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ARM: 'Adjustable Rate Mortgage' A loan in which the interest rate and payment can vary over the course of the loan. There are many variations to the way the loan can adjust (see 'Types of Loans'). The adjustment periods are specified and the amount of the adjustment is subject to 'caps' or limits on the amount the loan rate can adjust within the specified time periods.

Balloon: A loan which can be amortized over a period of time (typically 30 years) but where the principal comes due in full prior to the end of the term. Another type of balloon is when the loan converts from a fixed interest rate for a specified term (usually 3, 5 or 7 years) to an interest rate determined by the market for the remaining life of the loan.

Caps: A cap is a limit on how high or low the interest rate of a loan can change within a certain period of time.

Conforming loan: A conventional loan (non-government) in which the loan amount is $240,000 or less.

Fixed rate loan: A loan in which the interest rate and payment do not change over the life of the loan (terms range from 10 years to as long as 40 years). At the end of the term, the loan balance will be $0.

FHA loan: A loan insured by the government. FHA stands for - 'Federal Housing Authority'. It can be had in various terms: one year adjustable, 15 and 30 year fixed. The down payment requirements are generally less and the underwriting guidelines are more lenient than those for conventional loans.

Jumbo loan: A loan amount that exceeds $240,000. The interest rate for a jumbo loan is typically about 1/8 to 1/4 percent higher than a conventional loan.

VA loan: A loan guaranteed by the Veteran's Administration. VA loans are available to active military personnel and veterans only. This loan is available in 30 year or 15 year terms with fixed rates and offers 100% financing (no down payment).

The interest rate remains fixed for the 30 year term of the loan resulting in a loan payment (principal and interest) that does not change. This is the most common mortgage loan.

20 Year Fixed: This loan is amortized over 20 years (240 months) resulting in a zero balance at the end of the loan.The interest rate remains fixed for the 20 year term of the loan resulting in a loan payment (principal and interest) that does not change. The interest rate is sometimes less that that of the 30 year fixed loan, usually about 1/8 percent less. The monthly payment for a 20 year fixed is not much higher than that of a 30 year fixed. The total interest paid over the 20 year life of the loan will be much less than that of the 30 year loan.

15 Year Fixed: This loan is amortized over 15 years (180 months) resulting in a zero balance at the end of the loan.The interest rate remains fixed for the 15 year term of the loan resulting in a loan payment (principal and interest) that does not change. The interest rate is typically about 1/4 percent less than that of the 30 year fixed loan. While the monthly payment for a 15 year fixed is about 1/3 higher than that of a 30 year fixed, the total interest paid over the life of the loan will be less than half as much. Your equity will grow much faster with this loan.

10 Year Fixed: This loan is amortized over 10 years (120 months) resulting in a zero balance at the end of the loan.The interest rate remains fixed for the 10 year term of the loan resulting in a loan payment (principal and interest) that does not change. This loan is not very common and results in an appreciably higher monthly payment than the above options.

5/25 Year Balloon: This loan is amortized over 30 years (360 months) with a fixed interest rate for the first five years of the loan. The interest rate for the first 5 years will be less than that of the 30 year fixed. After the 5 year period, the interest rate for the remaining 25 years converts to slightly above the prevailing 30 year rate at the time.

7/23 Year Balloon: This loan is amortized over 30 years (360 months) with a fixed interest rate for the first five years of the loan. The interest rate for the first 7 years will be less than that of the 30 year fixed. After the 7 year period, the interest rate for the remaining 23 years converts to slightly above the prevailing 30 year rate at the time.

1 Year ARM: This loan is amortized over 30 years (360 months) with an specified interest rate for the first year of the loan. The interest rate and therefore, the payment can change every year with a 2% cap (interest rate limit) per change and a lifetime cap of 6% above the start rate. This type of loan is best for those who will be in their home for a short period of time. The start rate is much less than 'fixed rate loans'.

