Mortgage Gloassary

ARM's: Adjustable Rate Mortgages have interest rates that vary. The rate is tied to a particular index. Usually possible increases have yearly and/or lifetime caps

Bridge Loan: A loan made on a new home prior to the pay-off of the existing homes mortgage, to help the borrower move into a new home prior to selling the old home.

Commercial Loan: Loans available for commercial real estate.

Construction Loan: A loan made in order to complete construction on a newly-built home. Once construction is completed, the construction loan is usually replaced by a standard conventional, FHA, or VA loan.

Conventional Loan: Residential mortgage issued by a lender without government guarantees or insurance, typically following Fannie Mae guidelines.

FHA Loan: A government-insured loan available with low down payment. MIP is required, and loans are available only up to a set local maximum.

FmHA Loan: program backed by the government, specifically for farms.

Income Property Loans: for income-producing property, such as apartment buildings or other rental property, have different requirements than exist for owner-occupied properties. For example, large down payments are usually required.

Low-doc loans: Mortgages requiring "low documentation" from the borrower are often available with larger-than-usual down payments of 30% or more.

LTV: "Loan-to-value" ratio. The ratio of the mortgage amount to the appraised value of the property.

MIP: MIP, or "Mortgage Insurance Premium" is required on FHA loans. This may be paid at closing, or financed over the course of the loan.

No-doc Loan : A "no-documentation" loan, streamlining the mortgage approval process, is sometimes available to borrowers with very large down payments of 40% or more.

Origination Fee: A fee equal to 1% of the total loan amount, that is usually charged by mortgage companies to ake the loan.

PMI: Private Mortgage Insurance is usually required on conventional loans where the down payment is less than 20%.

Points: Points are additional mortage company charges for making a loan. A point is equal to 1% of the loan amount. By paying a larger number of "points" a borrower can obtain a lower interest rate. dt>Portfolio Loan A portfolio loan is a loan kept in-house by the lender and not sold in the secondary market. These are usually loans in which the buyer, oftern due to poorer credit, does not meet Fannie Mae guidelines. Portfolio loans are usually at higher interest rates than ordinary conventional loans.

Ratios: The ratios of a consumer's proposed monthly mortgage payment, and proposed overall monthly debt to his or her gross monthly income. These ratios must fall within specific ranges for specific types of mortgages.

VA Loan: A loan guaranteed by the Veteran's Administration. These loans are available only to qualifying veterans, and may allow a home to be purchased with no down payment. A VA funding fee is required.