ARM: Acronym For Adjustable Rate Mortgage

Category: Finance.

Before you visit a lending institution, it is important to brush up on your banking lingo.

Amortization: Refers to the paying off of debt over time. Applying for a mortgage is easier when you understand the following terms. It may also take into consideration the depreciation in value of an asset over time. Refers to a mortgage whose interest rate is either raised or lowered at regular intervals. ARM: Acronym for adjustable rate mortgage. May also be called a variable- rate mortgage.

Most often used when the buyer will not receive an interest rate as low as the rate on the seller s mortgage. Assumed Mortgage: Occurs when a buyer of a real property assumes the mortgage terms and obligations of the seller of the real property. Borrower: Refers to the party taking out a loan. Down payment: Refers to the initial upfront payment portion for a loan. Collateral: Refers to any asset that is promised if one cannot satisfy a loan agreement. Some loans require down payments, while others do not. Encumbrance: Refers to anything that limits a property s title.

By requiring a down payment, a lender increases its chances of recovering the full amount if the borrower defaults on payments. Popular encumbrances include: mortgages, easements, leases, liens, or building orders, deed restrictions. FHA: Acronym for the Federal Housing Administration. Equity: Refers to the difference between market price of a property and any remaining liability- such as the amount owed on a loan. The government agency set to improve housing standards and conditions and stabilize the market. Applicants must meet criteria concerning employment history, credit scores and income.

The FHA also provides financing. 1FHA Loan: A loan issued through the FHA. Types of loans the FHA offers include: adjustable rate mortgages, energy efficient mortgages, fixed rate mortgages, graduated payment mortgages and growing equity mortgages. 1Foreclosure: Refers to the legal process during which a lender repossesses a piece of real property after a borrower defaults in repayment. This Cabinet department was established under Lyndon B. The lender can then re- sell the property. 1HUD: Acronym for the Department of Housing and Urban Development. Johnson s term as President of the United States. In some cases, the interest on the principal sum will also have to be paid by that date. 1Interest Rate: Percentage of the principal that is paid as a fee( interest) , over a certain period of time. 1Lender: An institution that provides an amount of money to the borrower.

HUD enables low- income families to secure housing. 1Principal: An agreed upon sum to be paid over a fixed period of time, to be repaid by a certain date. Usually, this service is. provided at a cost, often referred to as interest. 1Mortgage: Is a loan that allows home buyers or builders to secure financing. 1PMI: Acronym of Private Mortgage Insurance. This protects the lender from loan default. 1Property Law: The area of law that governs various forms of ownership in property( land/ real estate and personal within the common law legal system) . When a borrower s down payment is less than 20% of the sale price, the borrower must obtain private mortgage insurance through the lender. There is a division between movable property( personal) and immovable property( land/ real estate) within the civil law system. 1Underwriting: Refers to the process that a financial service provider uses to assess the eligibility of a customer to receive products like insurance, or credit, mortgage. 280- 10- 1Refers to a program involving two loans with a 10% down payment. While the secondary loan carries a higher interest rate, it is only for a small portion of the total loan.

The 90% loan is financed through a primary mortgage that is 80% of the sale price, and a second mortgage covers the remaining 10% of the sale price. Therefore, monthly payments of the two mortgages are less than if paying one mortgage and PMI.

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