Actual Notice: In a real estate transaction Actual Notice is the occurrence of one Party, (i.e. the Seller) notifying the other Party (Buyer) of an event, fact, or other information. An example of Actual Notice is the real estate agent telling the Buyer that their offer/bid on the house has been accepted by the Seller. Actual Notice is also the recording of documents at closing or settlement.

Acquisition Fee: A charge by some leasing companies to originate a new lease. Any fee charged to borrow money is an acquisition fee.

Adjustable-rate mortgages: ARMs are those mortgage loans that start with a lower interest rate for a certain period of time. This allows a borrower to qualify for a higher loan amount and to take advantage of paying short term rates rather than those of a 30 year fixed rate mortgage.

All adjustable rate mortgages have a fixed period prior to any adjustment (this can be termed the “Honeymoon period”. That period can be one month or up to 10 years. After the initial period the rate will change at regular intervals. The new rate will be determined by the Index value the loan is based on plus the Margin that is built into the loan. The may be Interest Rate Caps and/or Payment Rate Caps also built into the loan.

It is critical that the borrower understand the features of the ARM loan that they are considering. Be sure to ask what the initial rate is, when does it first adjust, what is the margin, what is the index, and what is the interest rate life cap? Your loan officer should be able to explain all of this to you. If not, please find another loan officer!

Alias: A popular television show…(just seeing if you were paying attention) An alias is another name used by a person than the name given at birth or marriage. It is also called AKA; which is an acronym for “Also Known As”. Tom Smith is technically an alias for Thomas Smith. Thomas Smith, Jr. is another alias for the same person.

ALT A: A mortgage loan term used to describe a borrower or loan program that is not a traditional mortgage loan or Borrower. 100% financing for a borrower with excellent credit would be described as ALT A financing. Often the term Sub-Prime is used inaccurately for this type of borrower and loan. See Sub-Prime and B-C Loans.

Amenity: A feature that enhances property value. Examples are addition of square footage, a deck, a view, a finished attic, a swimming pool, school districts that have won awards, off-street reserved parking within a condominium community, the proximity of public transportation, tennis courts, or a home or homeowner’s association gym.

Amortization: The schedule ofrepayment of a mortgage debt with periodic payments of both principal and interest. It is calculated to retire/pay off the obligation at the end of a fixed period of time. A fully amortized loan refers to one that will pay down the loan at a specific date when regular payments are made at a set amount.

Amortization Schedule: The actual numbers and payments set into an information table that shows the loan payments and how those payments work to bring the balance to zero in the scheduled amount of time.

Annual Fee: A sum of money charged to keep an account open. Many credit card companies will charge an annual fee for you to use their credit card. I recommend that you call and ask them to waive the fee. After that you may also need to call each year once they agree to be sure that the fee is waived each year.

Annual Percentage Rate (APR): The cost of credit, financing, or loans expressed as a single percentage rate. The APR can include the interest rate, points, broker fees and certain other credit charges that the borrower is required to pay to obtain the loan. The same is true of all types of credit. including car loans, credit card debt, & signature loans to name a few.

Applicant: A prospective borrower who has applied for credit. Any loan application is a series of steps, to confirm what is contained in the application with the goal of extending credit to the applicant/borrower.

Application: The initial steps taken to borrow money or take out a loan of any kind. Typically, the higher the value of the item being applied for the greater the amount of information needed for the application.Also, the actual form on paper or internet.

Appraisal: A professional opinion of value reached by an appraiser based upon current market data, knowledge, experience, and a study of pertinent data. It is a specific report needed for most real estate transactions involving a loan for purchase or refinance of the property.

Appraised Value: A professional opinion of value reached by an appraiser. It is based on current market data, market conditions, knowledge and, the experience of the appraiser.

Appraiser: One qualified by education, training, experience, & proper licensing to estimate the value of real estate and personal property.

Appreciation: An increase in value of an item, a piece of real estate or personal property. Appreciation can be due to market conditions or improvements and additions made to the property by the owner. The owner of the property enjoys the benefit of appreciation.

Arrears: Paymentsmade after the interest on the loan has been used. For instance, real estate loans allow the borrower to “use” the money for one month and then the payment for that use is collected as interest. A mortgage payment made on time in January is for interest used in December.

