Home Purchase Loan Resources

An 'A' paper loan is a loan that comes with the most favorable credit terms and interest available. 'A' loans are offered to borrowers with excellent credit scores, strong debt-to-income ratios, job stability, and a 20% down payment for a purchase mortgage and at least 10% equity stake for a refinance mortgage. 'A' borrowers must not have derogatory items on their credit reports,  such as  late mortgage payments within the most recent 12-month period or the presence of non-medical collection accounts.

"B" loans are a classification of mortgage loans that are available to borrowers with less than good credit ratings. They are also referred to as subprime loans. Different lenders use different criteria to define who is a "B" borrower.

"C" loans are a classification of mortgage loans that are available to borrowers with poor credit ratings. They are also referred to as subprime loans. Different lenders use different criteria to define who is a "C" borrower.

The  203(b) loan program is the FHA's single family program which provides mortgage insurance to FHA-approved lenders, to protect against borrower default. 203(b) loans are used to finance the purchase of new or existing one to four family housing. 203(b) insured loans require a low down payment, offer flexible qualifying guidelines, and come with limited fees. 203(b) loans are restricted to a maximum loan size based on the county in which the property is located.

The 203(k) loan program is an FHA mortgage insurance program that enables home buyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan. The 203(k) program can also be used to purchase a home on another site and move it onto a new foundation on the mortgaged property.

Documents recording the chronological ownership of a property, along with any encumbrances that relate to that property.

A clause typically found in mortgages that allows the lender to declare the loan due and payable in full in certain situations, such as the borrower failing to make payments as agreed.

The written approval of the buyer's offer by the seller.

Money paid to the lender, in addition to the established payment amount, that is applied directly against the loan principal. Additional principal payments shorten the length of the loan.

An adjustable rate mortgage is a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change, at specified periods, based on a rate that is tied to a specified index, such as the LIBOR.  ARMs come with a margin, the fixed amount over the index that your loan interest rate will change. ARMs come with a cap and a ceiling. The ceiling sets an upper limit on your interest rate over the life of the loan.  The cap sets a limit on how much your loan can adjust during any single adjustment. ARMs are also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).

A feature of a home or property that increases its attractiveness, but is not essential to the use of the property. Amenities can include high-end fixtures, a swimming pool, or a location with a view.

The American Society of Home Inspectors is a professional association of independent home inspectors. Phone: (800) 743-2744

In mortgage terminology, amortization is making installment payments on a loan, where a portion of the payment goes to the principal balance and a portion goes to the interest. Fixed-rate loans are usually amortized so that the monthly payment is the same throughout the life of the loan. Adjusted rate mortgages are re-amortized each time the interest adjusts.

A yearly report sent by the mortgage lender to the borrower that lists how much the borrower paid towards the loan's principal balance, in taxes, and in interest.

In mortgage terminology, APR is the cost of credit to the borrower, expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and mortgage insurance that the borrower is required to pay. However, APR doesn't necessarily include all of the fees and costs of a mortgage loan. For example, an appraisal fee or a loan application fee are not usually included in the APR. Because of the extra costs included, the APR is a higher interest rate than the simple interest rate the borrower is quoted on the mortgage. Use the APR to compare loans, but make sure to include other costs you are quoted, too.

In mortgage terminology, the application is the formal initiation of the mortgage process by the borrower. A standard loan application is  called the Universal Residential Loan Application. It is also known as Form 1003.  This 1003 provides a detailed view of the borrower's financial picture, so the lender's underwriters can evaluate whether or not the borrower is a suitable candidate for the loan.  The lender assists the borrower in filling out the Form 1003.

A fee charged by lenders to the borrower, in order to process the borrower's loan application.

A formal written evaluation supplied by a professional, licensed property value estimator, the appraiser. The appraisal contains an estimate of a property's fair market value. The appraisal is based on the sale price of comparable homes in the area and the property's specific features. Lenders usually require an appraisal, before approving a loan, in order to have an accurate idea of the property's current value. A recent appraisal protects the lender from making a loan for an amount that is greater than the percentage of the home's value that the lender's requirements permit.

