A mortgage loan or Deed of Trust which allows the lender to periodically adjust the interest rate in accordance with a specified index.
Balloon Mortgage
A balloon payment is due on a mortgage that usually offers a low monthly payment for an initial period of time. After that period of time elapses, the balance must be paid by the borrower or the amount must be refinanced. The large sum payable at the end of the loan term is called the “balloon payment.”
Construction Loan
A short-term, interim loan for financing the cost of construction; the lender advances funds to the builder at periodic interval as work progresses.
Conventional Loan
A private sector loan which is not guaranteed or insured by the U.S. government.
FHA Loan
FHA loans have been helping people become homeowners since 1934. The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal through a low down payment, lower closings and easier credit qualifying. In recent years, mortgage insurance fees on FHA loans are making them less competitive.
Fixed-Rate Mortgage
A mortgage with an interest rate that does not change over the life of the loan, and as a result, monthly payments for principal and interest do not change.
Hybrid ARMs
These loans are a mix or a hybrid of a fixed-rate period and an adjustable-rate period. For example, a 3/1 ARM will have a fixed interest rate for the first three years and then will adjust annually until the loan is paid off. The first number tells you how long the fixed interest-rate period will be and the second number tells you how often it will adjust after the initial period.
Interest Only ARMs
An interest-only (I-O) ARM payment plan allows you to pay only the interest for a specific number of years, typically between 3 and 10 years. This allows you to have smaller payments for a period of time. After that, your monthly payments will increase, even if the interest rate stays the same, because you must start paying back the principal as well as the interest each month.
VA Loan
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs. The VA loan was designed to offer long-term financing with no down payment to eligible American veterans or their surviving spouses (provided they do not remarry). The VA loan allows veterans 103.3 percent financing without private mortgage insurance. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed.
