Adjustable-Rate Mortgage (ARM).

An ARM will have interest rates and payments that change from time-to-time over the life of the loan. Depending on the type of ARM you have, your interest rate may increase gradually every few years until it reaches a preset ceiling. When you apply for an ARM, you’ll be told how, when, and why the rates may change.

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Annual Percentage Rate (APR).

The APR, shown on your mortgage papers, is a standardized way of showing you the total cost of borrowing money. The APR is a combination of the interest rate charged by the creditor along with any fees they might charge. The fees are expressed in percentages and added to the actual interest rate to come up with the total APR.

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Back-End Debt-to-Income Ratio.

Your debt-to-income ratio compares your monthly debt payments to your monthly income, and is a widely used measure of your creditworthiness. You compute your debt-to-income ratio by dividing your monthly minimum debt payments, excluding your rent or mortgage, by your monthly take-home pay.

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