Fee charged by a professional appraiser to estimate the current fair-market value of a property.

An estimate of a property's current fair-market value that is provided by a professional appraiser.

A professional individual, licensed by the State, who estimates the current fair-market value of a property.

The percent of a mortgage, based on interest, mortgage insurance, and loan origination fee (points), established as a yearly rate.

An adjustable rate mortgage is a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change, at specified periods, based on a rate that is tied to a specified index, such as the LIBOR.  ARMs come with a margin, the fixed amount over the index that your loan interest rate will change. ARMs come with a cap and a ceiling. The ceiling sets an upper limit on your interest rate over the life of the loan.  The cap sets a limit on how much your loan can adjust during any single adjustment. ARMs are also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).

The dollar value assigned to a property by local tax authorities that is used to determine a tax obligation. The assessed value is not the same thing as the appraised value.

An assumable mortgage is a mortgage loan where the purchaser of a home is allowed to take over the sellers current mortgage, with no change in the terms and payment schedule of the loan. Because the holder of an assumable mortgage may transfer that mortgage to another party in the sale of the home, it can make selling the home easier. Lenders will allow a mortgage to be assumed only if the property value is greater than the size of the remaining principal balance on the mortgage. The buyer who wishes to assume the mortgage must meet the lender's credit and income requirements.

A measure used by lenders  in the loan qualifying process to determine if a borrower can afford the  prospective mortgage payment. The 'back-end' ratio divides a person's gross income by the sum of the mortgage payment, property taxes, and homeowner's insurance, as well as the monthly costs for debts like car payments, credit card debts,  and child support or alimony obligations. The ratio is expressed as a percentage, the percentage of a person's gross income that the debts utilize.

A balloon mortgage is a mortgage loan that is structured with monthly payments that do not pay off the balance of the loan by the time of the last required monthly payment. The remaining balance is paid in one lump sum.

Making payment on your mortgage twice a month. Paying biweekly is equivalent to making 13 monthly mortgage payments per year. This will reduce the amount of interest you pay on the loan.

Closing costs are expenses separate from the price of the property that are paid by the borrower. Closing costs can be separated into two categories: non-recurring costs and pre-paid costs. Non-recurring costs include the loan origination fee, discount fees, flood check fee, title charges,  escrow closing fees, and government recording and transfer fees. Pre-paid costs include homeowner's insurance, property taxes, and pre-paid interest.

A cloud on title, sometimes called a 'title defect', refers to problems found during a title search that can prevent the smooth transfer of title. 

An individual who signs on the loan but does not have ownership of the property being signed upon. A co-signer is not named as a primary on the title of the property; rather he/she is leveraging his/her credit to help the primary borrower qualify for the loan. However, the co-signer is responsible for payment of the loan if the borrower defaults on payments.

The CLTV takes your total principal balances, from all loans against your property, and divides them by the fair market value of your property. For example, a home worth $200,000 with a first mortgage of $120,000 and as second mortgage of $30,000 has a CLTV of 75%.

Comps are an analysis of recent sale prices on homes with similar characteristics to a home that a person wishes to sell, in order to estimate the value of the person's home. Real estate agents provide COMPS based on size of property, number of rooms, and amenities.  COMPS are part of a licensed appraiser's analysis, though the appraiser also uses other information, such as the condition of the home, to establish his or her estimate.

Compensating factors are facts that can allow a borrower to qualify for a loan, when the does not qualify according to the standard rules. For instance, a borrower with less than excellent credit may qualify for a loan due to the compensating factors of having a lot of equity in the home and having a low debt-to-income ratio.

The conforming limit is the maximum dollar amount for a loan that fits within Fannie Mae or Freddie Mac's guidelines. Non-conforming loans that exceed the dollar limit are called jumbo loans.

A loan that fits within Fannie Mae's and Freddie Mac's guidelines for loan amount, income qualification, and documentation. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

A short-term loan that is used to finance the costs of building of a new home. Construction loans, to finance the cost of building a new home. The lender disburses cash to the builder during the building process. The borrower replaces a construction loan with long term financing that was arranged prior to the construction loan monies being disbursed.  Once the building is completed, the borrower pays off the entire construction loan.

