| Fixed
Rate Mortgages
The most common type of mortgage
program where your monthly payments for interest and principal never change. Adjustable
Rate Mortgages (ARM)
These loans begin with an interest
rate that is lower than a comparable fixed rate mortgage, but the rate changes
at specified intervals. Reverse Mortgages
A Special type of loan made to older homeowners to enable them
to convert the equity in their home to cash to finance other needs. London
Inter Bank Offered Rate (LIBOR)
LIBOR is the rate
on dollar-denominated deposits, also know as Eurodollars, traded between banks
in London. Balloon Mortgages
Short
term mortgages that have some features of a fixed rate mortgage. Interest
Rate Buydowns
The buyer would pay points above current
market points in order to pay a below market interest rate during the first two
years of the loan. At the end of the two years they would then pay the old market
rate for the remaining term. Cost of Funds
Index
The ratio of the dollar amount paid in interest
during the month to the average dollar amount of the funds for that month constitutes
the weighted average cost of funds ratio for that month. Graduated
Payment Mortgage
With a GPM the payments are usually
fixed for one year at a time. Amortization
A gradual paying off of a debt by periodic installments which
pay principal and interest. Negative Amortization
An increase in principal balance which occurs when the monthly
payments do not cover all of the interest cost. The interest cost which is not
covered by the payment is added to the unpaid principal balance. (APR)
Annual Percentage rate
The effective rate of interest
for a loan per year. This rate is typically higher than the note rate because
it takes into account closing costs. This is one way to compare loan programs
offered by different lenders. Caution : the APR is sometimes computed differently
by different lenders and can be misleading (LTV)
Loan to Value Ratio
The loan amount divided by the
value of the property. Appraisal
An opinion or estimate of the value of a property at a given
date. 
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