Real Estate Reference Home Buyer and House Plan Terms and Definitions
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  by Mark Mathis

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  When you start shopping for a new home, you may encounter some words and terms with which you are unfamiliar. The following glossary will help you to be a better informed shopper.



Adjustable Rate Mortgage (ARM) - A loan whose interest rate is adjusted according to movements in the financial market.

Amortization - A payment plan by which a borrower reduces a debt gradually through monthly payments of principal and interest.

Annual Percentage Rate (APR) - The annual cost off credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance, and other items.

Appraisal - An evaluation to determine what a piece of property would sell for in the marketplace.

Appreciation - The increase in the value of a property.

Assessment - A tax levied on a property or a value placed on the worth of property by a taxing authority.

Assumption - A transaction allowing the buyer of a home to assume responsibility for an existing loan on the home instead of getting a new loan.

Balloon - A loan which has a series of monthly payments (often for 5 years or less) with the remaining balance due in a large lump sum payment at the end.

Binder - A receipt for a deposit paid to secure the right to purchase a home at terms agreed upon by the buyer and seller.

Buydown - A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a mortgage loan.

Cap - A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan.
 
     
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