HI! Sorry it took me so long to respond to your letter. Things have

been busy (as I'm sure you can appreciate) as we try to get settled in and get everything squared away in the new house. We enjoyed the sunflowers very much- what a pleasant surprise to come home to and we are certainly enjoying the quieter neighborhood and the pool!

I wanted to let you know how much Damon and I appreciated your professionalism and promptness in our loan process and closing. It was very reassuring to know that you were always aware of what was going on in the process and keep us informed as to our progress and any information you needed. You were always very prompt in returning our phone calls and emails and never made us feel that we were intruding on your time or interrupting you when we had questions or concerns.

We especially appreciated that you were able to manage dealing with both Realtors in scheduling and coordinating all of the inspections and the other work that you needed them to complete, as well as being available to be with us during closing to address the challenges that arose during that time. We felt like, at times, that you were the only person working for us in the whole process!

Again, we can't express how much we appreciate all of your time, effort and assistance in making this happen for us. We waited a long time to be able to own a home and because of your help, we now do! We will be sure to refer you to anyone who might need your services and will be sure to tell everyone what a great help you have been.

If you need any help with moving, let us know! Thanks again for everything!

Sincerely,

Julie & Damon

From A realtor 8/29/2006

You are the best LO i have ever worked with, Thanks T.J. keep up th good work Keep those leads coming to me.

Mo

KW

T.J. Thank you for going the extra mile to help us. We will let anyone that we know that needs help. We enjoyed working with you. Thank you for the sunflowers.

Keep in touch

Matt & Kelly

For exciting opportunities in the mortgage and finance industry, call us at 913-980-8766 or e-mail tjquick@sunflowerfinancial.com

Serious inquiries only.

Mortgage Terms

Glossary

3/2 Down Payment

Programs offered by some lenders under which a borrower who is able to secure a grant or gift equal to 2% of the down payment will only have to provide a 3% down payment from their own funds. This can be a good deal for a cash-short borrower.

Acceleration

The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.

Adjustable Rate Mortgage (ARM)

Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re-negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

Adjustment Date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Interval

On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Adjustment Period

The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Alternative Documentation

Expedited and simpler documentation requirements designed to speed up the loan approval process. The documentation modifications can range from the modest, such as substituting payroll stubs for tax returns, to no documentation whatever. Borrowers looking for the latter should expect to pay at least 30% and more likely 40% down.

Amortization

Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Amortization Schedule

A table showing the mortgage payment, broken down by interest and amortization, the loan balance, and perhaps other data.

Amortization Term

The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Annual Percentage Rate (A.P.R.)

Is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan. Be sure to get a full disclosure of fees involved in a loan, since all lenders differ on what needs to be included in the A.P.R. calculation. See APR below.

Application

A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.

Application Fee

A fee that some lenders charge to accept an application. It may or may not be refundable if the lender declines the loan or the borrower cancels.

Appraisal

An estimate of the value of property, made by a qualified professional called an "appraiser".

Appraiser

A person qualified by education, training, and experience to estimate the value of real property and personal property.

Appreciation

An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Approval

Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.

APR

The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. It is a comprehensive measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges. It is also adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid ten years down the road. However, the APR is calculated on the assumption that the loan runs to term, and is therefore potentially deceptive for borrowers with short time horizons. See Annual Percentage Rate above.

Assessment

A local tax levied against a property for a specific purpose, such as a sewer or street lights.

Asset

Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignment

The transfer of a mortgage from one person to another.

Assumable Mortgage

A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller. Assuming a loan will save the buyer money if the rate on the existing loan is below the current market rate, and closing costs are avoided as well. A loan with a "due-on-sale" clause stipulating that the mortgage must be repaid upon sale of the property, is not assumable.

Assumption

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, probably higher, market-rate interest charges will apply. Not many assumable loans exist anymore. Buyer beware.

