Amortization – schedule showing how much of each loan payment goes to principal and to interest throughout the life of the loan. Commercial real estate loans generally amortize over a 20- to 30-year period while non-real estate loans tend to amortize over a shorter 3- to 10-year period.

Annual Debt Service – total principal and interest paid each year on a commercial loan.

Basis Point – equals 1/100 of one percent and is used to describe the interest rate on a commercial real estate loan. For example, 350 basis points in interest is the same as 3.50%.  Basis points are also used to quantify origination fees on the loan.

Borrower – person (or business) that applies for a loan and receives funds. The borrower is responsible for repaying the loan according to the agreed upon loan terms.

Bridge Loan – short-term loan, usually for six months to three years, that allows a borrower time or temporary financing until obtaining permanent financing. Bridge loans are sometimes used during property renovation or while seeking a long-term commercial tenant.

Closing Costs— fees and expenses associated with the closing of a loan such as origination and documentation fees.  For real estate loans, these are fees over and above the price of the property, incurred by the buyer and/or the seller in the property ownership transfer. Closing costs may include title searches, attorney’s fees, survey charges, and deed filing fees.

Collateral – an asset, such as real estate, vehicles, cash, and investments, that can be pledged to a lender to secure a loan. If the loan is not repaid, the lender can take possession of the collateral.

Commercial Loan – a loan made for business purposes.

Construction Loan – short-term, interim loan used to finance the cost of construction. The loan funds are advanced by the lender to the builder in periodic intervals as the work progresses. Payments are billed on an interest only basis.

Construction-to-Permanent Loan – the same as a construction loan but written for a longer term.  Initially written on an interest-only basis then converted to an amortizing (permanent) loan.

Contingency Reserve – additional funds set aside in the construction loan budget to be used in the event of cost overruns during a construction or renovation project.

Cost Basis – the total cost of a property including purchase price, hard and soft costs and less depreciation. Upon sale of the asset, the amount due in capital gains is equivalent to the sales price less the cost basis.

Debt Service – periodic payments of principal and interest made on a loan.

Default – failure to repay a loan as promised in accordance with the terms of the promissory note. The point in time that a debt is considered to be in default can vary by the lender and the type of debt and is specified in the loan agreement.

Delinquent – failure to make an installment payment when due or to meet other terms of the promissory note.

Demand Loan – a loan written without a specific term with the principal balance due upon demand by the lender.

Guarantor – an individual or entity that is contractually obligated to make repayment on the loan in addition to the borrower.

Hard Costs – actual expenses for construction and building improvements such as grading, excavation, concrete, framing, electrical, carpentry, roofing, and landscaping.

Interest – sum paid for borrowing money, which covers the lenders’ cost of doing business.

Interest Rate – the sum charged for borrowing money expressed as a percentage.

Late Fee – a fee that may be charged by the lender when a payment is not made on time. The amount of the late fee and when it will be charged is included in the loan agreement.

Lender – person or entity such as a bank that is loaning money to the borrower.

Loan Agreement – legal contract between the borrower and the lender which includes information about the loan amount, payment schedules, interest rate, late charges, what happens in case of default, and other important information.

Loan Origination Fee – a charge that may be collected by the lender and deducted from the loan amount to cover expenses related to the loan. Expenses could include the costs of underwriting, processing, and administering the loan. 

Loan Term – the period of time to maturity of the loan.  Can, on occasion, be shorter than the amortization period.

Loan-to-Cost Ratio (LTC) – the construction loan amount in relation to the cost of building the project. The LTC ratio is used in underwriting to help lenders assess the risk associated with a project before offering a construction loan on the project. The lower the LTC, the safer the loan is for the bank.

Loan-to-Value Ratio (LTV) – the full amount of money borrowed for the project in relation to the value of the property when completed. The LTV ratio is used in commercial loan underwriting.

Line of Credit – a revolving loan most typically provided for business working capital purposes.  Can be written on a demand basis or for a specified term.

Maturity Date – date that the outstanding loan principal, interest, and fees must be paid in full.

Origination Date – date a loan takes effect and is funded or disbursed.

Prime Rate – the interest rate that banks charge their best customers when lending them money. The U.S. Prime Rate, as published by The Wall Street Journal, is based on a survey of the prime rates of the 10 largest banks in the United States.

Principal – the amount of money that was borrowed, which decreases as the loan is repaid.

Promissory Note – legal and binding signed contract between the lender and the borrower which states that the borrower will repay the loan as agreed upon in the terms of the contract.

Secured loan – has collateral such as property or real estate pledged to it. If the loan enters default, the lender can seize the asset that was attached to the loan.  

Soft Costs – construction-related costs such as architect's fees, engineering reports and fees, appraisal fees, municipal government fees, and financial costs such as construction period interest and loan fees.

Underwriting – process of determining if a loan should be made, based on property cash flow, credit, and other factors.

Unsecured Loan – a loan written without a pledge of collateral.

Variable Interest Rate – a financing option where the interest rate on the loan can vary (“adjust”) based on a benchmark rate. The payments on a loan with variable interest rates can increase or decrease over time based on changes in the underlying interest rate. The benchmark rate and frequency of the loan’s rate changes will be specified in the loan agreement.

GLOSSARY A

" A" Loan or " A" Paper: a credit rating where the FICO score is 660 or above. There have been no late mortgage payments within a 12- month period. This is the best credit rating to have when entering into a new loan.

ARM: Adjustable Rate Mortgage; a m mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.

Abstract of Title: documents recording the ownership of property throughout time.

Acceleration: the right of the lender to demand payment on the outstanding balance of a loan.

Acceptance: the written approval of the buyer's offer by the seller.

Additional Principal Payment: money paid to the lender in addition to the established payment amount used directly against the loan principal to shorten the length of the loan.

Adjustable- Rate Mortgage ( ARM) : a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as adjustable mortgage loans ( AMLs) or variable- rate mortgages ( VRMs).

Adjustment Date: the actual date that the interest rate is changed for an ARM.

Adjustment Index: the published market index used to calculate the interest rate of an ARM at the time of origination or adjustment.

Adjustment Interval: the time between the interest rate change and the monthly payment for an ARM. The interval is usually every one, three or five years depending on the index.

Affidavit: a signed, sworn statement made by the buyer or seller regarding the truth of information provided.

Amenity: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural ( like location, woods, water) or man- made ( like a

swimming pool or garden).

American Society of Home Inspectors: the American Society of Home Inspectors is a professional association of independent home inspectors. Phone: ( 800) 743- 2744

Amortization: a payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest- only. The monthly amount is based on the schedule for the entire term or length of the loan.

Annual Mortgagor Statement: yearly statement to borrowers detailing the remaining principal and amounts paid for taxes and interest.

Annual Percentage Rate ( APR) : a measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a

good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.

Application: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

Application Fee: a fee charged by lenders to process a loan application.

Appraisal: a document from a professional that gives an estimate of a property's fair market value based on the sales of comparable homes in the area and the features of a property; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Appraisal Fee: fee charged by an appraiser to estimate the market value of a property.

Appraised Value: an estimation of the current market value of a property.

Appraiser: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appreciation: an increase in property value.

Arbitration: a legal method of resolving a dispute without going to court.

As- is Condition: the purchase or sale of a property in its existing condition without repairs.

Asking Price: a seller's stated price for a property.

Assessed Value: the value that a public official has placed on any asset ( used to determine taxes).

Assessments: the method of placing value on an asset for taxation purposes.

Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.

Assets: any item with measurable value.

Assumable Mortgage: when a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit

review of the new borrower and may charge a fee for the assumption. Some Mortgages contain a due- on- sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. An assumable mortgage can help you attract buyers if you sell your home.

Assumption Clause: a provision in the terms of a loan that allows the buyer to take legal responsibility for the mortgage from the seller.

Automated Underwriting: loan processing completed through a computer- based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer. 

Average Price: determining the cost of a home by totaling the cost of all houses sold in one area and dividing by the number of homes sold.

B

" B" Loan or " B" Paper: FICO scores from 620 - 659. Factors include two 30 day late

mortgage payments and two to three 30 day late installment loan payments in the last 12 months. No delinquencies over 60 days are allowed. Should be two to four years  since bankruptcy. Also referred to as Sub- Prim e.

