Adjustable Rate Mortgage (ARM) -
A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

Adjustment Interval -
For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

Amortization -
Literally to "kill off" (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that you pay both interest and principal with each equal payment.

Annual Percentage Rate (APR) -
The interest rate which reflects the cost of a mortgage as a yearly rate. This rate is usually higher than the stated loan rate for the mortgage, because it takes into account points and other charges.

Application Fee -
The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.

Appraisal -
The determination of property value based on recent sales information of similar properties.

Assumable Loan -
These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

Balloon Mortgage -
Behaves like a fixed-rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.

Broker -
An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Caps -
A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.

Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.

Two-Step loans are quoted with a single cap, which is the amount by which the loan may adjust at its single adjustment date.

Closing Costs -
Fees paid by the borrower when property is purchased or refinanced. These typically include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. Since points are listed separately, they are not included in the Closing Costs column on the PMLC mortgage tables. PMI costs are also excluded from this figure. Title insurance, though typically considered a part of closing costs, is not reflected on PMLC Mortgage Center's tables. This fee is usually in the range of 25-30cents per $1,000 borrowed. An N/A in the Closing Costs category means that the information was not available from the lender or, in the case of multiple-state lenders, differed materially from state to state.

Comments -
Lenders may provide a brief description of some of their programs or special features on the PMLC Mortgage Center Tables. Many lenders offer discounts to any borrower who mentions PMLC. It is always recommended that you tell your lender that you found him on the PMLC Mortgage Tables, because some lenders offer these discounts even if they do not explicitly say so in their comments.

Commitment -
A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

Conforming Loan -
A mortgage loan for up to $300,700 in the continental United States (Alaska and Hawaii limits are higher).

Construction Loan -
A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Conventional Loan -
A mortgage neither insured by the FHA nor guaranteed by the VA.

Conversion -
The right of a borrower to convert an adjustable or balloon loan into a fixed loan. The Conversion Option column on PMLC balloon tables indicates the right of a borrower to convert this balloon loan. The possible options are as follows...