Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically based on current overall industry rates.

• 7/1 ARM: A loan with a fixed rate for the first 7 years that has a rate that changes once each year for the remaining life of the loan. Because the interest rate can change after the first 7 years, the monthly payment may also change.
• 5/1 ARM: A loan with a fixed rate for the first 5 years that has a rate that changes once each year for the remaining life of the loan. Because the interest rate can change after the first 5 years, the monthly payment may also change.
• 3/1 ARM: A loan with a fixed rate for the first 3 years that has a rate that changes once each year for the remaining life of the loan. Because the interest rate can change after the first 3 years, the monthly payment may also change.
• 1/1 ARM: A loan with a fixed rate for the first year that has a rate that changes once each year for the remaining life of the loan. Because the interest rate can change after the first year, the monthly payment may also change.

ARM Calculations (Initial/Max)
The ARM payment calculations are based on a 1% increase in the interest rate each year after the initial fixed rate expires. The initial/maximum payments were calculated by adding the payments for the fixed term of the loan to an average 1% interest rate increase per year for each year after the fixed term has expired, with a maximum cap of 6% interest increase over the life of the loan.

ARM payment
Under an adjustable-rate mortgage, the monthly payment is fixed for an initial period of time (e.g. 3, 5, 7 years) and then subject to change, as mortgage rates change over time. ARM's are usually preferable for someone that doesn't plan to keep a property for a long period of time or plans to refinance within the initial period of the ARM. ARM's are one way to keep initial payments low for property ownership if you expect to have increases in wages in future years.

Asking price
The dollar amount that is being asked for the property or home.

Down payment
Money paid to make up the difference between the purchase price and loan amount. Down payments usually are 10 to 20 percent of the sale price on conventional loans, and 0 to 5 percent on FHA and VA loans.

FHA Loan
Federal Housing Administration (FHA) loan for first time home buyers. Typically FHA loans allow for lower down payments, 3 - 5% of the appraised value or the purchase price of the home, whichever is lower. In addition, the down payment can be 100% gift funds. FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region.

Fixed Loan
Loan where the interest rate is locked down during the entire length of the loan.

• 30yr Fixed: A mortgage in which the interest rate does not change over the term of the loan, in this case for 30 years.
• 15yr Fixed: A mortgage in which the interest rate does not change over the term of the loan, in this case, for 15 years.

Homeowner's insurance
Also called property insurance, homeowner's insurance protects the homeowner from weather-related damage, as well as potential liability from events that occur on the property. Lenders require homeowner's insurance coverage to protect the collateral that secures their loan. Most homeowner's insurance policies do not cover catastrophic events such as earthquakes, mudslides or floods.

Loan amount
The amount of money you plan to borrow from the bank to pay for your home or property.

Loan interest rate
The annual rate of interest on the loan, expressed as a percentage of 100.

Mortgage Insurance
Also called Private Mortgage Insurance (PMI). This is an insurance policy that a mortgage lender requires of the borrower if the down payment is less than 20% of the value of the home. Mortgage insurance protects the lender from the risk that the borrower may default on the loan. We calculated an average mortgage insurance rate by using 0.4% of the loan amount.

Property taxes
Property taxes, also called real estate taxes, are paid to the local taxing authority or municipality. Property taxes are often calculated as a percentage of your home's assessed value. For example, if you pay 0.3% in property taxes of the assessed value, a home assessed at $250,000 would have a yearly property tax bill of $750.

Term
The period of a loan, generally measured in years. Mortgage loans are typically 15 or 30 years.

VA Loan
Veteran's Administration Loan. Loan given to qualifying former military service personnel. Allows for no down payments on homes up to a certain value, and frequently offers lower interest rates than conventional loans. The qualification guidelines for VA loans are more flexible than those for either the Federal Housing Administration (FHA) or conventional loans.

* The payment result is truncated to the nearest $1. The results in this calculator are estimates only and are not intended to be a completely accurate representation of your mortgage payments. You should verify the result with the financial lender of your choice. Your lender will have a more accurate method to calculate your exact mortgage payment.