Back End Ratio ( debt ratio) : a ratio that com pares the total of all m onthly debt paym ents ( m ortgage, real estate taxes and insurance, car loans, and other consum er loans) to gross m onthly incom e.

Back to Back Escrow : arrangem ents that an owner m akes to oversee the sale of one property and the purchase of another at the sam e t im e.

Balance Sheet: a financial statem ent that shows the assets, liabilit ies and net worth of an individual or com pany.

Balloon Loan or Mortgage: a m ortgage that typically offers low rates for an init ial period of t im e ( usually 5, 7, or 10) years; after that t im e period elapses, the balance is due or is

refinanced by the borrower.

Balloon Paym ent: the final lum p sum paym ent due at the end of a balloon m ortgage.

Bankruptcy: a federal law whereby a person's assets are turned over to a t rustee and used to pay off outstanding debts; this usually occurs when som eone owes m ore than they have the ability to repay.

Biw eekly Paym ent Mortgage: a m ortgage paid twice a m onth instead of once a m onth, reducing the am ount of interest to be paid on the loan.

Borrow er: a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan term s.

Bridge Loan: a short- term loan paid back relatively fast. Norm ally used until a long- term loan can be processed.

Broker: a licensed individual or firm that charges a fee to serve as the m ediator between the buyer and seller. Mortgage brokers are individuals in the business of arranging funding or

negotiating contracts for a client, but who does not loan the m oney. A real estate broker is som eone who helps find a house.

Building Code: based on agreed upon safety standards within a specific area, a building code is a regulation that determ ines the design, construction, and m aterials used in

building.

Budget: a detailed record of all incom e earned and spent during a specific period of t im e.

Buy Dow n: the seller pays an am ount to the lender so the lender provides a lower rate and lower paym ents m any t im es for an ARM. The seller m ay increase the sales price to cover the cost of the buy down.

C

" C" Loan or " C" Paper: FI CO scores typically from 580 to 619. Factors include three to four 30 day late m ortgage paym ents and four to six 30 day late installm ent loan paym ents or two to four 60 day late paym ents. Should be one to two years since bankruptcy. Also referred to as Sub - Prim e.

Callable Debt: a debt security whose issuer has the r ight to redeem the security at a specified price on or after a specified date, but prior to it s stated final m aturity.

Cap: a lim it , such as one placed on an adjustable rate m ortgage, on how m uch a m onthly paym ent or interest rate can increase or decrease, either at each adjustm ent period or during

the life of the m ortgage. Paym ent caps do not lim it the am ount of interest the lender is earning, so they m ay cause negative am ortization.

Capacity: The ability to m ake m ortgage paym ents on t im e, dependant on assets and the am ount of incom e each m onth after paying housing costs, debts and other obligations.

Capital Gain: the profit received based on the difference of the original purchase price and the total sale price.

Capital I m provem ents: property im provem ents that either will enhance the property value or will increase the useful life of the property.

Capital or Cash Reserves: an individual's savings, investm ents, or assets.

Cash- Out Refinance: when a borrower refinances a m ortgage at a higher principal am ount to get additional m oney. Usually this occurs when the property has appreciated in value. For

exam ple, if a hom e has a current value of $100,000 and an outstanding m ortgage of $60, 000, the owner could refinance $80,000 and have additional $20,000 in cash.

Cash Reserves: a cash am ount som et im es required of the buyer to be held in reserve in addition to the down paym ent and closing costs; the am ount is determ ined by the lender.

Casualty Protection: property insurance that covers any dam age to the hom e and personal property either inside or outside the hom e.

Certificate of Title: a docum ent provided by a qualified source, such as a t it le com pany, that shows the property legally belongs to the current owner; before the t it le is t ransferred at closing, it should be clear and free of all liens or other claim s.

Chapter 7 Bankruptcy: a bankruptcy that requires assets be liquidated in exchange for the cancellation of debt.

Chapter 1 3 Bankruptcy: this type of bankruptcy sets a paym ent plan between the borrower and the creditor m onitored by the court. The hom eowner can keep the property, but m ust

m ake paym ents according to the court's term s within a 3 to 5 year period.

Charge- Off: the portion of principal and interest due on a loan that is written off when deem ed to be uncollectible.

Clear Title: a property t it le that has no defects. Properties with clear t it les are m arketable for sale.

Closing: the final step in property purchase where the t it le is t ransferred from the seller to

the buyer. Closing occurs at a m eeting between the buyer, seller, settlem ent agent, and other agents. At the closing the seller receives paym ent for the property. Also known as settlem ent.

Closing Costs: fees for final property t ransfer not included in the price of the property. Typical closing costs include charges for the m ortgage loan such as origination fees, discount points, appraisal fee, survey, t it le insurance, legal fees, real estate professional fees, prepaym ent of taxes and insurance, and real estate t ransfer taxes. A com m on

estim ate of a Buyer's closing costs is 2 to 4 percent of the purchase price of the hom e. A com m on estim ate for Seller's closing costs is 3 to 9 percent.

Cloud On The Title: any condition which affects the clear t it le to real property.

Co- Borrow er: an additional person that is responsible for loan repaym ent and is listed on the t it le.

Co- Signed Account: an account signed by som eone in addition to the prim ary borrower, m aking both people responsible for the am ount borrowed.

Co- Signer: a person that signs a credit application with another person, agreeing to be equally responsible for the repaym ent of the loan.

Collateral: security in the form of m oney or property pledged for the paym ent of a loan. For exam ple, on a hom e loan, the hom e is the collateral and can be taken away from the

borrower if m ortgage paym ents are not m ade.

Collection Account: an unpaid debt referred to a collection agency to collect on the bad debt.

This type of account is reported to the credit bureau and will show on the borrower's credit report.

Com m ission: an am ount, usually a percentage of the property sales price that is collected by a real estate professional as a fee for negotiating the t ransaction. Traditionally the hom e seller pays the com m ission. The am ount of com m ission is determ ined by the real estate professional and the seller and can be as m uch as 6% of the sales price.

Com m on Stock: a security that provides voting r ights in a corporation and pays a dividend after preferred stock holders have been paid. This is the m ost com m on stock held within a com pany.

Com parative Market Analysis ( COMPS) : a property evaluation that determ ines property value by com paring sim ilar properties sold within the last year.

Com pensating Factors: factors that show the ability to repay a loan based on less t raditional criteria, such as em ploym ent, rent, and utilit y paym ent history.

Condom inium : a form of ownership in which individuals purchase and own a unit of housing in a m ult i- unit com plex. The owner also shares financial responsibility for com m on areas.

Conform ing loan: is a loan that does not exceed Fannie Mae's and Freddie Mac's loan lim it s. Freddie Mac and Fannie Mae loans are referred to as conform ing loans.

Consideration: an it em of value given in exchange for a prom ise or act.

Construction Loan: a short- term , to finance the cost of building a new hom e. The lender pays the builder based on m ilestones accom plished during the building process. For exam ple,

once a sub- contractor pours the foundation and it is approved by inspectors the lender will pay

for their service.

Contingency: a clause in a purchase contract outlining conditions that m ust be fulfilled before the contract is executed. Both, buyer or seller m ay include contingencies in a contract, but both parties m ust accept the contingency.

Conventional Loan: a private sector loan, one that is not guaranteed or insured by the

U. S. governm ent.

Conversion Clause: a provision in som e ARMs allowing it to change to a fixed- rate loan at som e point during the term . Usually conversions are allowed at the end of the first adjustm ent period. At the t im e of the conversion, the new fixed rate is generally set at one of the rates

then prevailing for fixed rate m ortgages. There m ay be additional cost for this clause.

Convertible ARM: an adjustable- rate m ortgage that provides the borrower the ability to convert to a fixed- rate within a specified t im e.

Cooperative ( Co- op) : residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

Cost of Funds I ndex ( COFI ) : an index used to determ ine interest rate changes for som e adjustable- rate m ortgages.

Counter Offer: a rejection to all or part of a purchase offer that negotiates different term s to reach an acceptable sales contract.

Covenants: legally enforceable term s that govern the use of property. These term s are

t ransferred with the property deed. Discrim inatory covenants are illegal and unenforceable. Also known as a condition, restriction, deed restriction or restrictive covenant.

Credit: an agreem ent that a person will borrow m oney and repay it to the lender over t im e.

Credit Bureau: an agency that provides financial inform at ion and paym ent history to lenders about potential borrowers. Also known as a National Credit Repository.

