Adjustable Rate Mortgage (ARM)
A variable rate mortgage with an interest rate that adjusts
periodically.
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Annual
Cap
Annual maximum adjustment of your adjustable rate mortgage.
For example, if your annual cap is 2%, your mortgage
interest rate can only increase by a maximum of 2%.
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Appraisal
An estimate of a property’s value as of a given date,
determined by a qualified professional appraiser. The value
may be based on several factors including, recent sales of
comparable properties.
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Conforming Loan
A loan that conforms to Federal National Mortgage
Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC) guidelines.
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Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal
government.
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Escrow
An item of value, money, or documents deposited with a third
party to be delivered upon the fulfillment of a condition.
For example, the deposit by a borrower with the lender of
funds to pay taxes and insurance when they become due.
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Escrow Collections
Funds set aside in an escrow account to pay the borrower’s
property taxes, mortgage insurance, and hazard insurance.
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Fixed
Rate Mortgage
A mortgage in which the interest rate does not change during
the entire term of the loan.
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"The key consideration for
people pondering an ARM is how long they intend to remain in
a house. Some popular ARMs carry a fixed rate during their
first three, five, seven or ten years, making them a good
choice for homeowners who plan to move in a relatively short
period. These so-called hybrid ARMs generally aren't a good
idea if you plan to stay put. Other ARMs adjust every year
or less, making borrowers more vulnerable to short-term
swings in interest rates." [Ruth Simon, The Wall Street
Journal Sunday] |