Assumption Clause

A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption Fee

The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Automated Underwriting

A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the applicant will be approved, rejected, or asked for additional information. The quick decision is based on information provided by the applicant, which is subject to later verification, and other information retrieved electronically including information about the borrower's credit history and the subject property.

Balance

The amount of the original loan remaining to be paid. It is equal to the loan amount less the sum of all prior payments of principal.

Balance Sheet

A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Mortgage

A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term. It therefore has a balloon that must be repaid or refinanced. On a 7-year balloon loan, for example, the payment is usually calculated over a 30-year period, and the balance at the end of the 7th year must be repaid or refinanced at that time.

Balloon Payment

The final lump sum payment of the remaining loan balance that is made at the maturity date of a balloon mortgage.

Bankrupt

A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy

A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Before-tax Income

Income before taxes are deducted.

Beneficiary

The person designated to receive the income from a trust, estate, or a deed of trust.

Binder

A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

Biweekly Payment Mortgage

A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

Blanket Mortgage

A mortgage covering at least two pieces of real estate as security for the same mortgage. The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

Bond

An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Borrower (Mortgagor)

One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Breach

A violation of any legal obligation.

Bridge Loan

A short-term loan, usually from a bank, that "bridges" the period between the closing date of a home purchase and the closing date of a home sale. To qualify for a bridge loan, the borrower must have a contract to sell the existing house. Also known as "swing loan".

Broker

An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers charge a fee or receive a commission for their services.

Buy-Down

When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Buy-down Mortgage

A temporary buy-down is a mortgage on which an initial lump sum payment is made by lender and/or the home builder to reduce a borrower's monthly payments during the first few years of a mortgage.

While the payments are initially low, they will increase when the subsidy expires.

A permanent buy-down reduces the interest rate over the entire life of a mortgage.

Call Option

A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

Cap

A pricing option exercised by the borrower at the time of the application wherein the rates and points prevailing at the time cannot rise if market rates rise, but they can decline if market rates decline. A cap costs the borrower more than a lock because it is more costly to the lender. Caps vary widely in terms of how often the borrower can exercise (usually only once), and exactly when the borrower can exercise. Do not confuse with interest rate increase caps and payment increase caps.

Capital Improvement

Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Caps (interest)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (payment)

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Cash Flow

The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)

Cash-Out Refinance

A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Certificate of Eligibility

The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility)

Certificate of Reasonable Value (CRV)

A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage. It's the VA version of an appraisal showing the property's current market value.

Certificate of Title

A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

Certificate of Veteran Status

The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Chain of Title

The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency

The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Clear Title

A title that is free of liens or legal questions as to ownership of the property.

Closing

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.

Closing Costs

Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country.

Closing Statement

Also referred to as the HUD-1. The final statement of costs incurred to close on a loan or to purchase a home.

Cloud on Title

Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Collateral

An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Collection

The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.

Co-Maker

A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.

Commission

The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment

A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Commitment Letter

A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."

Common Areas

Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Community Home Improvement Mortgage Loan

An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.

Community Property

In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

Comparables

An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location , and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Condominium

A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Condominium Conversion

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Conforming Mortgage

A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. Has specific loan amount limits.

Construction Loan

A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

Consumer Reporting Agency (or bureau)

An organization that prepares reports that is used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Contingency

A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract

An oral or written agreement to do or not to do a certain thing.

Contract Sale or Deed:

A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Conventional Loan

A mortgage not insured by FHA or guaranteed by the VA.

Conversion Option

The option to convert an ARM to an FRM at some point during its life. These loans are likely to carry a higher rate or points than ARMs that do not have the option.

Convertibility Clause

A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.

Convertible ARM

An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative (co-op)

A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Corporate Relocation

Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

Correspondent

A lender who delivers loans to a wholesaler against prior price commitments the wholesaler has made to the correspondent.