Credit Counseling: education on how to im prove bad credit and how to avoid having m ore debt than can be repaid.

Credit Enhancem ent: a m ethod used by a lender to reduce default of a loan by requiring collateral, m ortgage insurance, or other agreem ents.

Credit Grantor: the lender that provides a loan or credit.

Credit History: a record of an individual that list s all debts and the paym ent history for each.

The report that is generated from the history is called a credit report. Lenders use this inform at ion to gauge a potential borrower's ability to repay a loan.

Credit Loss Ratio: the ratio of credit- related losses to the dollar am ount of MBS outstanding and total m ortgages owned by the corporation.

Credit Related Expenses: foreclosed property expenses plus the provision for losses.

Credit Related Losses: foreclosed property expenses com bined with charge- offs.

Credit Repair Com panies: Private, for- profit businesses that claim to offer consum ers credit

and debt repaym ent difficulties assistance with their credit problem s and a bad credit report.

Credit Report: a report generated by the credit bureau that contains the borrower's credit history for the past seven years. Lenders use this inform at ion to determ ine if a loan will be granted.

Credit Risk: a term used to describe the possibility of default on a loan by a borrower.

Credit Score: a score calculated by using a person's credit report to determ ine the likelihood of a loan being repaid on t im e. Scores range from about 360 - 840: a lower score m eaning a person is a higher r isk, while a higher score m eans that there is less r isk.

Credit Union: a non- profit financial institution federally regulated and owned by the m em bers or people who use their services. Credit unions serve groups that hold a com m on interest and you have to becom e a m em ber to use the available services.

Creditor: the lending institution providing a loan or credit.

Creditw orthiness: the way a lender m easures the ability of a person to qualify and repay a loan.

D

Debtor: The person or entity that borrows m oney. The term debtor m ay be used interchangeably with the term borrower.

Debt- to- I ncom e Ratio: a com parison or ratio of gross incom e to housing and non- housing expenses; With the FHA, the- m onthly m ortgage paym ent should be no m ore than 29% of

m onthly gross incom e ( before taxes) and the m ortgage paym ent com bined with non- housing debts should not exceed 41% of incom e.

Debt Security: a security that represents a loan from an investor to an issuer. The issuer in turn agrees to pay interest in addition to the principal am ount borrowed.

Deductible: the am ount of cash paym ent that is m ade by the insured ( the hom eowner) to cover a portion of a dam age or loss. Som et im es also called " out- of- pocket expenses." For

exam ple, out of a total dam age claim of $1,000, the hom eowner m ight pay a $250 deductible toward the loss, while the insurance com pany pays $750 toward the loss. Typically, the higher the deductible, the lower the cost of the policy.

Deed: a docum ent that legally t ransfers ownership of property from one person to another. The deed is recorded on public record with the property description and the owner's signature. Also known as the t it le.

Deed- in- Lieu: to avoid foreclosure ( " in lieu" of foreclosure), a deed is given to the lender to

fulfill the obligation to repay the debt; this process does not allow the borrower to rem ain in the house but helps avoid the costs, t im e, and effort associated with foreclosure.

Default: the inability to m ake t im ely m onthly m ortgage paym ents or otherwise com ply with

m ortgage term s. A loan is considered in default when paym ent has not been paid after 60 to 90 days. Once in default the lender can exercise legal r ights defined in the contract to begin

foreclosure proceedings Delinquency: failure of a borrower to m ake t im ely m ortgage paym ents under a loan agreem ent. Generally after fift een days a late fee m ay be assessed.

Deposit ( Earnest Money) : m oney put down by a potential buyer to show that they are

serious about purchasing the hom e; it becom es part of the down paym ent if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. During the contingency period the m oney m ay be returned to the buyer if the contingencies are not m et to the buyer's satisfaction.

Depreciation: a decrease in the value or price of a property due to changes in m arket conditions, wear and tear on the property, or other factors.

Derivative: a contract between two or m ore parties where the security is dependent on the price of another investm ent.

Disclosures: the release of relevant inform at ion about a property that m ay influence the final sale, especially if it represents defects or problem s. " Full disclosure" usually refers to the responsibility of the seller to voluntarily provide all known inform ation about the

property. Som e disclosures m ay be required by law, such as the federal requirem ent to warn of potential lead- based paint hazards in pre- 1978 housing. A seller found to have knowingly lied about a defect m ay face legal penalties.

Discount Point: norm ally paid at closing and generally calculated to be equivalent to 1% of the total loan am ount, discount points are paid to reduce the interest rate on a loan. I n an ARM

with an init ial rate discount, the lender gives up a num ber of percentage points in interest to give you a lower rate and lower paym ents for part of the m ortgage term ( usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index

rate.

Dow n Paym ent: the portion of a hom e's purchase price that is paid in cash and is not part of the m ortgage loan. This am ount varies based on the loan type, but is determ ined by taking the difference of the sale price and the actual m ortgage loan am ount. Mortgage insurance is

required when a down paym ent less than 20 percent is m ade.

Docum ent Recording: after closing on a loan, certain docum ents are filed and m ade public record. Discharges for the prior m ortgage holder are filed first . Then the deed is filed with the new owner's and m ortgage com pany's nam es.

Due on Sale Clause: a provision of a loan allowing the lender to dem and full repaym ent of the loan if the property is sold.

Duration: the num ber of years it will take to receive the present value of all future paym ents on a security to include both principal and interest.

E

Earnest Money ( Deposit) : m oney put down by a potential buyer to show that they are serious about purchasing the hom e; it becom es part of the down paym ent if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. During the contingency period the m oney m ay be returned to the buyer if the contingencies are not m et to the buyer's satisfaction.

Earnings Per Share ( EPS) : a corporation's profit that is divided am ong each share of com m on stock. I t is determ ined by taking the net earnings divided by the num ber of outstanding com m on stocks held. This is a way that a com pany reports profitability.

Easem ents: the legal r ights that give som eone other than the owner access to use property for a specific purpose. Easem ents m ay affect property values and are som et im es a part of the deed.

EEM: Energy Efficient Mortgage; an FHA program that helps hom ebuyers save m oney on

utilit y bills by enabling them to finance the cost of adding energy efficiency features to a new or existing hom e as part of the hom e purchase

Em inent Dom ain: when a governm ent takes private property for public use. The owner

receives paym ent for it s fair m arket value. The property can then proceed to condem nation proceedings.

Encroachm ents: a structure that extends over the legal property line on to another

individual's property. The property surveyor will note any encroachm ent on the lot survey done before property t ransfer. The person who owns the st ructure will be asked to rem ove it to prevent future problem s.

Encum brance: anything that affects t it le to a property, such as loans, leases, easem ents, or restrictions.

Equal Credit Opportunity Act ( ECOA) : a federal law requiring lenders to m ake credit

available equally without discrim ination based on race, color, religion, national origin, age, sex, m arital status, or receipt of incom e from public assistance program s.

Equity: an owner's financial interest in a property; calculated by subtracting the am ount st ill owed on the m ortgage loon( s) from the fair m arket value of the property.

Escape Clause: a provision in a purchase contract that allows either party to cancel part or the entire contract if the other does not respond to changes to the sale within a set period. The

m ost com m on use of the escape clause is if the buyer m akes the purchase offer contingent on the sale of another house.

Escrow : funds held in an account to be used by the lender to pay for hom e insurance and property taxes. The funds m ay also be held by a third party until contractual conditions are m et and then paid out.

Escrow Account: a separate account into which the lender puts a portion of each m onthly m ortgage paym ent; an escrow account provides the funds needed for such expenses as

property taxes, hom eowners insurance, m ortgage insurance, etc.

Estate: the ownership interest of a person in real property. The sum total of all property, real and personal, owned by a person.

Exclusive Listing: a written contract giving a real estate agent the exclusive r ight to sell a property for a specific t im efram e.

F

FI CO Score: FI CO is an abbreviation for Fair I saac Corporation and refers to a person's credit score based on credit history. Lenders and credit card com panies use the num ber to decide if the person is likely to pay his or her bills. A credit score is evaluated using inform at ion from

the three m ajor credit bureaus and is usually between 300 and 850.

FSBO ( For Sale by Ow ner) : a hom e that is offered for sale by the owner without the benefit of a real estate professional.

