Are You confused by all the terms? To learn more check out our mortgage glossary for easy-to-read definitions.
Mortgage Glossary
|
|
 |
Conventional Fixed Rate Mortgage Loan
This program features fixed terms of repayment, length of loans between 10 & 30 years. Rate may be locked at time of application or may float with the market. Generally require a minimum of 5% down payment. Private Mortgage Insurance (PMI) required when less than 20%. Investor loans require larger down payments. Escrow for taxes and insurance generally are required. Seller may contribute between 3% and 6% towards closing costs depending on down payment. Available on 1-4 unit structures.
Federal Housing Administration
As part of the Department of Housing and Urban Development (HUD) the Federal Housing Administration (FHA) insures loans made by lenders. The most common of these loan programs is known as a 203b loan. down payments range from 1.25% to 2.25% depending on the purchase price. Terms range from 15 to 30 years. There are no income limits but there are maximum mortgage limits that vary depending upon where the property is located. FHA requires the payments of mortgage insurance, a portion of which is financed in the mortgage with the balance collected monthly. Seller may contribute up to 6% of purchase price towards closing costs. This type of mortgage is available for owner occupied purchases only FHA also offers a loan for property rehabilitation (203K) and an adjustable rate mortgage. Available on 1-4 unit structures.
Department of Veterans Affairs Loan
Guaranteed by this department available to veterans who meet appropriate discharge and length of service requirements, and veteran must furnish certificate of eligibility to be approved. These loans generally require no down payment, but do require the payment of a nominal funding fee which is based on the term of loan, down payment and the number of times the eligibility has been used. This fee as well as all other closing costs may be paid by the seller. This is a fixed rate loan with terms between 15 and 30 years, and is only available on owner occupied 1 to 4 unit purchases.
New Construction Financing
This type of mortgage used to facilitate construction of owner occupied single family and second homes. Terms between 10 and 30 years. Minimum down payment or owner equity is 10% (PMI required with less than 20%) of the total acquisition cost (land value and construction cost). This program requires only one closing that occurs at the time of the first draw, which can be as early as the completion of the foundation. Long term (2-12 months) rate guarantee available, and should rates be lower at time of completion you may move your rate down. Very attractive rate available during construction period.
Rural Housing Service
The Rural Housing Service (RHS), formally the Farmers Home Administration, makes available through private lenders a 30 year fixed rate mortgage with no down payment required. Closing cost may be paid by seller (max. 6% of sales price) or may be financed if there is enough value in property. Restrictions on property location, purchase price and income exist, there is no private mortgage insurance (PMI) required. Single family homes only. This program is not restricted to first time homebuyers, and may be assumable.
Adjustable Rate Mortgages
Commonly referred to as an ARM, this mortgage provides access to rates that generally start out below standard fixed rate loans. Future adjustments of those rates are determined by the index and margin associated with the loan. The frequency of adjustment is determined at the time the loan is selected, with 6 months to 5 years being the normal range. Most all ARM's have limits on how much rate movement takes place at each adjustment period (Interim cap) and how much movement over the life of the loan (Lifetime cap). Some ARM's have convertibility options which allow the loans to be changed to a fixed rate within a specific period of time. Repayment terms from 10 to 30 years, are available on 1-4 unit structures, and require PMI when less than 20% down payment, in addition these loans may be assumable.
State of New York Mortgage Agency
Better known as SONYMA, this agency provides financing opportunities primarily for first time homebuyers a fixed rate program. Standard program offers a below market rate. Other programs available include market rate/zero down payment, new construction, and an assistance program for low to moderate income. For all programs there are income and purchase price limits established. Private mortgage insurance is required with less than 20% down payments. Available on 1-4 unit structures, owner occupied only. Seller assistance on closing costs of between 3% and 6% are acceptable depending on down payment.
Biweekly Mortgage
Same features as conventional fixed mortgages except for payment schedule. Instead of making 1 payment every 30 days the lender requires 1/2 of the payment to be paid every two weeks. This process will cause loan to pay off approximately 8 years early. Generally require 5% down payment as a minimum with private mortgage insurance (PMI) required if less than 20%. Seller may pay between 3% and 6% towards closing costs depending on down payment. Available of 1-4 unit owner occupied structures.
Jumbo Mortgage
These types of loans are referred to as non-conforming as the mortgage size exceeds those limits established by the large secondary market purchasers of loans (FNMA, FHLMC). Available in both a fixed and adjustable rate format. 10-30 year terms available.
Home Equity Line of Credit
The Home Equity Line of Credit or HELOC is a revolving line of credit that is secured by a mortgage on your residence. You may borrow a percentage of your equity and take between 15-20 years to repay. As the line is paid back it can be advanced again. Interest rate is generally tied to the prime rate and fees to obtains this loan type are generally very low to zero.
Community Homebuyers / Affordable Housing
This grouping of programs is designed to enhance the ability of a wider segment of the population to afford a home purchase. Most of these programs use income guidelines equal to 80% to 100% of a communities median income. Most also have some relaxation of down payment requirements, underwriting criterion and cash reserve needs. Some even provide for below market rates. The programs can be used in conjunction with local community affordable housing initiatives. Only available as fixed rate, and in most cases available only for 30 year terms.
|
|
