Types of Mortgages

Fixed Rate Mortgages
The fixed rate mortgage is a traditional method of financing a home. The interest stays the same for the entire term of the loan, usually 15-30 years, therefore the interest and principal portions of your monthly payment remain the same.

Adjustable Rate Mortgage (ARM)
The interest on an adjustable rate mortgage is linked to a financial index, such as a Treasury security, so your monthly payments can vary over the life of the loan, usually 15-30 years. Most adjustable rate mortgages have a lifetime cap on the interest rate increase in order to protect the borrower.

Fannie Mae ( FNMA)
Nickname for Federal National Mortgage Association. It is a government-chartered non-bank financial services company and the nation's largest source of financing for home mortgages. It was started to make sure mortgage money is available in all areas of the country.

Freddie Mac (FHLMC)
Nickname for Federal Home Loan Mortgage Corp. A financial corporation chartered by the federal government to buy pools of mortgages from lenders and sell securities backed by these mortgages.

FHA/VA Mortgage
Repayment of the loan is guaranteed by the Federal Housing Administration, a federally sponsored agency, which allows lenders to provide loans with the lower down payments and slightly better interest rates for moderate income families. However, there are limits on the amount of money that can be borrowed and a maximum income for the eligible borrower.

Bi-Weekly Mortgage
A fixed-rate mortgage that lets you make the equivalent of 13 months of payments in a year to reduce a 30 year mortgage to 18 to 19 years.

Mortgage Terms

Annual Percentage Rate (APR)
A standardized method of calculating the cost of a mortgage, stated as a yearly rate which includes such items as interest, mortgage insurance, and certain points or credit costs.

Cap
A limit on the amount that the interest rate or the monthly payment can increase in an adjustable-rate mortgage.

Down Payment
The amount of money a buyer agrees to give the seller when a sales agreement is signed. Complete financing is later secured with a lender.

Equity
Determinations of the value of a property after existing liens are deducted.

Debt-To-Income Ratio
A borrower's monthly payment obligation on long-term debts divided by his/her net effective income or gross monthly income expressed as a percentage.

Loan-To-Value Ratio (LTV)
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.