In real estate terminology, a contingency refers to condition that must be satisfied before a purchase contract can be executed. Sellers and/or buyers can include contingency clauses in a purchase agreement. A common contingency clause is one where a buyer's offer to purchase the seller's home is contingent on the buyer selling a current property. Both parties must agree to the contingency for it to be binding.

In mortgage terminology a conversion clause allows a borrower to convert an adjustable rate mortgage (ARM) into a fixed-rate mortgage, during the term of the loan under predetermined conditions. Conversions often take place at the end of the first adjustment period.  A borrower may pay a fee to include a conversion clause in an ARM.

A convertible ARM  is an adjustable-rate mortgage that allows the borrower to convert the mortgage to a fixed-rate mortgage, per the terms  and conditions of the mortgage.

A deed is a legal  document that conveys the title of a property. There are different types of deeds, including grant deeds, warranty deeds, and quitclaim deeds.

Home equity is calculated by subtracting the amount owed on any mortgage loan(s) from the fair market value of the property. Equity can be expressed in dollars or in percentage form. For instance a homeowner with a house worth $200,000 with a loan balance of $150,000 can be said to have an equity stake of $50,000 or a 25% equity stake.

Escrow is when money or something of value is held by a neutral third-party and disbursed, if terms of a contract are met. When buying a home, the buyer's earnest money is held in escrow account. The money is applied to the purchase. Any money the buyer borrows from a mortgage lender is disbursed to the escrow officer who makes sure that all lien holders on the property are paid, according to terms specified by the lender's funding agent.

Fannie Mae is the nickname of The Federal National Mortgage Association (FNMA). Fannie Mae was federally chartered but is privately owned. Fannie Mae purchases residential mortgages, converts them into securities, and sells the securities to investors.

A federal agency created by statute in 2008. The FHFA combined functions of the the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB), as well as taking on certain functions that were under the supervision of the U.S. Dept. of Housing and Urban Development (HUD). Amongst the FHFA responsibilities, it  oversees the FHA, sets FHA loan limits, and computes the Housing Price Index.

The Federal Housing Administration (FHA) was established in 1934. The FHA insures loans made to borrowers by banks and other lenders. FHA insures loans for home construction, home purchase, and refinance loans. The FHA does not issue loans. The FHA is a part of the U.S. Dept of Housing and Urban Development that insures certain mortgages. Although the FHA does not fund loans, it does establish underwriting guidelines and construction standards for loans it guarantees . By guaranteeing the loan, the FHA gives lenders the confidence that the loan will be paid, even if the borrower defaults on the loan.

The primary mortgage on a property. In some cases, more than one mortgage is taken out on a property.  In case of borrower default, the first mortgage has priority over any other mortgage or lien, when it comes to collecting proceeds from the sale of the property. Property taxes, however, can get in line ahead of a first mortgage lender. 

A type of loan where the interest rate remains the same throughout the duration of the loan.

A fixture is personal property that is permanently attached to real estate or real property that becomes a part of the real estate and whose removal would do harm to the property. Fixtures can include plumbing, heating, and electrical systems, as well as items like built-in bookcases or or a ceiling fan.

Freddie Mac is the nickname of The Federal Home Loan Mortgage Corporation (FHLMC) that was created in 1970. Freddie Mac buys mortgages on the secondary market, bundles them together and then sells them as a mortgage-backed security to investors. This secondary mortgage market is supposed to increases the pool of money available for mortgage lending for purchase loans and refinance loans.

A measure used by lenders  in the loan qualifying process to determine if a borrower can afford the  prospective mortgage payment. The 'front-end' ratio divides a person's monthly gross income by the sum of the mortgage payment's principal and interest, as well as the monthly costs for property taxes and homeowner's insurance. The ratio is expressed as a percentage, the percentage of a person's gross income that the various payments utilize.

