With a fixed rate mortgage the interest rate is fixed for the life of the loan.

Pre-qualification: You have given the mortgage loan officer your financial information and based on the stated income and debts, the loan officer gives you the amount of mortgage you will qualify for. Generally, no credit is checked, no income or assets are verified

Pre-approval: Your income, credit and assets are verified and submitted to an underwriter for approval. The loan officer will issue a “pre-approval letter” that will allow you to shop for homes and make an offer. Many realtors require you be pre-approved before you start shopping for a home.

A balloon is a fixed rate fully amortized mortgage. However, there is a balloon term. Meaning the unpaid principal balance is due and payable in full at the end of the balloon term. This loan will need to be paid in full at the end of the term or be refinanced. For example, a seven-year balloon will be due and payable in full at the end of the seventh year.

Mortgage Insurance, also known as Private Mortgage Insurance (PMI), is insurance for the lender in case the mortgage goes into foreclosure. Mortgage Insurance is a monthly premium that is added to your mortgage payment. Mortgage Insurance is only required if you finance more than 80% of the value or purchase price, whichever is lower. If you have a 20% down payment, no Mortgage Insurance is required.

The APR (annual percentage rate) is a combination of your note rate (interest rate) and a portion of your closing costs and pre-paids combined together. The APR helps you compare interest rates and closing costs between lenders.

An ARM (adjustable rate mortgage) is a variable rate mortgage, in which the interest rate adjusts based on the terms of the mortgage. For example, with a one-year ARM, the interest rate adjusts annually. With a 3-1 ARM, the interest rate is fixed for a period of three years then adjusts annually thereafter.