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Real Estate Glossary
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| Two-Step Mortgage | The Two-Step Mortgage is a special type of adjustable-rate mortgage (ARM) that adjusts only once. Depending on whether you select a five-year or seven-year Two-Step Mortgage, your interest rate will adjust once at the end of either five or seven years. Then, your interest rate stays the same for the remaining 25 or 23 years of your 30-year loan. Advantages: -- You can qualify with a low starting interest rate. Your initial interest rate is only slightly higher than a balloon loan and is often lower than a 30-year fixed rate loan. -- You get stable, predictable payments for five or seven years and, after adjustment, for the remaining 25 or 23 years of the loan. -- You are protected from rising interest rates during the early years of homeownership. -- You do not have to re-qualify or pay refinance costs at the time the interest rate adjusts. -- You have time to increase your earnings or accumulate additional assets before the interest rate adjusts at the end of five or seven years. Details: -- Your interest rate cap can be no more than 6 percent above your initial interest rate. -- You can use this mortgage to buy one- to four-family residences including second homes and condos, co-ops and planned unit developments. -- Manufactured homes are also eligible. (Manufactured housing units must be built on a permanent chassis at a factory and then transported to a permanent site and attached to a foundation.) | |
| Glossary V2.0 | ||
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