The professionals here at First American Home Loan have started to compile a list of commonly asked questions from their customers. If you do not find your answers here, one of our representatives will be happy to answer them for you.

1. What are convertible ARM's?

Some variable loans come with options to convert them to a fixed loan based on a pre-determined formula, during a given time period. For example the 1 yr tbill adjustable may be converted to a fixed during the first five years on the adjustment date. The means that you could convert during the 13th, 25th, 37th, 49th and 61th months of the loan.

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2. What is a Balloon (Payment) Mortgage?

Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
Example : A balloon mortgage for $25,000 has interest only payments for 5 years at 12% ($250 per month), with the full principal of $25,000 due and payable after 5 years.

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3. What is the term adjustment period mean in reference to an Adjustable Rate Mortgage?

This is the length of time for which the interest rate is fixed on an adjustable. Therefore if the adjustment period is six months, then the interest rate will remain fixed for six months, after which time it will adjust.

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4. What is the term margin refer to on an Adjustable Rate Mortgage?

A fixed number added to the index to compute the rate on an adjustable rate mortgage.

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