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Abstract of title
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A specified piece of real estate's title history in the form of a written summary.
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Abstract of Title
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A summary of recorded transactions concerning a property. (An attorney or title insurance company examines an abstract of title for any title defects which must be cleared before a buyer can purchase clear, marketable and insurable title.)
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Acceleration Clause
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Condition in a mortgage that gives the lender the right to require immediate repayment of the loan balance if regular mortgage payments are not made, or for breach of other conditions of the mortgage.
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Acceleration Clause
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A provision of a mortgage or note which provides that the entire outstanding balance will become due and payable in the event of default.
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Accrued interest
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Interest that is due but hasn't yet been paid. It most often comes into play when you buy bonds in the secondary market. Bonds usually pay interest every six months, but it is earned (accrued) by bondholders every month. If you buy a bond halfway between interest payment dates, you must pay the seller for the three months' interest accrued but not yet received. You get the money back three months later when you receive the interest payment for the entire six-month period.
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Accrued Interest
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Interest which has been incurred but not paid.
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Acquisition indebtedness
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Mortgage debt on which the interest is deductible. The debt must be used to buy, build or substantially improve your principal residence or second home and must be secured by the property. Qualifying interest paid on up to $1 million can be deducted.
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Active participation
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The level of involvement that real estate owners must meet to qualify to deduct up to $25,000 of losses from rental real estate. Failure to pass this test could make such losses nondeductible under passive-loss rules.
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Adjustable Rate Mortgage (ARM)
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A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.
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Adjustable Rate Mortgage (ARM)
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A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Subject to certain limitations, the rate and payments on an ARM loan rise and fall with the market.
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Adjusted basis
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Your basis in property is the stepping-off point for determining taxable gain or loss. The basis generally starts out as what you pay for the property, although special rules apply to assets you inherit or receive as a gift. Your basis can be adjusted while you own property. When rental property is involved, for example, you reduce your basis by the amount of any depreciation you deduct while you own the property.
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Adjusted gross income
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This is your income from all taxable sources minus certain adjustments. The adjustments — sometimes called above-the-line deductions because you can claim them whether or not you itemize deductions — include deductible contributions to regular individual retirement accounts, medical savings accounts and Keogh plans, any penalty paid on early withdrawal of savings, the deduction for 50% of the self-employment tax paid by self-employed taxpayers, alimony payments and job-related moving expenses.
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Adjusted Gross Income (AGI)
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The amount used in the calculation of an individual's income tax liability; one's income after certain adjustments are made, but before standardized and itemized deductions and personal exemptions are made.
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Adjustment Interval
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For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.
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Adjustment Interval or Adjustment Period
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The length of time between rate adjustments on an Adjustable Rate Mortgage (ARM).
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Agreement of Sale
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Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
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Alimony
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Qualifying payments to an ex-spouse that can be deducted as adjustments to income whether or not you itemize. The recipient must include the payments in his or her taxable income.
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Alternative Documentation
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A substitute method of providing the documentation necessary to approve a loan. For example, bank statements may be substituted if it is not possible to provide written verification of the bank balance directly from the borrower’s bank.
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Amortization
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Literally to "kill off" (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.
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Amortization
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The process of paying off a mortgage in regular increments.
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Amortization Schedule
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This is the formal name for the repayment schedule that shows each of your mortgage payments with a breakdown of how much goes to principal and interest.
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Amortization Schedule
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A monthly repayment schedule outlining how a loan will be paid off in fixed payments combining principal and interest.
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Annual Percentage Rate (APR)
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The interest rate which reflects the cost of a mortgage as a yearly rate. This rate is usually higher than the stated loan rate for the mortgage, because it takes into account points and other charges.
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Annual Percentage Rate (APR)
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A calculation that expresses the total cost of a mortgage loan as a yearly rate (according to a federally mandated procedure). The APR calculation takes into account monthly interest payments, mortgage insurance, points, and certain fees paid at origination. It generally results in a rate slightly higher than the stated interest rate on the loan.
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Annuity
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A series of regular payments, usually from an insurance company, guaranteed to continue for a specific time, usually the annuitant's lifetime, in exchange for a single payment or a series of payments to the company. With a deferred annuity, payments begin sometime in the future. With an immediate annuity, payments begin right away. A fixed annuity pays a fixed income stream for the life of the contract. With a variable annuity, the payments may change according to the relative investment success of the insurance company.
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Application
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An initial statement of personal and financial information required to approve a loan provided by the borrower and necessary to intitiate the approval process for a loan.
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Application Fee
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The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.
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Appraisal
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The determination of property value based on recent sales information of similar properties.
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Appraisal
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A written estimate of a property’s current market value, based on recent sales information for similar properties, the condition of the property and the neighborhood’s impact on future property value.
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Appraisal Fee
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A fee charged by a licensed, certified appraiser to provide an appraisal.
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APR
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See Annual Percentage Rate.
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ARM
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See Adjustable Rate Mortgage.
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ARM fund
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A mutual fund that invests in adjustable-rate mortgages (ARMs).
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Assessment
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A local tax levied against a property for a specific purpose, such as road or sidewalk construction or sewer or street light installation.
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Assignment
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The transfer of property rights by one person, the assignor, to another, the assignee.
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Assumability
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A loan feature that allows the loan to be transferred from the seller to the purchaser of a home with the same terms and conditions, subject to lender approval.
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Assumable Loan
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These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.
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