Glossary

Amortization. The payment of a debt distributed over a given amount of time.

Negative Amortization. A condition in which the value of your loan exceeds the initial value of the loan.

ARM (adjustable rate mortgage). A mortgage in which the rate is based on a fixed margin which is added to the current index to give the complete rate. This mortgage has fixed caps which allow the mortgage to increase only a certain amount in a given time frame.

PMI (private mortgage insurance). Insurance which is required to be purchased if the loan amount is more than 80% of the property value. This insurance can be avoided by obtaining two loans (such as an 80/20).

LTV. Given in a percentage, it is the amount of your loan divided by the value of the property.

CLTV. This is a percentage value that describes the total amount borrowed divided by the value of the property. This ratio will take into account each loan for the property.

P & I (principal and interest). A regularly scheduled payment which is structured to pay down both principle and interest over the life of the loan.

No Doc Loans. No documentation is required to verify employment, income, or assets.

Stated Income. No documentation is provided to prove your monthly income, but documentation is required to prove that you are employed.

Stated Assets. No documentation is required to prove your assets (such as bank accounts).

100% financing. A loan type in which you are required to come in with no money down. In order to avoid mortgage insurance, the loan is normally structured as an 80/20 where you have two loans. One loan has a value of 80% of the property and the other has a 20% value.

Fixed loans. A mortgage in which your payment is fixed throughout the life of the loan. These can be amortized over 15, 20, 30, and 40 years.

Interest Only. A mortgage in which you are only required to pay interest. The payment is much lower than the P & I payment.

10/30 Interest Only. A 30 year fixed loan with interest only payments available for the first 10 years of the loan.

1% Option ARMs*. An ARM which has an introductory rate of 1%. After the introductory period, the rate adjusts monthly according to a fixed margin and the index. This loan re-amortizes each month and gives you four payment options: interest only, 30- year, 15-year, and negative amortization payment.

2/28 and 3/27. A mortgage which is fixed for the first 2 or 3 years and then switches to an ARM.

5/1 and 3/1 LIBORS. A mortgage which is fixed for the first 5 or 3 years. After that term, it switches to an ARM which adjusts every year based on the LIBOR index.

* 1.152% APR, may result in negative amortization.