentage rate.
ANNUITY
Payments made at specified intervals, such as with insurance contracts or certain types of investments.
ANTI-MONEY LAUNDERING PROGRAM (AML PROGRAM)
A program established in an effort to detect and guard against money laundering. These programs involve safeguards including internal procedures and controls, designated compliance officers, ongoing employee training, and independent audits. Anti-money laundering programs are required for certain institutions under the Bank Secrecy Act (BSA).
APPLICATION
The method by which a consumer formally applies to obtain a mortgage loan. The application form is known as the Uniform Residential Loan Application (URLA) or Form 1003.
APPLICATION FEE
A fee charged for processing a mortgage loan application. An application fee may be a flat fee or a percentage of the loan amount.
APPRAISAL
An opinion of the fair market value of a property, based on the appraiser’s knowledge and experience and on an analysis of the property utilizing recent comparable sales and market conditions.
a.k.a.: Valuation
APPRAISED VALUE
An estimate of the fair market value of real or personal property.
APPRAISER
A person qualified through state licensing procedures to estimate the value of real property.
