Adjustable Rate Mortgage (ARM)

A mortgage, which allows the lender to adjust the mortgage's interest rate

periodically on the basis of changes in a specified index. Interest rates

may move up or down, as market conditions change. The change in interest

rate will result in a change in the periodic payments due under the

mortgage. ARMs are attractive when short-term interest rates are trending

lower.

Balloon Mortgage

Usually a short-term fixed-rate loan that involves small payments for a

certain period of time with the balance due in a single, large payment at

a time specified in the contract. Whenever the balloon mortgage becomes

due, the entire unpaid balance is due. Generally, the homeowner must

either refinance or sell the property.

Buy-Down

The payment of extra money on a loan now so as to provide a lower interest

rate over either a given period or over the life of the loan. To buy-down

a mortgage, the buyer pays additional points to the lender, which will

decrease the interest rate for a specific period.

Conforming Loan

Conventional home mortgages, first mortgages up to loan amounts mandated by Congressional directive, which meet the qualifications for sale or delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).

Construction Loan

A structured, short-term loan to provide funds necessary to begin

construction on buildings or homes.

Conventional Mortgage

A mortgage loan made by an institutional lender without the inclusion of

government guarantees such as VA or FHA loans.

Convertible ARM

The convertible ARM is a combination of both fixed-rate and adjustable

rate mortgages, allowing the best of both options in one package.

Deferred Interest Mortgage

A mortgage in which the payment is not sufficient to cover the principal

and the interest and the payment portion of the interest is postponed

until a certain date at which time the interest postponed is added to the

principle owing.

Federal Home Loan Mortgage Corporation (FHLMC)

The Federal National Mortgage Association is a congressionally chartered,

shareholder-owned company and is the largest national supplier of home

mortgage funds. It is commonly known as Freddie Mac. The company buys

mortgages from lending institutions, pools them with other loans, and

sells shares to investors. Detailed information may be found at

http://www.freddiemac.com.

Federal Housing Administration (FHA)

An agency of the federal government, the Division of the Department of

Housing and Urban Development, that sets standards for the underwriting of

private mortgages and insures residential mortgages made by private

lenders.

Federal Housing Administration (FHA) Loans

Federal Housing Administration (FHA) low-rate loans are available to

Americans with smaller incomes who are interested in modestly priced

homes. Down payment requirements are usually lower than the prevailing

ones.

Federal National Mortgage Association (FNMA)

The U.S.'s largest supplier of mortgages to home buyers and owners, a

corporation established by Congress and owned by stockholders. It is

commonly referred to as 'Fannie Mae,' this government-sponsored enterprise is chartered by Congress. This federally chartered agency buys mortgages from lending institutions, pools them with other loans, and sells shares to investors. Detailed information may be found at

http://www.fanniemae.com

Fixed-Rate Mortgage

The interest rate you pay and the monthly principal and interest payments

are agreed upon from the outset and will not change throughout the entire

term of the mortgage.

Government National Mortgage Association (GNMA)

A government-owned corporation within the U.S. Department of Housing and

Urban Development, it is also referred to as 'Ginnie Mae,’. This

government agency guarantees the payment of principal and interest on all

of its pass-through securities, and its guarantee is backed in turn by the

full faith and credit of the U.S. Government.

Graduated Payment Mortgage (GPM)

A mortgage that usually starts the borrower with low payments that are

gradually increased over five to ten years, before leveling off for the

remainder of the term of the loan until the loan is fully amortized.

Negative amortization usually occurs until the payment reaches the level

payment stage. Usually government insured loans (VA or FHA)

Growing Equity Mortgage (GEM)

This is a long-term mortgage whereby the borrower agrees to increase his

payment each year by an agreed amount. The added money per payment is

applied directly to the outstanding principal on the mortgage. The

mortgage thereby is paid off in a shorter number of years.

Renegotiable Rate Mortgage (RRM)

Similar to an Adjustable Rate Mortgage, this type of mortgage allows the

interest rates and payments to be adjusted periodically according to an

index.

Reverse Annuity Mortgage (RAM)

A type of mortgage where the property's equity serves as security for

periodic payments made by the lender to the borrower. Mortgage is

generally paid out upon the sale of the property.

Rollover Mortgage (ROM)

A mortgage where the payments are only guaranteed for three, four, or five

years. The borrower is allowed to refinance at the end of the term at the

interest rate then applicable.

Shared Appreciation Mortgage (SAM)

It is a loan arrangement where two or more parties participate in the

purchase of real estate and share the appreciation and tax deduction.

Similar to shared equity mortgages.

Veterans' Administration Loans

Mortgage loans to veterans by banks, savings and loans, or other lenders

that are guaranteed by the Veterans' Administration, enabling veterans to

buy a residence with little or no money down.

Wraparound Mortgage

A secondary financing option in which a new larger mortgage is created to

encompass the first mortgage. This large second mortgage is used to

preserve the low interest rate on the first mortgage for a potential buyer