A special rate offered by the financial institution that is applied during a portion of the loan term and set significantly lower to lure consumers to take out loans.

A mortgage product whose interest rate changes during the term of the mortgage as defined in the mortgage note. The rate will remain fixed for the initial period of the loan and then may adjust at specified intervals of time. For example, a 3/1 ARM is fixed for 3 years and then may adjust every year after for the term of the loan.

The systematic repayment of a mortgage loan by equal monthly installments of principal and interest.

The period of time (normally expressed in years or months) used to determine the monthly payment amount required to pay back a mortgage loan in equal monthly payments. (Typically used with Balloon and ARM Mortgages)

Annual Percentage Yield. Expresses an annual rate of interest taking into account the effect of compounding. For Deposit instruments, it is always greater than or equal to the Annual Percentage Rate. For loan instruments, it will always be less than the Annual Percentage Rate (APR), which includes items such as loan fees and closing costs.

A provision on an ARM loan that limits how much the interest rate can increase or decrease. The cap is typically stated as a percentage amount. There are both annual (per change) caps and lifetime caps. Most annual caps are either 1% or 2%. Lifetime caps can be either a percentage change from the original interest rate (such as 6%) or can be a maxi [..]

A residential mortgage loan that meets all FNMA (Federal National Mortgage Association – Fannie Mae) and/or all FHLMC (Federal Home Loan Mortgage Corporation – Freddie Mac) standards. A Conforming loan has a dollar amount equal to or less than $417,000.

A mortgage loan based solely on the value of the real estate and the credit worthiness of the borrower. This is a mortgage loan without any government insurance or guarantees. This is the type of mortgage loan that anyone can qualify for.

An ARM loan that has the option of converting to a fixed rate loan. This convertible option is written into the ARM note and is typically only available during the first five years of the loan.

A percentage that the borrower pays at closing in order to get a lower interest rate, sometimes simply called a point. (usually between 0% - 3% or 0 to 3 points.)