Cost of Funds Index (COFI)

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

Covenant

A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Credit

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History

A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Report

Report of an individual's credit history from a credit bureau documenting the credit history and current status of a borrower's credit standing used by a lender in determining a loan applicant's creditworthiness.

Credit Repository

An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Credit Score

A single numerical score based on an individual's credit history, that measures that individual's credit worthiness. Credit scores are as good as the algorithm used to derive them.

Cumulative Interest

The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include up-front cash payments, and it is not adjusted for the time value of money. See effective rate.

Current Index Value

The most recently published value of the index used to adjust the interest rate on indexed ARMs.

Debt

An amount owed to another.

Debt-to-Income Ratio

The ratio expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.

Deed

The legal document conveying title to a property.

Deed of Trust

In many states, this document is used in place of a mortgage to secure the payment of a note. Title is conveyed to a trustee

Deed-in-Lieu

A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.

Default

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Interest

When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance .See negative amortization

Delinquency

Failure to make payments on time. This can lead to foreclosure. This is not a good thing. Make those payments on time.

Department of Veterans Affairs (VA)

An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Deposit

A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.

Depreciation

A decline in the value of property; the opposite of appreciation.

Discount Point

see Points

Down Payment

The difference between the purchase price of the property and the loan amount, expressed in dollars, or as a percentage of the price. For example, if the house sells for $100,000 and the loan is for $80,000, the down payment is $20,000 or 20%. The loan amount used in this calculation does not include any prepaid finance charges that are included in the loan. For example, if the $80,000 loan in the example above includes a $1,000 up-front mortgage insurance premium, the down payment is $21,000. The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Due-on-sale Clause Provision

A provision of a loan contract that stipulates that if the property is sold the loan balance must be repaid. This bars the seller from transferring responsibility for an existing loan to the buyer when the interest rate on the old loan is below the current market. A mortgage containing a due-on-sale clause is not an assumable mortgage.

Earnest Money Deposit

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Easement

A right of way giving persons other than the owner access to or over a property.

Effective Age

An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Effective Gross Income

Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Encumbrance

Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Endorser

A person who signs ownership interest over to another party. Contrast with co-maker.

Entitlement

The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity

A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage. The difference between the value of a home and the outstanding loan balance on the home.

Escrow Account

An account held by the lender into which the home buyer pays money for tax or insurance payments. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due.

Escrow

An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. The deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow Analysis

The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow Collections

Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.

Escrow Disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow Payment

The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.

Estate

The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Eviction

The lawful expulsion of an occupant from real property.

Examination of Title

The report on the title of a property from the public records or an abstract of the title.

Fair Credit Reporting Act

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Market Value

The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae

A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.

Fannie Mae

See Federal National Mortgage Association.

Fannie Mae's Community Home Buyer's Program

An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

Farmers Home Administration (FmHA)

Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Bank Board (FHLBB)

The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision.

Federal Home Loan Mortgage Corporation(FHLMC) also called "Freddie Mac",

Is a quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers

Federal Housing Administration (FHA)

An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Federal National Mortgage Association (FNMA) also know as "Fannie Mae"

A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

Fee Simple

The greatest possible interest a person can have in real estate.

Fees

The sum of all up front cash payments required by the lender as part of the charge for the loan. Origination fees and points are expressed as a percent of the loan.

FHA Loan

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($155,250 as of 1/1/96), they are generous enough to handle moderately priced homes almost anywhere in the country.

FHA Mortgage

A mortgage on which the lender is insured against loss by the Federal Housing Administration, with the borrower paying the mortgage insurance premium. The major advantage of an FHA mortgage is that the required down payment is very low, but the maximum loan amount is also quite low. While it varies from area to area depending on local prices so check with an FHA lender near you.

FHA Mortgage Insurance

Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FHLMC

The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans by purchasing their conventional loans. Also known as "Freddie Mac."

Firm Commitment

A promise by FHA to insure a mortgage loam for a specified property and borrower. A promise from a lender to make a mortgage loan.

First Mortgage

A mortgage that is the primary lien against a property. It's the first-priority claim against the property in the event the borrower defaults on the loan.

Fixed-Rate Mortgage (FRM)

A mortgage in which the interest rate does not change during the entire term of the loan.

Float

An option which the borrower may exercise at the time of the application to allow the rate and points to vary with changes in market conditions rather than to "lock in" those prevailing at that time. The borrower may elect to lock at any point but must do so a few days before the closing.

Flood Insurance

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

FNMA

The Federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."

Foreclosure

A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Freddie Mac

see Federal Home Loan Mortgage Corporation

Fully Amortized ARM

An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

Fully Amortizing Payment

The monthly mortgage payment which, if maintained unchanged through the remaining life of the loan at the then-existing interest rate, will pay off the loan over the remaining life. On some ARMs the mortgage payment may not rise whenever the interest rate increases, or the payment increase may be limited by a payment increase cap. In such case, the payment is not fully amortizing -- if maintained it will not pay off the loan at term -- and at some point it will have to be raised to make it fully amortizing.

Fully Indexed Interest Rate

The current index value plus the margin on an ARM. Most ARMs have initial interest rates well below the fully indexed rate. If the index does not change from its initial level, after the initial rate period ends the interest rate will rise to the fully indexed rate after a period determined by the interest rate increase cap. For example, if the initial rate is 4% for 1 year, the fully indexed rate 7%, and the rate adjusts every year subject to a 1% rate increase cap, the 7% rate will be reached at the end of the third year.

Ginnie Mae

see Government National Mortgage Association.

GNMA

Government National Mortgage Association (GNMA)

Graduated Payment Mortgage (GPM)

A mortgage on which the payment rises by a constant percent for a specified number of periods, after which it levels out over the remaining term and amortizes fully. For example, the payment might increase by 7.5% every 12 months for 60 months, after which it is constant for the remaining term at a fully amortizing level. This type of mortgage has negative amortization built into it.

Graduation Period

The interval at which the payment rises on a GPM.

Graduation Rate

The percentage increase in the payment on a GPM.

Guaranty

A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract

Hazard Insurance

Insurance purchased by the borrower, and required by the lender, to protect the property against loss from fire and other hazards. It is the second "I" in PITI.

Historical Scenario

The assumption that the index value to which the rate on an ARM is tied follows the same pattern as in some prior historical period.

Homeowner's Equity

See equity.

Housing Expense

The sum of mortgage payment, hazard insurance, property taxes, and homeowner association fees.

Housing Expenses-to-Income Ratio

The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.

HUD

The U.S. Department of Housing and Urban Development.

Impound

That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down. Some commonly used indeces include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).

Initial Interest Rate

The interest rate that is fixed for some specified number of months at the beginning of the life of a mortgage. On an ARM, the initial rate is sometimes referred to as a "teaser" because it is below the fully indexed interest rate.

Initial Rate Period

The number of months for which the initial rate holds. On ARMs this period can range from 3 months to 10 years, but on an FRM the initial rate holds for the life of the loan.

Interest Due

The portion of the mortgage payment which goes toward interest on the loan, expressed in dollars. It is computed by multiplying the loan balance at the end of the preceding period times the annual interest rate divided by 12 (on a biweekly mortgage it is divided by 26). It is the same as interest payment except when the total mortgage payment is less than the interest due, in which case the difference is added to the balance and constitutes negative amortization.

Interest Payment

The dollar amount of interest paid each month. It is the same as interest due except when the total mortgage payment is less than the interest due, in which case the interest payment is less than the interest due; the difference is added to the balance and constitutes negative amortization.

Interest Rate

The rate charged the borrower each period, by custom quoted on an annual basis. A rate of 6%, for example, means a rate of 1/2% per month. For a monthly payment mortgage the rate divided by 12 is multiplied by the balance at the end of the preceding month to determine the monthly interest due.

Interest Rate Adjustment Period

The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, using common terminology, a 3/3 ARM is one in which both periods are 3 years while a 3/1 ARM has an initial rate period of 3 years after which the rate adjusts every year.

Interest Rate Ceiling

The highest interest rate possible under an ARM contract; same as "lifetime cap." It is often expressed as a specified number of percentage points above the initial interest rate.

Interest Rate Decrease Cap

The maximum allowable decrease in the interest rate on an ARM each time the rate is adjusted. It is usually 1 or 2 percentage points.

Interest Rate Floor

The lowest interest rate possible under an ARM contract. Floors are less common than ceilings.

Interest Rate Increase Cap

The maximum allowable increase in the interest rate on an ARM each time the rate is adjusted. It is usually 1 or 2 percentage points.

Interest Rate Index

The specific interest rate series to which the interest rate on an ARM is tied, such as "Treasury Constant Maturities, 1-Year," or "Eleventh District Cost of Funds." All the indices are published regularly in readily available sources.

Interim Financing

A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Investor

A borrower who owns or purchases a property as an investment rather than as a primary residence.

Investor

A money source for a lender.

Jumbo Mortgage

A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac (see Non-conforming mortgage). However, some lenders use the term to refer to programs for even larger loans, such as, e.g., greater than $500,000. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Lien

An encumbrance against property for money due, either voluntary or involuntary.

The lender's right to claim the borrower's property in the event the borrower defaults. If there is more than one lien, the claim of the lender holding the first lien will be satisfied before the claim of the lender holding the second lien, which in turn will be satisfied before the claim of a lender holding a third lien, etc.

Lifetime Cap

A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Loan Amount

The amount the borrower(s) promise to repay, as set forth in the mortgage contract. It differs from the amount of cash disbursed by the lender by the amount of points and other credit charges.

Loan to Value Ratio (LTV)

The ratio of the amount of your loan to the appraised value of the home. Loan amount is divided by the lesser of the selling price or the appraised value and expressed as a percentage.. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.

Lock

An option exercised by the borrower, at the time of the loan application or later, to "lock in" the rates and points prevailing in the market at that time. The lender and borrower are committed to those terms, regardless of what happens between that point and the closing date.

Lock Period

The number of days for which any lock or cap holds.

Lock-in

A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

Margin

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

Market Value

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Maturity

The period until the last payment is due.

Maximum Loan Amount

The largest loan size permitted on a particular loan program. For programs where the loan is targeted for sale to Fannie Mae or Freddy Mac, the maximum will be the largest loan eligible for purchase by these agencies. On FHA loans, the maximums are set by the Federal Housing Administration and vary somewhat by geographical area.

Maximum Loan to Value Ratio

The maximum allowable loan-to-value ratio on the selected loan program.

Maximum Lock

The maximum period for which the lender will provide a rate/point commitment on any program. The most common maximum lock period is 60 days, but on some programs the maximum is 90 days; only a few go beyond 90 days.

Minimum Downpayment

The minimum allowable ratio of downpayment to sale price on any program. If the minimum is 10%, for example, it means that you must make a downpayment of at least $10,000 on a $100,000 house, or $20,000 on a $200,000 house.

MIP (Mortgage Insurance Premium)

It is insurance from FHA to the lender against incurring a loss on account of the borrower's default.

Monthly Debt Service

Monthly payments required on credit cards, installment loans, home equity loans, and other debts but not including payments on the loan applied for.

Monthly Housing Expense

The sum of the monthly mortgage payment (which includes principal and interest), taxes and insurance.

Monthly Total Expenses

Monthly housing expense, PITI, plus monthly debt service including but not limited to credit card payments, auto loan payment, student loan payments, child support or alimony payments, etc.

