Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that adjusts and is not fixed. With an ARM loan, part of the interest-rate risk transfers to the borrower and away from the lender. ARM loans typically have a lower initial rate than fixed-rate loans because of the risk transfer feature. The interest rate increases or decreases over the life of the loan based upon market conditions.

Adjustable-rate mortgages have two important terms - the index and the margin. An index, based on for example the Treasury bill (T-bill), is the benchmark used to adjust the interest rate at specified times in the future. The margin is the lender's profit. To decide the interest rate for an adjustable-rate loan, add the margin to the index.

Balloon Payment: The final payment in a balloon mortgage. The balloon payment ends the mortgage; the mortgage is paid in full. This final payment is called the balloon or bullet.

Conventional Loans: Loans that are secured by government sponsored entities or GSEs such as Fannie Mae and Freddie Mac. Conventional loans can be made to purchase or refinance homes with first and second mortgages on 1-4 family residences.

Conventional Purchase: This is a mortgage loan product for the purchase of 1-4 family owner occupied residential properties.

Conventional No-Cash Out Refinance: This is a mortgage loan product for the refinance of owner occupied 1-4 family residences. This may help homeowner's lower their interest rate or shorten their loan term.

Conventional Cash-Out Refinance: This is a mortgage loan product for the refinance of 1-4 family owner occupied residential properties with cash out. It allows borrowers to get equity out of their home to be used for home improvement, car purchase, investments etc.

Deed of Trust: A deed of trust, or simply a trust deed, is a deed recorded with the County and available for the public to view. In some states a deed of trust is called a mortgage. A deed of trust is a document used to secure a loan on real property.

A deed of trust involves three parties: the borrower as the trustor, the lender as the beneficiary, and a neutral third party as the trustee. The trustee can be thought of someone who holds temporary (but not full) title until the lien is paid off in full. The deed of trust is cancelled or reconveyed, when the debt is paid off. Until then, the trustee has the power to foreclose if the debt is not paid according to the terms of the note.

All loans that Almera Group brokers are secured by deed of trusts.

Equity: It is the financial interest or cash value of your home, minus the current loan balance(s). If selling the home, this would also be minus any costs incurred in selling the home.

If you are buying a home and don't have sufficient money for the down payment, you may want to find out if the seller would be interested in "sweat equity". This would allow you to perform the labor on any needed repairs and maintenance to the home, (such as outside repairs, painting or electrical work) in exchange for credit towards closing costs.

Federal National Mortgage Association (Fannie Mae)(FNMA): A corporation that provides a secondary market for FHA, VA and conventional loans. Fannie Mae purchases loans from approved lenders, securitizes them and sells them to investors. The agency also helps to establish most lending guidelines.

Federal Home Loan Mortgage Corporation (Freddie Mac)(FHLMC): Freddie Mac buys residential mortgages from lenders, packages them into new securities, provides certain guarantees, and then resells them as securities in the secondary (open) market.

Fixed-Rate Mortgage: A mortgage with an interest rate that does not change over the life of the mortgage contract. Accrued interest affects the principal at a fixed rate of interest, typically monthly, on an annually amortized basis.

Income Property: Property that is not occupied by the owner but instead used to generate income.

Interest-Only Loan: This is a loan in which for a set term the borrower pays only the interest on the principal balance, with the principal balance unchanged. At the end of the interest-only term the borrower may enter an interest-only mortgage, pay the principal, or (with some lenders) convert the loan to a principal and interest payment (or amortized) loan at his/her option.

Jumbo Loan Purchase and Refinance: A mortgage loan that has a principal balance greater than the amount eligible for purchase by Fannie Mae or Freddie Mac.

Loan-To-Value Ratio: The percentage amount borrowed in the acquisition or refinancing of a property. An 80% loan-to-value ratio would require the loan to be no more than 80% of the lesser of the purchase price or the appraised value. The loan-to-value ratio is calculated by taking the amount to be borrowed divided by the value of the home.

For example, Jane wants to buy her first house which costs $ 200,000. She has a down payment of $ 30,000 and needs to borrow the remaining $ 170,000. The loan-to-value ratio is 85% ($170,000 divided by $200,000).

The loan to value ratio is used to qualify borrowers for a mortgage, and the higher the LTV, the tighter the qualification guidelines for certain mortgage programs become. Low loan-to-value ratios are considered below 80%, and carry lower rates since borrowers are lower risk. Lenders are more likely to consider people with poor credit and financial history who have a low LTV.

Prepayment Penalty: A fee imposed by a lender for the prepayment of a mortgage, usually a percentage of the balance paid. Some prepayment penalties call for a penalty if any portion of the loan is prepaid; other allow up to a certain amount of the balance to be prepaid during a period before invoking a penalty. A Soft Prepayment Penalty is one that lessens as the loan term continues.

Principal: The loan balance of a mortgage.

Principal, Interest, Taxes and Insurance (PITI): A monthly payment on a real estate loan that includes a payment to amortize the loan balance (P), interest on the outstanding loan balance for that month (I), 1/12 of the annual real estate taxes (T) and 1/12 of the annual insurance premium (I).

Private Money Loans or Non-Conventional Loans: A specific type of financing in which a borrower receives funds based on the value of a specific parcel of real estate. Hard money loans focus on the property vale, as opposed to the conventional lending institutions which have strict underwriting guidelines for borrower's credit and income. Hard money loans provide much quicker closings than conventional loans.

Private Mortgage Insurance (PMI): Private mortgage insurance insures a portion of the loan against default. The amount insured depends upon the type of mortgage and the loan-to-value ratio. For example, a fixed rate loan based on a 90% LTV ratio could be insured on a 20% coverage basis, meaning that a purchaser's down payment plus the mortgage insurance will reduce the lender's risk to approximately 70 percent.

PMI costs depend on the coverage required, type of mortgage and the premium plan selected. Premium plans offered are usually either an annual plan that is paid on a monthly basis or a single premium plan that can be paid for a varying number of years.

Promissory Note: A document (a Note) stating that one party promises to pay another party back for monies he or she is going to borrow. It is a written promise to pay a certain amount of money over a specified period of time in the future. If the obligation is not put in writing, it may be very difficult to enforce the payment terms later. Also, a Promissory Note differs from an I Owe You (IOU) in that the first one is a promise to pay and the second is simply an acknowledgement of the debt.

Title Insurance: There are two types of title insurance, Lender's Policy and Owner's Policy. The lender's policy protects a loan institution against loss resulting from any defects in the title or claims against the real property that were not uncovered in the title search or that were not listed as exemptions to the scope of the insurance policy. The owner's policy protect owners from a defect in the title that was not disclosed at the time of closing, usually a defect that went unnoticed in the title search.

Underwriting: Underwriting is the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan. Mortgage underwriting includes a review of the potential borrower's credit and employment history, financial statements and a judgment of the quality of the property. The person who completes the underwriting services is called an underwriter. The underwriting decisions include the following:

· If a loan is in compliance with investor criteria
· The creditworthiness of a borrower
· The acceptability of collateral
· Establishing conditions that must be satisfied before closing