Your GFE gives you a detailed breakdown of your estimated costs on your mortgage loan. The Real Estate Settlement Procedures Act (RESPA) requires your mortgage lender to give you a written good faith estimate that shows your closing costs within 3 business days of submitting your application for a loan, whether you are purchasing or refinancing a property. Your actual expenses at closing may be somewhat different from the GFE, but the GFE is your guideline to compare the estimate and actual costs. At closing, fees that different substantially or new fees not included in the estimate should be satisfactorily explained.

A HELOC is a form of revolving credit , usually taken as a second mortgage, in which a home serves as collateral. Unlike a credit card, which is another type of revolving credit, at the end of the loan term on the HELOC, usually 10 to 20 years, the borrower has to repay any remaining balance in full.  A HELOC has an expiration date, a maximum limit, and a variable interest rate.

HUD is an abbreviation for The Department of Housing and Urban Development, a cabinet department in the Executive branch of the US federal government. According to HUD, its mission is "to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business."

A HUD1 statement is also known as a "settlement sheet," or "closing statement." The HUD1 itemizes all the closing costs that are the borrower's responsibility. A HUD1 must be given to the borrower at or before closing. The HUD1 must include real estate commissions, all loan fees, any points the borrower is paying, and escrow amounts.

In mortgage terminology, an index is a published interest rate that is used as a standard by which changes to an adjustable rate mortgage (ARM) are determined.  When the time comes for an ARM to adjust, the index to which the mortgage was tied is reviewed. The current rate of the index is used to determine the new rate, by adding the index rate to the margin that is specified in the loan. The LIBOR is an example of a common index used by mortgage lenders.

The amount of the mortgage payment applied to the interest that is accruing on the loan.

Joint tenancy is when two or more owners share equal ownership and rights to a property. Joint tenancy with rights of survivorship addresses what happens when one joint owner of a property dies. At that time, the deceased's share of the property passes to the surviving owner, without the property having to go through probate. Because joint tenancy requires that the property transfer to the surviving owner, property held under a  joint tenancy, cannot be willed to any party that is not a joint owner.

A judgment is a legal decision made by a court of law. If a person has an unpaid debt and is sued for repayment,  the court can issue a judgment that awards the creditor the legal right to pursue collecting the debt. A judgment for debt can be enforced against the debtor as a wage garnishment and a levy on a bank account. It can also lead to a lien filed against the debtor that will appear on the debtor's credit report in the public records area and encumber the sale of property the debtor owns, such as the debtor's house.

A jumbo loan is a non-conforming loan, a mortgage loan for a dollar amount that is greater than Fannie Mae's and Freddie Mac's loan limits.

Assists low to moderate income home buyers in purchasing a home by allowing them to lease a home with an option to buy. The rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

A lien is a legal claim for money owed by a person that is a matter of public record. A lien can affect any property that the debtor owns. A lien against a debtor with real estate clouds the title to the property. Unless the lien is paid or 'satisfied', ownership  of the property cannot be transferred.

A document that releases a consumer (homeowner) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.

Loan fraud can be used to describe a wide range of activities.  For instance, a borrower applying for a loan can commit loan fraud by misrepresenting facts on the loan application in order to make it easier to qualify for the loan,  such as misstating income, debt,  or facts about employment history. Loan fraud can result in civil liability or criminal penalties.

A loan lock guarantees a borrower that the lender will fund the mortgage loan, at an agreed upon interest rate and points, regardless of any market changes in interest rates. Loan locks are generally offered for a specific period of time, such as 30 or 60 days. If the loan doesn't fund before the lock expires, the interest rate and fees are subject to change.

A loan officer is a representative of a lending or mortgage company whose job it is to generate loan business and to assist the borrower in completing the loan application. After the loan application is submitted, the loan officer often acts as the intermediary between the applicant and other part's of the loan officer's financial institution, such as the underwriting and funding departments, helping to complete the loan process.

Loan servicing is the process of administering a loan from the time that the loan closes and the funds are disbursed until the final loan payment is made. Loan servicing can include: billing the borrower, collecting payments, sending payments to the note holder, monitoring and following up on delinquent payments, escrowing tax and insurance payments. Loan servicing can be done by the lender or by a company designated by the lender.