Fair Credit Reporting Act: federal act to ensure that credit bureaus are fair and accurate protecting the individual's privacy r ights enacted in 1971 and revised in October 1997.

Fair Housing Act: a law that prohibits discrim ination in all facets of the hom e buying process

on the basis of race, color, national origin, religion, sex, fam ilial status, or disability.

Fair Market Value: : the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with com plete knowledge of the situation.

Fam ilial Status: HUD uses this term to describe a single person, a pregnant wom an or a household with children under 18 liv ing with parents or legal custodians who m ight

experience housing discrim ination.

Fannie Mae: Federal National Mortgage Association ( FNMA); a federally- chartered enterprise owned by private stockholders that purchases residential m ortgages and converts them into securities for sale to investors; by purchasing m ortgages, Fannie Mae supplies funds that

lenders m ay loan to potential hom ebuyers. Also known as a Governm ent Sponsored Enterprise ( GSE).

FHA: Federal Housing Adm inistration; established in 1934 to advance hom eownership opportunities for all Am ericans; assists hom ebuyers by providing m ortgage insurance to lenders to cover m ost losses that m ay occur when a borrower defaults; this encourages lenders to m ake loans to borrowers who m ight not qualify for conventional m ortgages.

First Mortgage: the m ortgage with first priority if the loan is not paid.

Fixed Expenses: paym ents that do not vary from m onth to m onth.

Fixed- Rate Mortgage: a m ortgage with paym ents that rem ain the sam e throughout the life of the loan because the interest rate and other term s are fixed and do not change.

Fixture: personal property perm anently attached to real estate or real property that becom es a part of the real estate.

Float: the act of allowing an interest rate and discount points to fluctuate with changes in the m arket.

Flood I nsurance: insurance that protects hom eowners against losses from a flood; if a hom e is located in a flood plain, the lender will require flood insurance before approving a loan.

Forbearance: a lender m ay decide not to take legal action when a borrower is late in m aking a paym ent. Usually this occurs when a borrower sets up a plan that both sides agree will bring overdue m ortgage paym ents up to date.

Foreclosure: a legal process in which m ortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.

Freddie Mac: Federal Hom e Loan Mortgage Corporation ( FHLM); a federally chartered corporation that purchases residential m ortgages, securitizes them , and sells them to investors; this provides lenders with funds for new hom ebuyers. Also known as a

Governm ent Sponsored Enterprise ( GSE).

Front End Ratio: a percentage com paring a borrower's total m onthly cost to buy a house

( m ortgage principal and interest, insurance, and real estate taxes) to m onthly incom e before deductions.

G

GSE: abbreviation for governm ent sponsored enterprises: a collection of financial services corporations form ed by the United States Congress to reduce interest rates for farm ers and hom eowners. Exam ples include Fannie Mae and Freddie Mac.

Ginnie Mae: Governm ent National Mortgage Association ( GNMA); a governm ent- owned

corporation overseen by the U. S. Departm ent of Housing and Urban Developm ent, Ginnie Mae pools FHA- insured and VA- guaranteed loans to back securities for private investm ent; as With Fannie Mae and Freddie Mac, the investm ent incom e provides funding that m ay then be lent to eligible borrowers by lenders.

Global Debt Facility: designed to allow investors all over the world to purchase debt ( loans) of U. S. dollar and foreign currency through a variety of clearing system s.

Good Faith Estim ate: an estim ate of all closing fees including pre- paid and escrow it em s as well as lender charges; m ust be given to the borrower within three days after subm ission of a loan application.

Graduated Paym ent Mortgages: m ortgages that begin with lower m onthly paym ents that get slowly larger over a period of years, eventually reaching a fixed level and rem aining there for

the life of the loan. Graduated paym ent loans m ay be good if you expect your annual incom e to increase.

Grantee: an individual to whom an interest in real property is conveyed.

Grantor: an individual conveying an interest in real property.

Gross I ncom e: m oney earned before taxes and other deductions. Som et im es it m ay include incom e from self- em ploym ent, rental property, alim ony, child support, public assistance paym ents, and retirem ent benefits.

Guaranty Fee: paym ent to FannieMae from a lender for the assurance of t im ely principal and interest paym ents to MBS ( Mortgage Backed Security) security holders.

H

HECM ( Reverse Mortgage) : the reverse m ortgage is used by senior hom eowners age 62 and older to convert the equity in their hom e into m onthly stream s of incom e and/ or a line of credit to be repaid when they no longer occupy the hom e. A lending institution such as a

m ortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, com m only known as HECM.

Hazard I nsurance: protection against a specific loss, such as fire, wind etc., over a period of t im e that is secured by the paym ent of a regularly scheduled prem ium .

HELP: Hom ebuyer Education Learning Program ; an educational program from the FHA that counsels people about the hom e buying process; HELP covers topics like budgeting, finding a hom e, getting a loan, and hom e m aintenance; in m ost cases, com pletion of the program m ay entitle the hom ebuyer to a reduced init ial FHA m ortgage insurance prem ium - from 2. 25% to

1.75% of the hom e purchase price.

Hom e Equity Line of Credit: a m ortgage loan, usually in second m ortgage, allowing a borrower to obtain cash against the equity of a hom e, up to a predeterm ined am ount.

Hom e Equity Loan: a loan backed by the value of a hom e ( real estate). I f the borrower

defaults or does not pay the loan, the lender has som e r ights to the property. The borrower can usually claim a hom e equity loan as a tax deduction. Hom e I nspection: an exam ination of the structure and m echanical system s to determ ine a hom e's quality, soundness and safety; m akes

the potential hom ebuyer aware of any repairs that m ay be needed. The hom ebuyer generally pays inspection fees.

Hom e W arranty: offers protection for m echanical system s and attached appliances against unexpected repairs not covered by hom eowner's insurance; coverage extends over a specific t im e period and does not cover the hom e's st ructure.

Hom eow ner' s I nsurance: an insurance policy, also called hazard insurance, that com bines protection against dam age to a dwelling and its contents including fire, storm s or other

dam ages with protection against claim s of negligence or inappropriate action that result in som eone's injury or property dam age. Most lenders require hom eowners insurance and m ay

escrow the cost . Flood insurance is generally not included in standard policies and m ust be purchased separately.

Hom eow nership Education Classes: classes that st ress the need to develop a strong credit history and offer inform at ion about how to get a m ortgage approved, qualify for a loan, choose an affordable hom e, go through financing and closing processes, and avoid m ortgage problem s that cause people to lose their hom es.

Hom estead Credit: property tax credit program , offered by som e state governm ents, that provides reductions in property taxes to eligible households.

Housing Counseling Agency: provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and hom e buying.

HUD: the U. S. Departm ent of Housing and Urban Developm ent; established in 1965, HUD

works to create a decent hom e and suitable living environm ent for all Am ericans; it does this by addressing housing needs, im proving and developing Am erican com m unities, and

enforcing fair housing laws.

HUD 1 Statem ent: also known as the " settlem ent sheet," or " closing statem ent" it item izes all closing costs; m ust be given to the borrower at or before closing. I tem s that appear on the

statem ent include real estate com m issions, loan fees, points, and escrow am ounts.

HVAC: Heating, Ventilation and Air Conditioning; a hom e's heating and cooling system .

I

I ndem nification: to secure against any loss or dam age, com pensate or give security for

reim bursem ent for loss or dam age incurred. A hom eowner should negotiate for inclusion of an indem nification provision in a contract with a general contractor or for a separate indem nity agreem ent protecting the hom eowner from harm , loss or dam age caused by actions or

om issions of the general ( and all sub) contractor.

I ndex: the m easure of interest rate changes that the lender uses to decide how m uch the

interest rate of an ARM will change over t im e. No one can be sure when an index rate will go up or down. I f a lender bases interest rate adjustm ents on the average value of an index over

t im e, your interest rate would not be as volatile. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.

I nflation: the num ber of dollars in circulation exceeds the am ount of goods and services available for purchase; inflat ion results in a decrease in the dollar's value.

I nflation Coverage: endorsem ent to a hom eowner's policy that autom at ically adjusts the am ount of insurance to com pensate for inflationary r ises in the hom e's value. This type of coverage does not adjust for increases in the hom e's value due to im provem ents.

I nquiry: a credit report request. Each t im e a credit application is com pleted or m ore credit is requested counts as an inquiry. A large num ber of inquiries on a credit report can som et im es m ake a credit score lower.

I nterest: a fee charged for the use of borrowing m oney.

I nterest Rate: the am ount of interest charged on a m onthly loan paym ent, expressed as a percentage.

I nterest Rate Sw ap: a t ransaction between two parties where each agrees to exchange paym ents t ied to different interest rates for a specified period of t im e, generally based on a notional principal am ount.

I nterm ediate Term Mortgage: a m ortgage loan with a contractual m aturity from the t im e of purchase equal to or less than 20 years.

I nsurance: protection against a specific loss, such as fire, wind etc., over a period of t im e that is secured by the paym ent of a regularly scheduled prem ium .

J

Joint Tenancy ( w ith Rights of Survivorship) : two or m ore owners share equal ownership and r ights to the property. I f a j oint owner dies, his or her share of the property passes to the other owners, without probate. I n joint tenancy, ownership of the property cannot be willed to som eone who is not a joint owner.

Judgm ent: a legal decision; when requiring debt repaym ent, a judgm ent m ay include a property lien that secures the creditor's claim by providing a collateral source.

Jum bo Loan: or non- conform ing loan, is a loan that exceeds Fannie Mae's and Freddie Mac's loan lim it s. Freddie Mac and Fannie Mae loans are referred to as conform ing loans.

K L

Late Paym ent Charges: the penalty the hom eowner m ust pay when a m ortgage paym ent is m ade after the due date grace period.

Lease: a written agreem ent between a property owner and a tenant ( resident) that st ipulates the paym ent and conditions under which the tenant m ay occupy a hom e or apartm ent and states a specified period of t im e.

Lease Purchase ( Lease Option) : assists low to m oderate incom e hom ebuyers in purchasing a hom e by allowing them to lease a hom e with an option to buy; the rent paym ent is m ade up of the m onthly rental paym ent plus an additional am ount that is credited to an account for use as a down paym ent.

Lender: A term referring to an person or com pany that m akes loans for real estate purchases. Som et im es referred to as a loan officer or lender.

Lender Option Com m itm ents: an agreem ent giving a lender the option to deliver loans or securities by a certain date at agreed upon term s.

Liabilities: a person's financial obligations such as long- term / short- term debt, and other financial obligations to be paid.

Liability I nsurance: insurance coverage that protects against claim s alleging a property owner's negligence or action resulted in bodily injury or dam age to another person. I t is norm ally included in hom eowner's insurance policies.

Lien: a legal claim against property that m ust be satisfied when the property is sold. A claim of m oney against a property, wherein the value of the property is used as security in

repaym ent of a debt. Exam ples include a m echanic's lien, which m ight be for the unpaid cost of building supplies, or a tax lien for unpaid property taxes. A lien is a defect on the t it le and needs to be settled before t ransfer of ownership. A lien release is a written report of the

settlem ent of a lien and is recorded in the public record as evidence of paym ent.

Lien W aiver: A docum ent that releases a consum er ( hom eowner) from any further obligation for paym ent of a debt once it has been paid in full. Lien waivers typically are used by

hom eowners who hire a contractor to provide work and m aterials to prevent any subcontractors or suppliers of m aterials from filing a lien against the hom eowner for nonpaym ent.

Life Cap: a lim it on the range interest rates can increase or decrease over the life of an adjustable- rate m ortgage ( ARM).

Line of Credit: an agreem ent by a financial institution such as a bank to extend credit up to a certain am ount for a certain t im e to a specified borrower.

Liquid Asset: a cash asset or an asset that is easily converted into cash.

Listing Agreem ent: a contract between a seller and a real estate professional to m arket and sell a hom e. A list ing agreem ent obligates the real estate professional ( or his or her agent) to seek qualified buyers, report all purchase offers and help negotiate the highest possible price and m ost favorable term s for the property seller.

Loan: m oney borrowed that is usually repaid with interest.

Loan Acceleration: an acceleration clause in a loan docum ent is a statem ent in a

m ortgage that gives the lender the r ight to dem and paym ent of the entire outstanding balance if a m onthly paym ent is m issed.

Loan Fraud: purposely giving incorrect inform at ion on a loan application in order to better qualify for a loan; m ay result in civil liabilit y or crim inal penalties.

Loan Officer: a representative of a lending or m ortgage com pany who is responsible for solicit ing hom ebuyers, qualifying and processing of loans. They m ay also be called lender, loan representative, account executive or loan rep.

Loan Origination Fee: a charge by the lender to cover the adm inistrative costs of m aking the m ortgage. This charge is paid at the closing and varies with the lender and type of loan. A loan origination fee of 1 to 2 percent of the m ortgage am ount is com m on.

Loan Servicer: the com pany that collects m onthly m ortgage paym ents and disperses

property taxes and insurance paym ents. Loan servicers also m onitor nonperform ing loans, contact delinquent borrowers, and notify insurers and investors of potential problem s. Loan servicers m ay be the lender or a specialized com pany that just handles loan servicing under contract with the lender or the investor who owns the loan.

Loan to Value ( LTV) Ratio: a percentage calculated by dividing the am ount borrowed by the price or appraised value of the hom e to be purchased; the higher the LTV, the less cash a

borrower is required to pay as down paym ent.

Lock- I n: since interest rates can change frequently, m any lenders offer an interest rate lock- in that guarantees a specific interest rate if the loan is closed within a specific t im e.

Lock- in Period: the length of t im e that the lender has guaranteed a specific interest rate to a borrower.

Loss Mitigation: a process to avoid foreclosure; the lender t r ies to help a borrower who has been unable to m ake loan paym ents and is in danger of defaulting on his or her loan

M

Mandatory Delivery Com m itm ent: an agreem ent that a lender will deliver loans or securities by a certain date at agreed- upon term s.

Margin: the num ber of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustm ent.

Market Value: the am ount a willing buyer would pay a willing seller for a hom e. An appraised value is an estim ate of the current fair m arket value.

Maturity: the date when the principal balance of a loan becom es due and payable.

Median Price: the price of the house that falls in the m iddle of the total num ber of hom es for sale in that area.

Medium Term Notes: unsecured general obligations of Fannie Mae with m aturities of one day or m ore and with principal and interest payable in U. S. dollars.

Merged Credit Report: raw data pulled from two or m ore of the m ajor credit- reporting firm s.

Mitigation: term usually used to refer to various changes or im provem ents m ade in a hom e; for instance, to reduce the average level of radon.

Modification: when a lender agrees to m odify the term s of a m ortgage without refinancing the loan.

Mortgage: a lien on the property that secures the Prom ise to repay a loan. A security

agreem ent between the lender and the buyer in which the property is collateral for the loan. The m ortgage gives the lender the r ight to collect paym ent on the loan and to foreclose if the loan obligations are not m et.

Mortgage Acceleration Clause: a clause allowing a lender, under certain circum stances, dem and the entire balance of a loan is repaid in a lum p sum . The acceleration clause is usually t r iggered if the hom e is sold, t it le to the property is changed, the loan is refinanced or the

borrower defaults on a scheduled paym ent.

Mortgage- Backed Security ( MBS) : a Fannie Mae security that represents an undivided interest in a group of m ortgages. Principal and interest paym ents from the individual

m ortgage loans are grouped and paid out to the MBS holders.

Mortgage Banker: a com pany that originates loans and resells them to secondary m ortgage lenders like Fannie Mae or Freddie Mac.

Mortgage Broker: a firm that originates and processes loans for a num ber of lenders.

Mortgage Life and Disability I nsurance: term life insurance bought by borrowers to pay off a m ortgage in the event of death or m ake m onthly paym ents in the case of disability. The

am ount of coverage decreases as the principal balance declines. There are m any different term s of coverage determ ining am ounts of paym ents and when paym ents begin and end.

Mortgage I nsurance: a policy that protects lenders against som e or m ost of the losses that can occur when a borrower defaults on a m ortgage loan; m ortgage insurance is required

prim arily for borrowers with a down paym ent of less than 20% of the hom e's purchase price.

I nsurance purchased by the buyer to protect the lender in the event of default. Typically

purchased for loans with less than 20 percent down paym ent. The cost of m ortgage insurance is usually added to the m onthly paym ent. Mortgage insurance is m aintained on conventional loans until the outstanding am ount of the loan is less than 80 percent of the value of the house or for a set period of t im e ( 7 years is com m on). Mortgage insurance also is available through a governm ent agency, such as the Federal Housing Adm inistration ( FHA) or through com panies

( Private Mortgage I nsurance or PMI ) .

