Mortgages Defined

ADJUSTABLE RATE MORTGAGE

An Adjustable Rate Mortgage or ARM, is a mortgage that has a fixed rate of interest for a set period of time; typically one, three, or five years. During the initial period the interest rate is lower, and after that it will adjust based on an index. The rate thereafter will adjust at set intervals. The ARM program will have caps as to how high or low the rate can go at each adjustment.

ANNUAL PERCENTAGE RATE (APR)

The rate of interest that will be paid back to the mortgage lender. The rate can either be a fixed rate or adjustable rate.

AMORTIZATION

The amortization of the loan is a schedule on how the loan is intended to be repaid. For example, a typical amortization schedule for a 15 year loan will include the amount borrowed, interest rate paid, and term. The result will be a monthly breakdown of how much interest you pay and the total to be paid on the amount borrowed.

APPRAISAL

Conducted by a professional appraiser who will look at a property and give an estimated value based on physical inspection and comparable houses that have been sold in recent times.

CLOSING COSTS

These are the costs that the buyer must pay during the mortgage process. There are many closing costs involved; ranging from attorney fees, recording fees and other costs associated with the mortgage closing.

CLOSING DISCLOSURE

A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).

CONSTRUCTION MORTGAGE

When a person is having a home-built, they will typically have a construction mortgage. With a construction mortgage, the lender will advance money based on the construction schedule of the builder. When the home is finished, the mortgage will convert into a permanent mortgage.