Adjustable Rate Mortgage (ARM) - A mortgage in which the interest rate remains the same for a time (usually 3-5 years) and then it “adjusts” (goes up). This can cause great troubles for the buyer if he rate goes way up and the owner cannot afford the new higher payment and cannot refinance due to poor credit or insufficient equity in the property. These mortgages can therefore lead unprepared borrowers into bankruptcy.

Annual Percentage Rate (APR) - Borrowed money has an APR associated with it, which determines how much interest is paid on the money, borrowed. The higher your interest rate the higher your monthly payment. In general, the better one’s credit is the lower one’s interest rates and the lower payment due every month. The number one reason to improve your credit is to lower your APR.

Appraisal - To find the “real value” of a property you must get an appraisal. A qualified appraiser does an appraisal. Appraisals typically cost $300-$500. An appraisal is needed as lenders use them to tell the value of a property. (Lenders typically don’t lend more money than an appraisal says the property is worth.) Appraisers use “comps” and improvements (often called “sweat equity”) made to the property to come up with a value.

Appreciation - The amount a property goes up in value due to the passage of time. If a market is poor a property can also go down in value (depreciate). Purchasing a home is considered an investment as most homes appreciate in value, while other purchases such as buying a car is not a good investment as cars tend to depreciate in value almost immediately.

Assets - Lenders consider assets important to qualifying you for a loan. Assets are things that can easily be turned into cash such as bank accounts, retirement accounts, properties, etc. If you have a good deal of assets then you are likely to get a better APR. In our opinion however, good credit is the best asset there is.