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There were 23 articles found in this category:
  1. questionWhat is an 1/1 ARM?
    A 1/1 ARM is an adjustable-rate mortgage that has a set initial interest rate for the first year. After that period, the mortgage rate adjusts each year. Each annual rate adjustment is based on (or “indexed to”) another rate, often the yield on a U.S. Treasury note. Learn more about ...

  2. questionWhat is a balloon payment?
    A balloon payment is a loan where the payments don’t pay off the principal in full by the end of the term. When the loan term expires (usually after 5-7 years), the borrower must either pay a balloon payment for the remaining amount or refinance. Balloon loans sometimes include convertible ...

  3. questionWhat is an Adjustable Rate Mortgage?
    An Adjustable Rate Mortgage (ARM) is a home loan where the interest rate changes periodically based upon a standard financial index. ARMs offer lower initial interest rates with the risk of rates increasing in the future. In comparison, a fixed rate mortgage (FRM) offers a higher rate that will ...

  4. questionIf I apply for an auto or mortgage loan and do multiple inquiries in a short period of time, I won't hurt my credit scores, right?
    This is true. There is logic built within the FICO credit scoring system that treats multiple mortgage and auto inquiries as one search for credit (a.k.a. only one hard inquiry). The goal of this logic is to prevent consumers from being penalized for being aggressive interest rate shoppers and o ...

  5. questionI heard that there's a new change in loan modification reporting that will help consumers; what is the latest?
    November 1st, 2009, brought with it good news for consumers who want to modify their mortgages without lowering their credit scores. It was the first day that a new way of reporting a loan modification to the credit bureaus became available to mortgage lenders. From this point forward, mortgage ...

  6. questionWhat is an interest rate cap?
    An interest rate cap is a limit on how much a borrower’s percentage rate can increase or decrease at rate adjustment periods and over the life of the loan. Interest rate caps are used for ARM loans where the rates can vary at certain points. Thinking about purchasing or refinancing a home? ...

  7. questionWhat is the difference between a first mortgage and a second mortgage?
    A first mortgage is the primary loan on a real estate property. It has priority over all other “secondary” loans. A second mortgage, on the other hand, is a loan that uses a home’s equity as collateral. A first mortgage must be repaid before a second mortgage in a sale. Thinkin ...

  8. questionWhat is private mortgage insurance (PMI)?
    Private Mortgage Insurance (PMI) is a form of insurance that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan. Private mortgage insurance is usually required if the down payment is less than 20 percent of the sale price. Thinking about purch ...

  9. questionWhat is a credit reporting agency?
    Credit reporting agencies (CRAs), also known as credit bureaus, compile and maintain records of your credit history from credit card companies, banks, mortgage companies, and other lending institutions. They use this information to create your credit reports. The information in your credit repor ...

  10. questionWhat are qualifying ratios?
    As calculated by a lender, a qualifying ratio is the percentage of income that is spent on housing debt and combined household debt. Thinking about purchasing or refinancing a home? Learn about the homebuying process and refinancing options.

  11. questionWhat is the difference between a loan to value ratio and a combined loan to value ratio?
    The loan-to-value ratio (LTV) is the percentage of a home’s price that is financed with a loan. On a house worth $100,000, if the buyer makes a $20,000 down payment and borrows $80,000, the loan-to-value ratio is 80 percent. When refinancing a mortgage, the LTV ratio is calculated using th ...

  12. questionWhat is a convertible ARM?
    A convertible ARM is an adjustable rate mortgage that can be converted to a fixed rate mortgage under certain circumstances. Thinking about purchasing or refinancing a home? Learn about the home-buying process and refinancing options.

  13. questionWhat are closing costs?
    Closing costs are the amounts charged to a consumer when they are transferring ownership or borrowing against a property. Closing costs include lender, title, and escrow fees and usually range from 3-6 percent of the purchase price. Thinking about purchasing or refinancing a home? Learn about th ...

  14. questionWhat is a pre approval letter and how is it different from a pre qualification letter?
    A pre-approval letter is a document from a lender or broker that estimates how much a potential homebuyer could borrow based upon current interest rates and a preliminary look at credit history. The letter is a not a binding agreement with a lender. Having a pre-approval letter can make it easie ...

  15. questionWhat is a fixed rate option?
    A fixed-rate option is a home equity line of credit financing option that allows borrowers to specify the payments and interest on a portion of their balance. This can be done a few times during the life of the loan, usually for an additional fee. Thinking about purchasing or refinancing a home? ...

  16. questionWhat is a High LTV Equity Loan?
    A high LTV equity loan is a specific kind of home loan that causes your loan-to-value ratio to be 125% or more. When the total principal of a loan leaves the borrower with debt that exceeds the fair market value of the home, the interest paid on the portion of the loan above that value may not b ...

  17. questionWhat is a mortgage point?
    When it comes to buying a home, a point refers to a unit that is used for measuring fees; one point equals 1 percent of a mortgage loan. Some lenders charge “origination points” to cover the expense of making a loan. Some borrowers pay “discount points” to reduce the loan ...

  18. questionWhat is a jumbo mortgage?
    A jumbo mortgage is a loan that exceeds the limits set by Fannie Mae and Freddie Mac (usually when the loan amount is more than $200,000-400,000). Also known as a non-conventional or non-conforming loan, these mortgages usually have higher interest rates than standard loans. Thinking about purch ...

  19. questionWhat is a low down mortgage?
    A low-down mortgage is a secured loan that requires a small down payment, usually less than 10 percent. Often, low-down mortgages are offered to special kinds of borrowers such as first-time buyers, police officers, veterans, etc. These kinds of loans sometimes require that the borrower purchase ...

  20. questionWhat is a prepayment penalty?
    A prepayment penalty is a fee that a lender charges a borrower who pays off his or her loan before the end of its scheduled term. Prepayment penalties are not charged by most standard lenders. Subprime borrowers should review the terms of their loan offers carefully to see if this fee is include ...

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