The amount you owe on your mortgage divided by the current market value of your home.  The ratio is stated in percentages. For example, a home with a mortgage balance of $80,000 that is worth $100,000 has an LTV of 80%.

Market value is the dollar price that a property will sell for, when both the buyer and seller are acting in their own best interests and are unaffected by undue pressures.

A mortgage consists of two documents: a note (or bond); and the mortgage itself. The note is the buyer’s personal promise to make the repayments. If there is a foreclosure against the property and the foreclosure sale does not yield enough to cover the outstanding mortgage debt, the note serves as the basis for a deficiency judgment against the borrower for the balance still due. The mortgage itself is a document that gives the lender the right to have the property sold to repay the loan if the borrower defaults. Since the mortgage in effect gives the mortgagee (the lender) an interest in the land, the mortgage is recorded at the county clerk’s office.

A clause allowing a lender, under certain circumstances, demand the entire balance of a loan is repaid in a lump sum. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

An individual or firm that charges a fee or commission to serve as the intermediary between the borrower and the lender for the purpose of loan origination.  Brokers do not work with only one lender, but work with various lenders. Brokers may negotiate on the borrower's behalf, attempting to find the best loan for the borrower. Brokers do not lend the money.

Mortgage insurance is an insurance policy that protects lenders from losses they can suffer if a borrower defaults on the mortgage loan. Most lenders require mortgage insurance from any borrower with less than a 20% equity stake in the home. Mortgage insurance costs are usually included in the mortgage payment. Mortgage insurance is available through private mortgage insurers or through a government agency, such as the FHA or VA.

Mortgage life and mortgage disability insurance are two types of mortgage insurance. Mortgage life insurance is a type of term life insurance that pays off a mortgage in the case of the insured's death. Mortgage disability insurance makes the monthly mortgage payment if the insured is disabled in a manner that is covered by the policy. Because both mortgage life and mortgage disability insurance restrict their benefits to covering mortgage costs, it is often wiser to seek more comprehensive mortgage and disability insurance.

A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period. The agreement is secured by a mortgage that is recorded in the public records along with the deed. Sometimes called simply a note.

The lender in a mortgage agreement.

The borrower in a mortgage agreement.

Multiple listing services compile a list of properties for sale that are being offered by different real estate agents or brokers within a geographical region. Depending on the size of the region, a region covered in one MLS could be a single county or it could be a few states. The MLS lists all properties that are listed for sale by any of the member agents or brokers.

A loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

In mortgage terminology, non-prime is another word for subprime.  Non-prime loans are loans that are available to higher risk borrowers, such as borrowers with: limited credit history, high debt to income ratios, blemished payment history, and a recent bankruptcy filing.

A non-recourse loan is a loan where the creditor's ability to collect on a defaulted loan is restricted to any assets used to secure the loan. With a non-recourse loan, if the lender forecloses, then it cannot get a deficiency judgment and attempt to collect it from the borrower. Whether a loan is recourse or non-recourse depends on the state you reside in and the specific terms of the loan.

PITI  is the borrower's monthly costs for principal, interest, property taxes, and homeowner's insurance. PITI reserves are the amount of cash that a borrower has to prove to the lender that is available to cover monthly PITI, after the borrower has covered the down payment and closing costs on a purchase loan or the closing costs on a refinance loan. PITI reserve requirements vary from lender to lender. Some lenders do not require any reserves on a loan for a primary residence. Lenders often require six months of reserves for a non-owner-occupied home.

PITI refers to the monthly required principal and interest payments on the mortgage loan, as well as the homeowner's monthly costs for property insurance and property taxes on the property. When qualifying for a loan, the lender judges the borrower's ability to afford the monthly PITI, regardless of whether or not the property taxes and homeowner's insurance are required to be included in the borrower's monthly mortgage payment to the lender.

Private Mortgage Insurance (PMI) is insurance provided by nongovernment insurers that protects a lender against loss, if the borrower defaults. PMI is required on non-government-backed loans that exceed 80% of the value of the property.

