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.

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Acceleration Clause
Provision in a mortgage that allows the lender to demand payment of the entire principal balance if a monthly payment is missed or some other default occurs.

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Additional Principal Payment
A way to reduce the remaining balance on the loan by paying more than the scheduled principal amount due.

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Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).

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Adjusted Basis
The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

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Adjustment Date
The date that the interest rate changes on an adjustable-rate mortgage (ARM).

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Adjustment Period
The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).

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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.

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

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Amortization Term
The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.

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Annual Percentage Rate (APR)
The cost of credit, expressed as a yearly rate including interest and mortgage insurance and loan origination fees. This allows the buyer to compare loans, however APR should not be confused with the actual note rate.

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

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

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Asset
Anything owned of monetary value including real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).

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Assignment
The transfer of a mortgage from one person to another.

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Assuming a Loan
An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders