Unlike a traditional fixed-rate mortgage or loan, a variable rate is dependent on the ebbs and flows of the market. Variable rate loans and mortgages are dependent on index rates set by the Fed and have the potential to increase or decrease with current market rates.

When a home loan has a variable interest rate, it is known as an adjustable-rate mortgage. Also known as variable-rate or floating mortgages, these mortgages set a fixed interest rate for period of time. After this period, the interest will reset periodically at annual or monthly intervals based on the performance of specified benchmarks or indexes. This is a useful option for homeowners who plan to refinance for a lower interest rate.

Also known as an interest-only mortgage, a deferred interest mortgage can be a beneficial option in times of economic uncertainty. With lower monthly payments for a set amount of time and increased payments in the future, these loans allow homeowners to postpone paying a loan’s interest (though interest will continue to accrue).

Both of these loans are designed to provide short-term funding for new construction projects; however, they are designated for different occupancy requirements. Floor loans are available for properties that will be occupied by tenants, not the owner, and are often the first step of a larger construction loan. On the other hand, construction loans are short-term loans available to individual homeowners who may opt to refinance the loan into a mortgage or new loan at a later date.

When it comes to a new build, combination loans are a great way to avoid private mortgage insurance (PMI) and reduce closing costs. These loans offer a set of two separate mortgage loans — such as an adjustable-rate mortgage and 30-year mortgage – through the same lender. A combination loan provides funding for new home construction and is followed by a conventional mortgage after the build is completed, with the second loan often paying off the first.

This personal finance tool compares the amount of debt homeowners have to gross income. This number becomes important as lenders utilize this as a baseline of your ability to repay a loan. To calculate your debt-to-income ratio (DTI), simply divide your recurring monthly debt by your gross monthly income.

The prime rate is the optimal interest rate charged to borrowers who are least likely to default on their loans. Each bank sets its own prime rate and often reserves this rate for corporate customers. Unfortunately, this means homeowners are likely to have an interest rate higher than the prime rate, but taking steps towards reducing debt, boosting your credit score, and minimizing risk factors can help you achieve a lower rate.

Points, or mortgage points, are part of the closing process. This prepaid interest is owed at closing, where one point equates to 1% of your loan. When you pay points as part of your closing costs (bonus: they’re tax deductible!), you’ll lower your monthly mortgage payment, making it more manageable in times where the housing market is in flux.