Late payments on any debt can also be described as being “in arrears”.

“AS IS”: An agreement or notice that property is being sold in the condition that it is in at offering and that the seller will not be making any repairs or improvements to close the sale. It does not relieve any agent, buyer or seller from investigating the property condition to determine all of the pertinent facts about the property to determine fully what AS IS “IS”. Any discoveries made in that investigation must be shared with the Seller and any other subsequent buyers should the Buyer requesting the inspection withdraw from purchasing.

Assessed Valuation: The determination of value, for tax purposes, of a property by the County Tax Assessor.

Assessment: A bill that comes due from the county tax assessor based upon the newly assessed value of the property. Home owners’ Association for condominiums, co-ops, and other properties with “Common Areas” can also be assessed for improvements and repairs needed for the property.

Assessor: The public official who appraises taxable property and calculates the assessment due on that property.

Assets: All things of value, including cash, investments, art, and other highly valued property, encumbered or not, owned by a person, corporation or other entity.

Assignment of Lease: A mortgage clause that passes control of leases on an income-producing property to the lender. This is typically a condition of a loan for real estate to ensure that, in case of mortgage default, any continuing income from the property goes directly to the lender rather than the mortgagor.

Assignment of Mortgage: A transfer of ownership of a mortgage from one property to another.

Assumable Mortgage/Loan: A real estate loan that allows another party to replace the original borrower under the same conditions and terms that the original borrower obtained. Most real estate loans are not assumable. Those that do allow loans to be assumed require that the new borrower qualify for the loan as if it were a new loan. They will typically charge a fee to do this. Two decades ago home buyers used to assume loans to avoid paying any new real estate fees. Nowadays the fees to assume a loan are typical closing costs for any home purchase.

Assumption: A buyer, wishing to purchase a property may take over payments on the existing loan held by the seller. Unless the assumption is approved by the current lender then the seller remains liable for the loan. In that case, the buyer may have no liability for the loan. A buyer may, in the case of VA and FHA loans, and certain few conventional loans may assume that loan with the permission and approval of the lender. In that case, the seller would be released from liability for the loan. A new buyer/borrower assuming the loan and releases the seller/owner from liability means that the seller/owner is no longer liable for the loan being paid on time. The new Buyer/Borrower “releases” the Seller.

Assumption Fee: The amount paid a lender for the paperwork and processing of records necessary to approve and document a new Applicant/Borrower/Buyer. It is typically the same as getting a new loan. Be sure to price the possible benefit of obtaining a new loan as opposed to assuming an existing mortgage.

ATM: Automated teller machine. ATM’s offer consumers convenient access to withdraw cash from their bank accounts, to make deposits, transfers and balance inquiries. Some banks charge ATM fees, depending on where the funds are drawn out. ATM transactions can also involve fees from more than one bank.

Authorized User: A person who is authorized by the holder of a credit card or other account to use the card. This person is not responsible for the payment of this account as far as the lender is concerned. (Mom & Dad might see it differently) Authorized Users do have the report listed on their own credit report as well as the person who is responsible for the account

Attorney in Fact: A person appointed to act as an agent for another under a power of attorney. The authority may be limited to a specific act or a much broader scope. There are real estate powers of attorney, medical powers of attorney, and specific powers of attorney available. This is a far reaching document to give to another person. Make sure that you consult an attorney before granting this power to another person.

Available Credit: The amount of un-used credit still available on a revolving or open-ended account.

Average Daily Balance Method: This is the most commonly used method for calculating interest due on credit card debt. This common method includes new purchases arriving on today’s date added to the balance from the previous day, subtracting any payments, and then dividing that by the number of days in the business cycle. That sum is then multiplied by the periodic rate; which is typically the annual percentage rate divided by 12. The sooner your payment arrives to the lender using this method the less interest you will pay on this type of loan. This is most usually used on revolving credit card debt or home equity lines of credit.

Essentially you are paying for each day that you use the loan.

Average Rate of Return: The return on an investment expressed in a percentage or dollar amount. It is calculated by averaging the total cash flow over the years during which the cash flow is received by the investor.