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TYPES
OF MORTGAGES
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Fixed
Rate Mortgage
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The
fixed rate mortgage is a traditional method of financing a home.
The interest stays the same for the entire term of the loan, usually
15-30 years, therefore the interest and principal portions of
your monthly payment remain the same.
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Adjustable
Rate Mortgage (ARM)
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The
interest on an adjustable rate mortgage is linked to a financial
index, such as a Treasury security, so your monthly payments
can vary over the life of the loan, usually 15-30 years. Most
adjustable rate mortgages have a lifetime cap on the interest
rate increase to protect the borrower.
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Fannie
Mae ( FNMA)
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Nickname
for Federal National Mortgage Association. It is a government-chartered
non-bank financial services company and the nation's largest
source of financing for home mortgages. It was started to make
sure mortgage money is available in all areas of the country.
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Freddie
Mac (FHLMC)
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Nickname
for Federal Home Loan Mortgage Corp. A financial corporation
chartered by the federal government to buy pools of mortgages
from lenders and sell securities backed by these mortgages.
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FHA/VA
Mortgage
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Repayment
of the loan is guaranteed by the Federal Housing Administration,
a federally sponsored agency, which allows lenders to provide
loans with the lower down payments and slightly better
interest rates for moderate income families. However,
there are limits on the amount of money that can be borrowed
and a maximum income for the eligible borrower.
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Bi-Weekly
Mortgage
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A fixed-rate
mortgage that lets you make the equivalent of 13 months of payments
in a year to reduce a 30 year mortgage to 18 to 19 years.
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MORTGAGE TERMS
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Annual Percentage
Rate (APR)
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A
standardized method of calculating the cost of a mortgage, stated
as a yearly rate which includes such items as interest, mortgage
insurance, and certain points or credit costs.
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Cap
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A limit
on the amount that the interest rate or the monthly payment
can increase in an adjustable-rate mortgage.
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Down
Payment
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The
amount of money a buyer agrees to give the seller when
a sales agreement is signed. Complete financing is later
secured with a lender.
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Equity
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Determinations
of the value of a property after existing liens are deducted.
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Debt-To-Income
Ratio
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A borrower's
monthly payment obligation on long-term debts divided by
his/her net effective income or gross monthly income expressed
as a percentage.
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Loan-To-Value
Ratio (LTV)
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The
relationship between the amount of the mortgage loan and the
appraised value of the property expressed as a percentage.
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