Mortgage I nsurance Prem ium ( MI P) : a m onthly paym ent - usually part of the m ortgage paym ent - paid by a borrower for m ortgage insurance.

Mortgage I nterest Deduction: the interest cost of a m ortgage, which is a tax - deductible expense. The interest reduces the taxable incom e of taxpayers.

Mortgage Modification: a loss m it igation option that allows a borrower to refinance and/ or extend the term of the m ortgage loan and thus reduce the m onthly paym ents.

Mortgage Note: a legal docum ent obligating a borrower to repay a loan at a stated interest

rate during a specified period; the agreem ent is secured by a m ortgage that is recorded in the public records along with the deed.

Mortgage Qualifying Ratio: Used to calculate the m axim um am ount of funds that an

individual t raditionally m ay be able to afford. A typical m ortgage qualifying ratio is 28: 36.

Mortgage Score: a score based on a com bination of inform at ion about the borrower that is obtained from the loan application, the credit report, and property value inform at ion. The score is a com prehensive analysis of the borrower's ability to repay a m ortgage loan and m anage

credit.

Mortgagee: the lender in a m ortgage agreem ent. Mortgagor - The borrower in a m ortgage agreem ent.

Mortgagor: the borrower in a m ortgage agreem ent

Multifam ily Housing: a building with m ore than four residential rental units.

Multiple Listing Service ( MLS) : within the Metro Colum bus area, Realtors subm it list ings and agree to attem pt to sell all properties in the MLS. The MLS is a service of the local Colum bus Board of Realtors® . The local MLS has a protocol for updating list ings and sharing com m issions. The MLS offers the advantage of m ore t im ely inform at ion, availability, and access to houses and other types of property on the m arket.

N

National Credit Repositories: currently, there are three com panies that m aintain national credit - reporting databases. These are Equifax, Experian, and Trans Union, referred to as Credit Bureaus.

N egative Am ortization: am ortization m eans that m onthly paym ents are large enough to pay the interest and reduce the principal on your m ortgage. Negative am ortization occurs when the m onthly paym ents do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This m eans that even after m aking m any paym ents, you could owe m ore than you did at the beginning of the loan. Negative am ortization can occur

when an ARM has a paym ent cap that results in m onthly paym ents not high enough to cover the interest due.

Net I ncom e: Your take- hom e pay, the am ount of m oney that you receive in your paycheck after taxes and deductions.

No Cash Out Refinance: a refinance of an existing loan only for the am ount rem aining on the m ortgage. The borrower does not get any cash against the equity of the hom e. Also called a

" rate and term refinance."

No Cost Loan: there are m any variations of a no cost loan. Generally, it is a loan that does not charge for it em s such as t it le insurance, escrow fees, settlem ent fees, appraisal, recording fees or notary fees. I t m ay also offer no points. This lessens the need for upfront cash during the

buying process however no cost loans have a higher interest rate.

N onperform ing Asset: an asset such as a m ortgage that is not currently accruing interest or which interest is not being paid.

N ote: a legal docum ent obligating a borrower to repay a m ortgage loan at a stated interest rate over a specified period of t im e.

Note Rate: the interest rate stated on a m ortgage note.

Notice of Default: a form al written notice to a borrower that there is a default on a loan and that legal action is possible.

Notional Principal Am ount: the proposed am ount which interest rate swap paym ents are based but generally not paid or received by either party.

Non- Conform ing loan: is a loan that exceeds Fannie Mae's and Freddie Mac's loan lim it s. Freddie Mac and Fannie Mae loans are referred to as conform ing loans.

N otary Public: a person who serves as a public official and certifies the authenticity of required signatures on a docum ent by signing and stam ping the docum ent.

O

Offer: indication by a potential buyer of a willingness to purchase a hom e at a specific price; generally put forth in writing.

Original Principal Balance: the total principal owed on a m ortgage prior to any paym ents being m ade.

Origination: the process of preparing, subm it t ing, and evaluating a loan application; generally includes a credit check, verification of em ploym ent, and a property appraisal.

Origination Fee: the charge for originating a loan; is usually calculated in the form of points and paid at closing. One point equals one percent of the loan am ount. On a

conventional loan, the loan origination fee is the num ber of points a borrower pays.

Ow ner Financing: a hom e purchase where the seller provides all or part of the financing,

acting as a lender.

Ow nership: ownership is docum ented by the deed to a property. The type or form of ownership is im portant if there is a change in the status of the owners or if the property changes ownership.

Ow ner' s Policy: the insurance policy that protects the buyer from t it le defects.

P

PI TI : Principal, I nterest, Taxes, and I nsurance: the four elem ents of a m onthly m ortgage paym ent; paym ents of principal and interest go directly towards repaying the loan while the

portion that covers taxes and insurance ( hom eowner's and m ortgage, if applicable) goes into an escrow account to cover the fees when they are due.

PI TI Reserves: a cash am ount that a borrower m ust have on hand after m aking a down paym ent and paying all closing costs for the purchase of a hom e. The principal, interest,

taxes, and insurance ( PI TI ) reserves m ust equal the am ount that the borrower would have to pay for PI TI for a predefined num ber of m onths.

PMI : Private Mortgage I nsurance; privately- owned com panies that offer standard and special affordable m ortgage insurance program s for qualified borrowers with down paym ents of less than 20% of a purchase price.

Partial Claim : a loss m it igation option offered by the FHA that allows a borrower, with help from a lender, to get an interest- free loan from HUD to bring their m ortgage paym ents up to date.

Partial Paym ent: a payment that is less than the total am ount owed on a m onthly

m ortgage paym ent. Norm ally, lenders do not accept partial paym ents. The lender m ay m ake exceptions during t im es of difficulty. Contact your lender prior to the due date if a partial paym ent is needed.

Paym ent Cap: a lim it on how m uch an ARM's paym ent m ay increase, regardless of how m uch the interest rate increases.

Paym ent Change Date: the date when a new m onthly paym ent am ount takes effect on an adjustable- rate m ortgage ( ARM) or a graduated- paym ent m ortgage ( GPM). Generally, the

paym ent change date occurs in the m onth im m ediately after the interest rate adjustm ent date.

Paym ent Due Date: Contract language specifying when paym ents are due on m oney

borrowed. The due date is always indicated and m eans that the paym ent m ust be received on or before the specified date. Grace periods prior to assessing a late fee or additional interest do not elim inate the responsibility of m aking paym ents on t im e.

Perils: for hom eowner's insurance, an event that can dam age the property. Hom eowner's

insurance m ay cover the property for a wide variety of perils caused by accidents, nature, or people.

Personal Property: any property that is not real property or attached to real property. For

exam ple furniture is not attached however a new light fixture would be considered attached and part of the real property.

Planned Unit Developm ent ( PUD) : a developm ent that is planned, and constructed as one entity. Generally, there are com m on features in the hom es or lots governed by

covenants attached to the deed. Most planned developm ents have com m on land and

facilit ies owned and m anaged by the owner's or neighborhood association. Hom eowners usually are required to participate in the association via a paym ent of annual dues.

Points: a point is equal to one percent of the principal am ount of your m ortgage. For exam ple, if you get a m ortgage for $95,000, one point m eans you pay $950 to the lender. Lenders

frequently charge points in both fixed- rate and adjustable- rate m ortgages in order to increase the yield on the m ortgage and to cover loan closing costs. These points usually are collected at closing and m ay be paid by the borrower or the hom e seller, or m ay be split between them .

Pow er of Attorney: a legal docum ent that authorizes another person to act on your behalf. A power of attorney can grant com plete authority or can be lim it ed to certain acts or certain

periods of t im e or both.

Pre- Approval: a lender com m it s to lend to a potential borrower a fixed loan am ount based on a com pleted loan application, credit reports, debt, savings and has been reviewed by an

underwriter. The com m itm ent rem ains as long as the borrower st ill m eets the qualification requirem ents at the t im e of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.

Predatory Lending: abusive lending practices that include a m ortgage loan to som eone who does not have the ability to repay. I t also pertains to repeated refinancing of a loan charging high interest and fees each t im e.

Predictive Variables: The variables that are part of the form ula com prising elem ents of a credit- scoring m odel. These variables are used to predict a borrower's future credit

perform ance.