Mortgage

A legal document that pledges a property to the lender as security for payment of a debt

Mortgage Broker

An independent contractor who offers the loan products of multiple lenders, termed wholesalers. A mortgage broker counsels on the loans available from different wholesalers, takes the application, and usually processes the loan. When the file is complete, but sometimes sooner, the lender underwrites the loan and funds it. In contrast to a correspondent, a mortgage broker does not fund a loan. A mortgage broker receives a commission from the lender, part of your closing fees, for the service they provide.

Mortgage Disability Insurance

A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.

Mortgage Insurance (MI)

Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LTV of 80.01% or higher.

Mortgage Insurance Premium

The up-front and/or annual charges that the borrower pays for mortgage insurance. There are different mortgage insurance plans with differing combinations of monthly, annual and up-front premiums.

Mortgage Payment

The monthly payment of principal and interest made by the borrower.

Mortgage Program

A bundle of characteristics of a mortgage including whether it is an FRM, ARM, or Balloon, the term, the initial rate period on an ARM, whether it is FHA-insured or VA-guaranteed, and if is not FHA or VA whether it is "conforming" (eligible for purchase by Fannie Mae of Freddie Mac) or "non-conforming".

Mortgagee

The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.

Mortgagor

The mortgage borrower who gives the mortgage as a pledge to repay. The borrower or homeowner.

Negative Amortization

Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.

Negative Amortization Cap

The maximum amount of negative amortization permitted on an ARM, usually expressed as a percentage of the original loan amount (e.g., 110%). Reaching the cap triggers an automatic increase in the payment, usually to the fully amortizing payment level, overriding any payment increase cap.

Net Effective Income

The borrower's gross income minus federal income tax.

No Change Scenario

The assumption that the value of the index to which the rate on an ARM is tied does not change from its initial level.

Non Assumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Non-Conforming Loan

Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a higher rate and origination fee premium.

Non-Conforming Mortgage (Jumbo Loan)

A mortgage that does not meet the purchase requirements of the two Federal agencies, Fannie Mae and Freddie Mac, because it is too large or for other reasons such as poor credit or inadequate documentation.

Non-Permanent Resident Alien

A non-citizen with a green card employed in the US. As distinct from a permanent resident alien, which lenders do not distinguish from US citizens. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than US citizens.

Note

A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand.

Office of Thrift Supervision (OTS)

The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank Board

Origination Fee

The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.Avg. of 2.87%

Owner Financing

A property purchase transaction in which the property seller provides all or part of the financing.

Payment Adjustment Interval

The period between payment changes on an ARM, which may or may not be the same as the interest rate adjustment period. Loans on which the payment adjusts less frequently than the rate may generate negative amortization.

Payment Increase Cap

The maximum percentage increase in the payment on an ARM at a payment adjustment date.

Payment Rate

The interest rate used to calculate the payment, which is usually but not necessarily the interest rate.

Payment Shock

A very large increase in the payment on an ARM that may surprise the borrower.

Payoff Month

The month in which the loan balance is paid down to zero. It is the same as the term on most loans.

Permanent Loan

A long term mortgage, usually ten years or more. Also called an "end loan."

Pipeline Risk

The lender's risk that between the time a commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling the loan.

PITI

Shorthand for principal, interest, taxes and insurance, which are the components of the monthly housing expense.

Planned Unit Developments (PUD)

A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

Pledged Account Mortgage (PAM):

Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

Points, Discount Points

Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the mortgage loan amount.

Power of Attorney

A legal document authorizing one person to act on behalf of another.

Preapproval

A commitment by a lender to make a loan prior to the identification of a specific property. It is designed to make it easier to shop for a house. Unlike a prequalification, the lender checks the applicant's credit. See What Is a Prequalification?

Premiums

See "points".

Prepaid Expenses

Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepaids

Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Prepayment

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

A payment made by the borrower over and above the scheduled mortgage payment. If the additional payment pays off the entire balance it is a "prepayment in full"; otherwise, it is a "partial prepayment."

Prepayment Penalty

A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment.