3 Year ARM: This loan is amortized over 30 years (360 months) with an specified interest rate for the first 3 year of the loan. After the 3 year period, the interest rate and payment can adjust every year with a 2% cap (interest rate limit) per change and a lifetime cap of 6% above the start rate. This type of loan is best for those who will be in their home for 4 years or less. The start rate is higher than the 1 year ARM but less than 'fixed rate loans'.

5 Year ARM: This loan is amortized over 30 years (360 months) with an specified interest rate for the first 5 year of the loan. After the 5 year period, the interest rate and payment can adjust every year. This type of loan is best for those who will be in their home for 4-6 years. The start rate is higher than the 3 year ARM but less than 'fixed rate loans'.

7 Year ARM: This loan is amortized over 30 years (360 months) with an specified interest rate for the first 7 year of the loan. After the 7 year period, the interest rate and payment can adjust every year. This type of loan is best for those who will be in their home for 6-8 years. The start rate is higher than the 5 year ARM but generally less than 30 year fixed loans.

10 Year ARM: This loan is amortized over 30 years (360 months) with an specified interest rate for the first 10 year of the loan. After the 10 year period, the interest rate and payment can adjust every year. This loan can be considered, for all practical purposes, a 'fixed rate loan' as most people will move or sell their home before the 10 year term expires. The interest rate is typically about the same as a 30 year fixed (conforming loan of $240,000) but can be much less than a 30 year fixed jumbo loan (over $240,000).

30 Year Fixed - FHA: The government insures this loan. It is amortized over 30 years (360 months) resulting in a zero balance at the end of the loan. The interest rate remains fixed for the 30 year term of the loan resulting in a loan payment (principal and interest) that does not change. The down payment requirements are generally less and the underwriting guidelines are more lenient than those for conventional loans.

15 Year Fixed - FHA: This loan is insured by the government. It is amortized over 15 years (180 months) resulting in a zero balance at the end of the loan. The interest rate remains fixed for the 15 year term of the loan resulting in a loan payment (principal and interest) that does not change. The interest rate is typically about 1/4 percent less than that of the 30 year fixed loan. The down payment requirements are generally less and the underwriting guidelines are more lenient than those for conventional loans.

1 Year ARM - FHA: The government insures this loan. It is amortized over 30 years (360 months) resulting in a zero balance at the end of the loan. The interest rate and therefore, the payment can change every year with a 1% cap (interest rate limit) per adjustment and a lifetime cap of 5% above the start rate. The down payment requirements are generally less and the underwriting guidelines are more lenient than those for conventional loans.

30 Year Fixed -VA: This loan is guaranteed by the Veteran's Administration and is available only to active military personnel and veterans. It offers 100% financing - no down payment is required. It is amortized over 30 years (360 months) resulting in a zero balance at the end of the loan. The interest rate remains fixed for the 30 year term of the loan resulting in a loan payment (principal and interest) that does not change. The underwriting guidelines are more lenient than those for conventional loans.

The "FHA Streamlined Refinance Program" is designed to lower the monthly principal and interest payments on a currently HUD-insured mortgage and must involve no cash back to the borrower.

"No-cost" refinances, in which the lender charges a premium interest rate to defray the borrower's closing costs, prepaid items, and or discounts, are permitted.

Fixed-Rate Mortgages on owner occupied principal residences may be refinanced to an adjustable rate mortgage, provided the interest rate of the new mortgage is at least two percent below the interest rate of the current mortgage.

Adjustable Rate Mortgage may be refinanced to a fixed-rate mortgage, provided the interest rate on the mortgage on the new fixed-rate mortgage will be no greater than two percent above the current rate of the ARM.

Adjustable Rate Mortgages may be refinanced to a better adjustable rate mortgage provided immediate payment relief occurs. (the lifetime cap/ceiling must remain the same or be lowered)

Streamlined Refinances without an Appraisal are limited to the unpaid principal balance (but no interest), minus any refund of MIP, plus the new upfront MIP if it is to be financed in the mortgage. The term of the mortgage is the lesser of 30 years or the unexpired term of the mortgage plus 12 years.

Adding or deleting individuals to title: New individuals may be added to title on a streamline refinance without credit worthiness review. Deleting individuals from title on a streamlined refinance is generally not acceptable.