Preferred Stock: stock that takes priority over com m on stock with regard to dividends and liquidation r ights. Preferred stockholders typically have no voting r ights.

Pre- foreclosure Sale: a procedure in which the borrower is allowed to sell a property for an am ount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the

borrower's debt.

Prepaym ent: any am ount paid to reduce the principal balance of a loan before the due date or paym ent in full of a m ortgage. This can occur with the sale of the property, the pay off the loan in full, or a foreclosure. I n each case, full paym ent occurs before the loan has been fully am ortized.

Prepaym ent Penalty: a provision in som e loans that charge a fee to a borrower who pays off a loan before it is due.

Pre- Foreclosure sale: allows a defaulting borrower to sell the m ortgaged property to satisfy the loan and avoid foreclosure.

Pre- Qualify: a lender inform ally determ ines the m axim um am ount an individual is eligible to borrow. This is not a guaranty of a loan.

Prem ium : an am ount paid on a regular schedule by a policyholder that m aintains insurance coverage.

Prepaym ent: paym ent of the m ortgage loan before the scheduled due date; m ay be Subject to a prepaym ent penalty.

Prepaym ent Penalty: a fee charged to a hom eowner who pays one or m ore m onthly paym ents before the due date. I t can also apply to principal reduction paym ents.

Prepaym ent Penalty Mortgage ( PPM) : a type of m ortgage that requires the borrower to pay a penalty for prepaym ent, partial paym ent of principal or for repaying the entire loan

within a certain t im e period. A partial paym ent is generally defined as an am ount exceeding 20% of the original principal balance.

Price Range: the high and low am ount a buyer is willing to pay for a hom e.

Prim e Rate: the interest rate that banks charge to preferred custom ers. Changes in the prim e rate are publicized in the business m edia. Prim e rate can be used as the basis for adjustable

rate m ortgages ( ARMs) or hom e equity lines of credit. The prim e rate also affects the current interest rates being offered at a particular point in t im e on fixed m ortgages. Changes in the prim e rate do not affect the interest on a fixed m ortgage.

Principal: the am ount of m oney borrowed to buy a house or the am ount of the loan that has not been paid back to the lender. This does not include the interest paid to borrow that

m oney. The principal balance is the am ount owed on a loan at any given t im e. I t is the original loan am ount m inus the total repaym ents of principal m ade.

Principal, I nterest, Taxes, and I nsurance ( PI TI ) : the four elem ents of a m onthly m ortgage paym ent; paym ents of principal and interest go directly towards repaying the loan while the

portion that covers taxes and insurance ( hom eowner's and m ortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Private Mortgage I nsurance ( PMI ) : insurance purchased by a buyer to protect the lender in the event of default. The cost of m ortgage insurance is usually added to the m onthly

paym ent. Mortgage insurance is generally m aintained until over 20 Percent of the outstanding am ount of the loan is paid or for a set period of t im e, seven years is norm al. Mortgage

insurance m ay be available through a governm ent agency, such as the Federal Housing Adm inistration ( FHA) or the Veterans Adm inistration ( VA), or through private m ortgage insurance com panies ( PMI ) .

Prom issory N ote: a written prom ise to repay a specified am ount over a specified period of t im e.

Property ( Fixture and N on- Fixture) : in a real estate contract, the property is the land

within the legally described boundaries and all perm anent structures and fixtures. Ownership of the property confers the legal r ight to use the property as allowed within the law and

within the restrictions of zoning or easem ents. Fixture property refers to those it em s

perm anently attached to the st ructure, such as carpeting or a ceiling fan, which t ransfers with the property.

Property Tax: a tax charged by local governm ent and used to fund m unicipal services such as schools, police, or st reet m aintenance. The am ount of property tax is determ ined locally by a

form ula, usually based on a percent per $1,000 of assessed value of the property.

Property Tax Deduction: the U. S. tax code allows hom eowners to deduct the am ount they have paid in property taxes from there total incom e.

Public Record I nform ation: Court records of events that are a m atter of public interest such as credit, bankruptcy, foreclosure and tax liens. The presence of public record

inform at ion on a credit report is regarded negatively by creditors.

Punch List: a list of it em s that have not been com pleted at the t im e of the final walk through of a newly constructed hom e.

Purchase Offer: A detailed, written docum ent that m akes an offer to purchase a property, and that m ay be am ended several t im es in the process of negotiations. When signed by all

parties involved in the sale, the purchase offer becom es a legally binding contract, som et im es called the Sales Contract.

Q

Qualifying Ratios: guidelines utilized by lenders to determ ine how m uch m oney a

hom ebuyer is qualified to borrow. Lending guidelines typically include a m axim um housing expense to incom e ratio and a m axim um m onthly expense to incom e ratio.

Quitclaim Deed: a deed t ransferring ownership of a property but does not m ake any guarantee of clear t it le.

R

RESPA: Real Estate Settlem ent Procedures Act; a law protecting consum ers from abuses

during the residential real estate purchase and loan process by requiring lenders to disclose all settlem ent costs, practices, and relationships

Radon: a radioactive gas found in som e hom es that, if occurring in strong enough concentrations, can cause health problem s.

Rate Cap: a lim it on an ARM on how m uch the interest rate or m ortgage paym ent m ay change.

Rate caps lim it how m uch the interest rates can r ise or fall on the adjustm ent dates and over the life of the loan.

Rate Lock: a com m itm ent by a lender to a borrower guaranteeing a specific interest rate over a period of t im e at a set cost.

Real Estate Agent: an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

Real Estate Mortgage I nvestm ent Conduit ( REMI C) : a security representing an interest in a t rust having m ult iple classes of securities. The securities of each class entitle investors to cash paym ents st ructured differently from the paym ents on the underlying m ortgages.

Real Estate Property Tax Deduction: a tax deductible expense reducing a taxpayer's taxable incom e.

Real Estate Settlem ent Procedures Act ( RESPA) : a law protecting consum ers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlem ent costs, practices, and relationships

Real Property: land, including all the natural resources and perm anent buildings on it .

REALTOR® : a real estate agent or broker who is a m em ber of the NATI ONAL ASSOCI ATI ON OF REALTORS, and it s local and state associations.

Recorder: the public official who keeps records of t ransactions concerning real property. Som et im es known as a " Registrar of Deeds" or " County Clerk."

Recording: the recording in a registrar's office of an executed legal docum ent. These include deeds, m ortgages, satisfaction of a m ortgage, or an extension of a m ortgage m aking it a part of the public record.

Recording Fees: charges for recording a deed with the appropriate governm ent agency.

Refinancing: paying off one loan by obtaining another; refinancing is generally done to secure better loan term s ( like a lower interest rate).

Rehabilitation Mortgage: a m ortgage that covers the costs of rehabilitating ( repairing or I m proving) a property; som e rehabilitation m ortgages - like the FHA's 203( k) - allow a

borrower to roll the costs of rehabilitation and hom e purchase into one m ortgage loan.

Reinstatem ent Period: a phase of the foreclosure process where the hom eowner has an opportunity to stop the foreclosure by paying m oney that is owed to the lender.

Rem aining Balance: the am ount of principal that has not yet been repaid.

Rem aining Term : the original am ortization term m inus the num ber of paym ents that have been applied.

Repaym ent plan: an agreem ent between a lender and a delinquent borrower where the borrower agrees to m ake additional paym ents to pay down past due am ounts while m aking regularly scheduled paym ents.

Return On Average Com m on Equity: net incom e available to com m on stockholders, as a percentage of average com m on stockholder equity.

Reverse Mortgage ( HECM) : the reverse m ortgage is used by senior hom eowners age 62 and older to convert the equity in their hom e into m onthly st ream s of incom e and/ or a line of credit to be repaid when they no longer occupy the hom e. A lending institution such as a m ortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, com m only known as HECM.

Right of First Refusal: a provision in an agreem ent that requires the owner of a property to give one party an opportunity to purchase or lease a property before it is offered for sale or lease to others.

Risk Based Capital: an am ount of capital needed to offset losses during a ten- year period with adverse circum stances.

Risk Based Pricing: Fee structure used by creditors based on r isks of granting credit to a borrower with a poor credit history.

Risk Scoring: an autom ated way to analyze a credit report verses a m anual review. I t takes into account late paym ents, outstanding debt, credit experience, and num ber of inquiries in an unbiased m anner.

