Adjustable rate mortgage in which rate is fixed for five year, seven year, and 10 year periods respectively, but may adjust annually after the initial fixed rate period. When your loan adjusts, monthly payments can go up or down, depending on current rates. Also referred to as a variable-rate mortgage.

Means loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. With each mortgage payment, some of the money reduces the loan balance and some pays interest. This allocation is called amortization. While the earliest payments mostly cover interest, the split changes over time. That’s because as the loan gets smaller, less interest gets charged. The Amortization schedule is the amount you pay each month in principal and interest to ensure your loan is repaid by the end of your loan's term.

The measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate it provides consumers with a good basis for comparing the cost of different loans.

Expenses over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property. When refinancing your home these are the expenses over and above the payoff amount of your existing loan(s). Closing costs may include, but are not limited to origination fees, property taxes, title insurance and escrow costs, appraisal fees, and reserves deposited for a lender maintained account to pay recurring taxes and insurance. Closing costs may vary according to the geographical area, property, and the lender used. The cost of closing usually is about 2 percent to 5 percent of the mortgage amount.

A loan amount which is within the limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

A loan insured by the Federal Housing Administration open to all qualified home purchasers. Federal Housing Administration (FHA) is a division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA also sets standards for underwriting federally insured mortgages.

A loan with an interest rate which remains the same for the entire loan.

An adjustable rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance at the interest accrual rate over the amortization term.

A loan which is larger than the limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

In the case of default, mortgage insurance protects the lender. Generally it’s required for borrowers who put down less than 20%. In government-backed mortgages, mortgage insurance takes several forms:

1. With Federal Housing Administration (FHA) loans, borrowers pay an upfront fee and an annual premium.

2. For U.S. Department of Agriculture (USDA) mortgages, borrowers also pay money upfront plus an ongoing premium.

3. Veterans with VA loans usually pay a one-time fee at closing.

For conventional (non-government) mortgages, coverage is provided by private insurers and is known as private mortgage insurance (PMI).

This insurance protects the lender if the borrower defaults on the mortgage. Often required on mortgages with a down payment below 20% (different guidelines apply to FHA and VA loans). PMI may be added to the monthly payment or paid in a lump sum at closing.

When you buy points, you’re paying more upfront in exchange for a lower interest rate, which means you pay less over time. Each point equals 1% of the mortgage. How much your interest rate gets lowered depends on the type of loan, the individual lender’s policies, and the mortgage market at the time.