One point is equal to 1 percent of the principal amount of a mortgage loan. For example, if a mortgage is $200,000, one point equals $2,000. Origination points are frequently charged by lenders, in both fixed-rate and adjustable-rate mortgages, to cover the lender's loan origination costs. Points can also be charged to provide additional compensation to the lender or broker. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs. Discount points (sometimes called discount fees) are points that the borrower voluntarily chooses to pay in return for a lower interest rate. Typically, a one point discount fee will reduce the interest rate on the loan by .25%.

A lender's evaluation of a borrower's eligibility to obtain a loan of a certain dollar size. Unlike a pre-qualification, a pre-approval is offered by a lender only after a formal loan application has been submitted and the lender has examined proof of the borrower's income, documents that demonstrate the borrower's credit history and employment history, and proof of the borrower's ability to make a sufficient down-payment.

A lender's evaluation of a borrower's eligibility to take out a loan of a certain dollar size that is made before the borrower has submitted a loan application. Pre-qualification does not require the borrower to submit proof of income and other documents that are required in a formal loan application. Receiving pre-qualification approval from a lender is not a guarantee that the borrower will be approved by the lender for the loan.

According to the FBI, predatory lending "involves a lender who encourages or pressures a borrower into a mortgage that he can’t afford, that involves excessive fees or interest rates, that strips the borrower of equity or puts the borrower into a risky loan."

Prepayment penalties only apply to borrowers whose loan contained a prepayment penalty clause and who pay off the loan early. Loans are paid off when the borrower refinances a loan, sells the home, or uses a lump sum. The length of time that the prepayment penalty stays in force is specified in the loan documents. Prepayment penalties are usually limited to the first few years of the loan’s term.

The interest rate that banks charge to preferred customers. Changes in the prime rate are publicized in the business media. Prime rate can be used as the basis for adjustable rate mortgages (ARMs) or home equity lines of credit. The prime rate also affects the current interest rates being offered at a particular point in time on fixed mortgages. Changes in the prime rate do not affect the interest on a fixed mortgage.

The part of a monthly mortgage payment that goes toward the principal balance of the loan.

Taxpayers in the United States are allowed to deduct the dollar amount that they paid for property taxes from their total income.

Court records of events that are a matter of public interest such as credit, bankruptcy, foreclosure, felonies, and tax liens. The presence of public record information on a credit report is regarded negatively by creditors.

A list of necessary work and repair that has yet to be completed, at the time the owner completes the final walk through on a new home.

A detailed proposal made by a home buyer to a seller that lists the price, terms, and conditions under which the buyer will purchase the home. If the purchase offer is accepted and signed by the seller, it becomes a legally binding contract.

A tool that lenders use to analyze a borrower's ability to repay the loan. Lenders want borrowers who use only a certain percentage of their income for their housing costs and for certain other monthly recurring bills. Many lenders will not offer a mortgage loan to a borrower that uses more than 45% of his or her income for PITI (principal, interest, taxes,  and insurance), as well as other bills like credit card payments, car payments, and alimony or child support.

A legal document in which one person releases his or her interest in a property and passes the interest in the property to another person. A quitclaim deed does not make any guarantee of clear title.

A recourse loan is one where the lender has the legal means to collect the deficiency balance from the borrower.

RESPA, the Real Estate Settlement Procedures Act is a federal law of the USA. RESPA is a consumer protection law, aimed at protecting consumers from abuses during the  mortgage loan and real estate purchase processes. RESPA requires all lenders to present to the borrower a Good Faith Estimate (GFE) within three days of the loan application, that lists the costs the borrower pays to obtain the loan.

In mortgage terminology, a teaser rate is a low interest rate that is offered for an initial period of time on an adjustable rate mortgage (ARM). The teaser rate is usually a rate that is below market value. Lenders offer teaser rates in order to lure borrowers to choose an ARM instead of a fixed-rate mortgage. Interest rates can adjust severely, once the teaser period ends.

A legal document offered by the seller  of a property to the buyer that guarantees that the seller is the actual owner of the property, possesses the right to sell the property, that the title is clear on the property, and that there are no claims against the property.