Prequalification

Same as qualification.

Primary Mortgage Market

Lenders making mortgage loans directly to borrower's such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA, etc.

Principal

Amount of debt, not including interest. The face value of a note or mortgage. The portion of the monthly payment that is used to reduce the loan balance. The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)

In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on you loan's structure.

Processing

What the lender does with your loan application. Processing involves compiling and maintaining the file of information about the transaction, including the credit report, appraisal, verification of employment and assets, and so on. The processing file is handed off to underwriting for the loan decision.

Qualification

The process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. It is sometimes referred to as "pre-qualification" because it is subject to verification of the information provided by the applicant. Qualification is short of approval because it does not take account of the credit history of the borrower. Qualified borrowers may ultimately be turned down because, while they have demonstrated the capacity to repay, a poor credit history suggests that they may be unwilling to pay.

Qualification Rate

The interest rate used in calculating the initial mortgage payment in qualifying a borrower. The rate used in this calculation may or may not be the initial rate on the mortgage.

Qualification Requirements

Standards imposed by lenders as conditions for granting loans, including maximum ratios of housing expense and total expense to income, maximum loan amounts, maximum loan-to-value ratios, and so on. Can be viewed as a quantifiable subset of underwriting requirements, which is more comprehensive and takes account of the borrower's credit record.

Qualifying Ratios

The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.

Rate

See Interest Rate.

Rate Cap

A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

Rate Lock-in

A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time. The longer the lock, the higher the cost to you will be.

Rate Protection

Protection against the danger that rates will rise between the time a borrower applies for a loan and the time the loan closes. This protection can take the form of a "lock" where the rate and points are frozen at their initial levels until the loan closes; or a "cap" where the rates and points cannot rise from their initial levels but they can decline if market rates decline. In either case, the protection only runs for a specified period. If the loan is not closed within that period, the protection expires and the borrower will either have to accept the terms quoted by the lender on new loans at that time, or start the shopping process anew.

Rate/point Options

All the combinations of interest rate and points that are offered on a particular program. On an ARM, rates and points may also vary with the margin and interest rate ceiling.

Realtor

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Rebate

Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with "points" (see above).

Recast Payment

Raising the mortgage payment to the fully amortizing payment. Periodic recasts are sometimes used on ARMs in lieu of negative amortization caps.

Recording Fees

Money paid to the county recorder for recording a home sale with the local authorities, thereby making it part of the public records.

Refinance

Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.

Refinancing

The process of paying off one loan with the proceeds from a new loan using the same property as security.

Renegotiable Rate Mortgage

A loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.

Required Cash

The total cash required of the home buyer to close the transaction, including downpayment, points and fixed dollar charges paid to the lender, any portion of the mortgage insurance premium that is paid up-front, and other settlement charges associated with the transaction such as title insurance, taxes, etc. The total required cash is shown on the Good Faith Estimate of Settlement that every borrower receives.

Residential Mortgage Credit Report (RMCR)

A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.

RESPA

Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.

Reverse Annuity Mortgage (RAM)

A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loan is paid in full. Also called a "release of mortgage."

Scheduled Mortgage Payment

The amount the borrower is obliged to pay each period, including interest, principal, and mortgage insurance, under the terms of the mortgage contract.

Second Mortgage

A mortgage made subsequent to another mortgage and subordinate to the first one.

It has second-priority claim against a property in the event that the borrower defaults on the loan. The lender who holds the second mortgage gets paid only after the lender holding the first mortgage is paid.

Secondary Mortgage Market

The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

Seller Carry Back

An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

Servicing

Administering loans between the time of disbursement and the time the loan is fully paid off. This includes collecting monthly payments from the borrower, maintaining records of loan progress, assuring payments of taxes and insurance, and pursuing delinquent accounts.

Settlement/Settlement Costs

see closing/closing costs

Shared Appreciation Mortgage (SAM)

A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.

Simple Interest

Interest which is computed only on the principle balance.

