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Information.
GLOSSARY
Annual Percentage Rate (APR)---
A measure of the cost of credit, expressed as a yearly rate. It
includes interest as well as other charges. Because all lenders follow
the same rules to ensure the accuracy of the annual percentage rate, it
provides consumers with a good basis for comparing the cost of loans,
including mortgage plans.
Adjustable-Rate Mortgage (ARM)---
A mortgage where the interest rate is not fixed, but changes during
the life of the loan in line with movements in an index rate. You may
also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs
(variable-rate mortgages).
Assumability---
When a home is sold, the seller may be able to transfer the
mortgage to the new buyer. This means the mortgage is assumable.
Lenders
generally require a credit review of the new borrower and may charge a
fee for the assumption. Some mortgages contain a due-on-sale clause,
which means that the mortgage may not be transferable to a new buyer.
Instead, the lender may make you pay the entire balance that is due when
you sell the home. Assumability can help you attract buyers if you sell
your home.
Buydown---
With a buydown, the seller pays an amount to the lender so that the
lender can give you a lower rate and lower payments, usually for an
early period in an ARM. The seller may increase the sales price to cover
the cost of the buydown. Buydowns can occur in all types of mortgages,
not just ARMs.
Cap---
A limit on how much the interest rate or the monthly payment can
change, either at each adjustment or during the life of the mortgage.
Payment caps don't limit the amount of interest the lender is earning,
so they may cause negative amortization.
The above text was extractly directly from the Consumer
Handbook On Adjustable Rate Mortgages, as published by the
Federal Reserve Board and Office of Thrift Supervision. Although the above
text is public domain, this electronic booklet is copyrighted © 1996
by Mortgage Market Information Services, Inc. Readers of this electronic
booklet are allowed to print the booklet for non-profit distribution
Pg 1 -- Introduction and credits
Pg 2 -- PEOPLE ARE ASKING
Pg 3 -- PEOPLE ARE ASKING (continued)
Pg 4 -- WHAT IS AN ARM?
Pg 5 -- HOW ARMS WORK:THE BASIC FEATURES
Pg 6 -- FEATURES (continued)
Pg 7 -- CONSUMER CAUTIONS (Discounts)
Pg 8 -- CONSUMER CAUTIONS (Payment shock)
Pg 9 -- HOW CAN I REDUCE MY RISK?
Pg 10 -- REDUCE MY RISK (continued)
Pg 11 -- REDUCE MY RISK (continued)
Pg 12 -- REDUCE MY RISK (continued)
Pg 13 -- REDUCE MY RISK (continued)
Pg 14 -- WHERE TO GET INFORMATION
Pg 15 -- INFORMATION (continued)
Pg 16 -- GLOSSARY
Pg 17 -- GLOSSARY (continued)
Pg 18 -- MORTGAGE CHECKLIST
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