Loan Programs Fixed Rate Mortgages The most common type of mortgage program where your monthly payments for interest and principal never change. Adjustable Rate Mortgages (ARM) These loans begin with an interest rate that is lower than a comparable fixed rate mortgage, but the rate changes at specified intervals. Standard ARMS and the Differences Choosing an ARM with an index that reacts quickly lets you take full advantage of falling interest rates. Introductory Rate ARM's Most ARM's have a low introductory rate, which is good anywhere from 1 month to as long as 10 years. Reverse Mortgages A Special type of loan made to older homeowners to enable them to convert the equity in their home to cash to finance other needs. London Inter Bank Offered Rate (LIBOR) LIBOR is the rate on dollar-denominated deposits, also know as Eurodollars, traded between banks in London. Balloon Mortgages Short term mortgages that have some features of a fixed rate mortgage. Interest Rate Buydowns The buyer would pay points above current market points in order to pay a below market interest rate during the first two years of the loan. At the end of the two years they would then pay the old market rate for the remaining term. Cost of Funds Index (COFI) The ratio of the dollar amount paid in interest during the month to the average dollar amount of the funds for that month constitutes the weighted average cost of funds ratio for that month. Graduated Payment Mortgage (GPM) With a GPM the payments are usually fixed for one year at a time. Choosing The Best Program The right type of mortgage for you depends on many different factors