Simple Interest Mortgage

A mortgage on which interest is calculated daily based on the balance at the time of the last payment. The daily interest is thus the same during the period between payments.

Standard Mortgage

An FRM with a single rate and level payments that fully amortizes over its term

Subordinate Financing

A second lien on the property securing the loan at the time of closing. This arises when there is a second lien on the property at the time the new loan is taken out, and the new loan does not pay it off.

Survey

A measurement of land, prepared by a registered land surveyor, showing the boundaries of a parcel of land, with reference to know points, its dimensions, and the location of all improvements.

Sweat Equity

Equity created by a purchaser performing work on a property being purchased.

Swing Loan

See Bridge loan.

Temporary Buydown

A reduction in the mortgage payment in the early years of the loan in exchange for an upfront cash payment provided by the home buyer, the seller, or both. As an illustration, a 2-1 buydown on an 8% loan results in a payment in year 1 calculated at 6%, in year two the payment is calculated at 7%, and in year 3 and thereafter it is calculated at 8%. The upfront cash payment must be large enough to cover the difference between the reduced payments made in the first two years by the borrower and the regular payment calculated at 8% received by the lender.

Tenants-in-Common

An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.

Term

The period used to calculate the monthly mortgage payment. The term is usually but not always the same as the maturity. On a 7-year balloon loan, for example, the maturity is 7 years but the term in most cases is 30 years.

Title

A document that gives evidence of an individual's ownership of property.

Title Insurance

a policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller. It insures against loss resulting from defects of title to a specifically described parcel of real property. Policies are also available to protect the lender's interests.

Title Search

An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.

Total Debt Ratio

Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.

Total Expense Ratio

The ratio of housing expense, PITI, plus current debt service payments to borrower income, which is used (along with the housing expense ratio and other factors) in qualifying borrowers. See qualification requirements.

Total Interest Payments

The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include up-front cash payments, and it is not adjusted for the time value of money. See Effective Rate.

Truth-in-Lending Act

A federal law requiring a disclosure of credit terms using a standard format known as the Annual Percentage Rate to potential borrowers shortly after they apply for the loan. Also known as Regulation Z. This is intended to facilitate comparisons between the lending terms of different financial institutions.

Two-Step Mortgage

A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. Also called "Super Seven" or "Premier" mortgage.

Underwriting

The decision process of examining all the data about the borrower(s), based on credit, employment, assets, property, etc. and other factors and the matching of this risk to an appropriate rate, term or loan amount and to determine whether the mortgage applied for by the borrowers should be issued.

Underwriting Requirements

The standards imposed by lenders in determining whether a borrower qualifies for a loan. These standards are more comprehensive than qualification requirements in that they include an evaluation of the borrower's creditworthiness.

USURY

Interest charged in excess of the legal rate established by law.

VA Mortgage/Loan

A low-or no-down payment mortgage on which the lender is insured against loss by the Veterans Administration. The major advantage of a VA mortgage is that the required down payment is very low, and maximum allowable loan amounts are higher than on FHA loans. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Funding Fee

A premium of a set percentage (depending on the size of the down payment) paid on a VA-backed loan that is either paid at closing or added to the amount financed.

Variable Rate Mortgage (VRM)

see adjustable rate mortgage

Verification of Deposit (VOD)

a document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE)

A document signed by the borrower's employer verifying his/her position and salary.

Veterans Administration (VA)

A government agency guaranteeing mortgage loans with no down payment to qualified veterans.

Waive Escrows

The borrower has the right to pay taxes and insurance directly. This is in contrast to the standard procedure where the lender adds a charge to the monthly mortgage payment that is deposited in an escrow account, from which the lender pays the borrower's taxes and insurance when they are due. On some loans lenders will not waive escrows, and on loans where waiver is permitted lenders are likely either to charge for it in the form of a small increase in points, or restrict it to borrowers making a large down payment.