S

Sale Leaseback: when a seller deeds property to a buyer for a paym ent, and the buyer sim ultaneously leases the property back to the seller.

Second Mortgage: an additional m ortgage on property. I n case of a default the first

m ortgage m ust be paid before the second m ortgage. Second loans are m ore r isky for the lender and usually carry a higher interest rate.

Secondary Mortgage Market: the buying and selling of m ortgage loans. I nvestors

purchase residential m ortgages originated by lenders, which in turn provides the lenders with capital for additional lending.

Secured Loan: a loan backed by collateral such as property.

Security: the property that will be pledged as collateral for a loan.

Seller Take Back: an agreem ent where the owner of a property provides second m ortgage financing. These are often com bined with an assum ed m ortgage instead of a portion of the seller's equity.

Serious Delinquency: a m ortgage that is 90 days or m ore past due.

Servicer: a business that collects m ortgage paym ents from borrowers and m anages the borrower's escrow accounts.

Servicing: the collection of m ortgage paym ents from borrowers and related responsibilities of a loan servicer.

Setback: the distance between a property line and the area where building can take place. Setbacks are used to assure space between buildings and from roads for a m any of purposes including drainage and utilit ies.

Settlem ent: another nam e for closing.

Settlem ent Statem ent: a docum ent required by the Real Estate Settlem ent Procedures Act ( RESPA). I t is an it em ized statem ent of services and charges relating to the closing of a

property t ransfer. The buyer has the r ight to exam ine the settlem ent statem ent 1 day before the closing. This is called the HUD 1 Settlem ent Statem ent.

Special Forbearance: a loss m it igation option where the lender arranges a revised

repaym ent plan for the borrower that m ay include a tem porary reduction or suspension of m onthly loan paym ents.

Stockholders' Equity: the sum of proceeds from the issuance of stock and retained earnings less am ounts paid to repurchase com m on shares.

Stripped MBS ( SMBS) : securities created by " stripping" or separating the principal and

interest paym ents from the underlying pool of m ortgages into two classes of securities, with each receiving a different proportion of the principal and interest paym ents.

Sub- Prim e Loan: " B" Loan or " B" paper with FI CO scores from 620 - 659. " C" Loan or " C" Paper with FI CO scores typically from 580 to 619. An industry term to used to describe loans with less st r ingent lending and underwriting term s and conditions. Due to the higher r isk,

sub- prim e loans charge higher interest rates and fees.

Subordinate: to place in a rank of lesser im portance or to m ake one claim secondary to another.

Survey: a property diagram that indicates legal boundaries, easem ents, encroachm ents, r ights of way, im provem ent locations, etc. Surveys are conducted by licensed surveyors and are

norm ally required by the lender in order to confirm that the property boundaries and features such as buildings, and easem ents are correctly described in the legal description of the

property.

Sw eat Equity: using labor to build or im prove a property as part of the down paym ent

T

Third Party Origination: a process by which a lender uses another party to com pletely or partially originate, process, underwrite, close, fund, or package the m ortgages it plans to deliver to the secondary m ortgage m arket.

Term s: The period of t im e and the interest rate agreed upon by the lender and the borrower to repay a loan.

Title: a legal docum ent establishing the r ight of ownership and is recorded to m ake it part of the public record. Also known as a Deed.

Title 1 : an FHA- insured loan that allows a borrower to m ake non- luxury im provem ents ( like renovations or repairs) to their hom e; Tit le I loans less than $7,500 don't require a property lien.

Title Com pany: a com pany that specializes in exam ining and insuring t it les to real estate.

Title Defect: an outstanding claim on a property that lim it s the ability to sell the property. Also referred to as a cloud on the t it le.

Title I nsurance: insurance that protects the lender against any claim s that arise from

argum ents about ownership of the property; also available for hom ebuyers. An insurance policy guaranteeing the accuracy of a t it le search protecting against errors. Most lenders

require the buyer to purchase t it le insurance protecting the lender against loss in the event of a t it le defect. This charge is included in the closing costs. A policy that protects the buyer from t it le defects is known as an owner's policy and requires an additional charge.

Title Search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claim s against the property.

Transfer Agent: a bank or t rust com pany charged with keeping a record of a com pany's stockholders and canceling and issuing certificates as shares are bought and sold.

Transfer of Ow nership: any m eans by which ownership of a property changes hands. These include purchase of a property, assum ption of m ortgage debt, exchange of possession of a property via a land sales contract or any other land t rust device.

Transfer Taxes: State and local taxes charged for the t ransfer of real estate. Usually equal to a percentage of the sales price.

Treasury I ndex: can be used as the basis for adjustable rate m ortgages ( ARMs) I t is based on the results of auctions that the U. S. Treasury holds for it s Treasury bills and securities.

Truth- in- Lending: a federal law obligating a lender to give full written disclosure of all

fees, term s, and conditions associated with the loan init ial period and then adjusts to another rate that lasts for the term of the loan.

Tw o Step Mortgage: an adjustable- rate m ortgage ( ARM) that has one interest rate for the

first five to seven years of it s term and a different interest rate for the rem ainder of the term .

Trustee: a person who holds or controls property for the benefit of another.

U

Underw r it ing: the process of analyzing a loan application to determ ine the am ount of r isk

involved in m aking the loan; it includes a review of the potential borrower's credit history and a judgm ent of the property value.

Up Front Charges: the fees charged to hom eowners by the lender at the t im e of closing a m ortgage loan. This includes points, broker's fees, insurance, and other charges.

V

VA ( Departm ent of Veterans Affairs) : a federal agency, which guarantees loans m ade to veterans; sim ilar to m ortgage insurance, a loan guarantee protects lenders against loss that m ay result from a borrower default.

VA Mortgage: a m ortgage guaranteed by the Departm ent of Veterans Affairs ( VA).

Variable Expenses: Costs or paym ents that m ay vary from m onth to m onth, for exam ple, gasoline or food.

Variance: a special exem pt ion of a zoning law to allow the property to be used in a m anner different from an existing law.

Vested: a point in t im e when you m ay withdraw funds from an investm ent account, such as a retirem ent account, without penalty.

W

W alk Through: the final inspection of a property being sold by the buyer to confirm that

any contingencies specified in the purchase agreem ent such as repairs have been com pleted, fixture and non- fixture property is in place and confirm the electrical, m echanical, and

plum bing system s are in working order.

W arranty Deed: a legal docum ent that includes the guarantee the seller is the t rue owner of the property, has the r ight to sell the property and there are no claim s against the property. X

Y Z

Zoning: local laws established to control the uses of land within a particular area. Zoning laws are used to separate residential land from areas of non- residential use, such as industry or

businesses. Zoning ordinances include m any provisions governing such things as type of st ructure, setbacks, lot size, and uses of a building.

Collect all of this information and enter it into the CRM under the client's contact.

1. Name of company:

2. Time in Business (TIB amount of years)

3. State business is registered:

4. Business Revenue:

5. What would the funds be used for?

6. What repayment terms are you wanting( monthly , weekly, years)

7. Estimate Credit Score 

8. Estimated monthly revenue in the past 4 months each month

9. Do you have a business bank account

10. Are the funds being deposited into the business account

11. Can you provide a copy of your 4 most recent bank statements, driver’s license, and a voided check or bank letter

Lenders classify borrowers in tiers. It is important to become familiar with the different tiers of borrowers as this will allow you to know which lenders the borrower may be best suited for.

An A-loan grading is the best rating and is available to borrowers who have a FICO credit score of 660 or higher 

B-loan applicants have FICO scores ranging from 620 to 659 and have recorded a few late mortgage or installment loan payments in the past 12 months 

C-loan applicants have FICO scores from 580 to 619 and three or more late mortgage or installment loan payments over the last 12 months.3 Both B and C loans are referred to as “subprime.” 

While B/C loans do not offer terms as favorable as A-labeled loans, they’re better than D loans. The lower the grade, the higher the risk a borrower is for defaulting on the loan, which is why most conventional financial institutions don’t issue them. Instead, borrowers must rely on alternative lenders who charge higher interest rates and fees. 

What services can I offer to my clients through DS Lending?

All of the following services are currently available to your clients.

• Business funding ( sba, lines of credit, merchant cash advances, term loans and other financing products)

• Mortgages - