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 Adjustable
Rate Mortgage (ARM)
A mortgage, which allows
the lender to adjust the mortgage's interest rate
periodically on the basis of changes in a specified
index. Interest rates may move up or down, as
market conditions change. The change in interest
rate will result in a change in the periodic payments
due under the mortgage. ARMs are attractive when
short-term interest rates are trending lower.
Balloon
Mortgage
Usually a short-term fixed-rate
loan that involves small payments for a certain
period of time with the balance due in a single,
large payment at a time specified in the contract.
Whenever the balloon mortgage becomes due, the
entire unpaid balance is due. Generally, the homeowner
must either refinance or sell the property.
Buy-Down
The payment of extra money
on a loan now so as to provide a lower interest
rate over either a given period or over the life
of the loan. To buy-down a mortgage, the buyer
pays additional points to the lender, which will
decrease the interest rate for a specific period.
Conforming
Loan
Conventional home mortgages,
first mortgages up to loan amounts mandated by
Congressional directive, which meet the qualifications
for sale or delivery to either the Federal National
Mortgage Association (FNMA) or the Federal Home
Loan Mortgage Corporation (FHLMC).
Construction
Loan
A structured, short-term
loan to provide funds necessary to begin construction
on buildings or homes.
Conventional
Mortgage
A mortgage loan made by an
institutional lender without the inclusion of
government guarantees such as VA or FHA loans.
Convertible
ARM
The convertible ARM is a
combination of both fixed-rate and adjustable
rate mortgages, allowing the best of both options
in one package.
Deferred
Interest Mortgage
A mortgage in which the payment
is not sufficient to cover the principal and the
interest and the payment portion of the interest
is postponed until a certain date at which time
the interest postponed is added to the principle
owing.
Federal
Home Loan Mortgage Corporation (FHLMC)
The Federal National Mortgage
Association is a congressionally chartered, shareholder-owned
company and is the largest national supplier of
home mortgage funds. It is commonly known as Freddie
Mac. The company buys mortgages from lending institutions,
pools them with other loans, and sells shares
to investors. Detailed information may be found
at http://www.freddiemac.com.
Federal
Housing Administration (FHA)
An agency of the federal
government, the Division of the Department of
Housing and Urban Development, that sets standards
for the underwriting of private mortgages and
insures residential mortgages made by private
lenders.
Federal
Housing Administration (FHA) Loans
Federal Housing Administration
(FHA) low-rate loans are available to Americans
with smaller incomes who are interested in modestly
priced homes. Down payment requirements are usually
lower than the prevailing ones.
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Federal
National Mortgage Association (FNMA)
The U.S.'s largest supplier
of mortgages to home buyers and owners, a corporation
established by Congress and owned by stockholders.
It is commonly referred to as 'Fannie Mae,' this
government-sponsored enterprise is chartered by
Congress. This federally chartered agency buys
mortgages from lending institutions, pools them
with other loans, and sells shares to investors.
Detailed information may be found at http://www.fanniemae.com
Fixed-Rate
Mortgage
The interest rate you pay
and the monthly principal and interest payments
are agreed upon from the outset and will not change
throughout the entire term of the mortgage.
Government
National Mortgage Association (GNMA)
A government-owned corporation
within the U.S. Department of Housing and Urban
Development, it is also referred to as 'Ginnie
Mae,’. This government agency guarantees
the payment of principal and interest on all of
its pass-through securities, and its guarantee
is backed in turn by the full faith and credit
of the U.S. Government.
Graduated
Payment Mortgage (GPM)
A mortgage that usually starts
the borrower with low payments that are gradually
increased over five to ten years, before leveling
off for the remainder of the term of the loan
until the loan is fully amortized. Negative amortization
usually occurs until the payment reaches the level
payment stage. Usually government insured loans
(VA or FHA)
Growing
Equity Mortgage (GEM)
This is a long-term mortgage
whereby the borrower agrees to increase his payment
each year by an agreed amount. The added money
per payment is applied directly to the outstanding
principal on the mortgage. The mortgage thereby
is paid off in a shorter number of years.
Renegotiable
Rate Mortgage (RRM)
Similar to an Adjustable
Rate Mortgage, this type of mortgage allows the
interest rates and payments to be adjusted periodically
according to an index.
Reverse
Annuity Mortgage (RAM)
A type of mortgage where
the property's equity serves as security for periodic
payments made by the lender to the borrower. Mortgage
is generally paid out upon the sale of the property.
Rollover
Mortgage (ROM)
A mortgage where the payments
are only guaranteed for three, four, or five years.
The borrower is allowed to refinance at the end
of the term at the interest rate then applicable.
Shared
Appreciation Mortgage (SAM)
It is a loan arrangement
where two or more parties participate in the purchase
of real estate and share the appreciation and
tax deduction. Similar to shared equity mortgages.
Veterans'
Administration Loans
Mortgage loans to veterans
by banks, savings and loans, or other lenders
that are guaranteed by the Veterans' Administration,
enabling veterans to buy a residence with little
or no money down.
Wraparound
Mortgage
A secondary financing option
in which a new larger mortgage is created to encompass
the first mortgage. This large second mortgage
is used to preserve the low interest rate on the
first mortgage for a potential buyer. |
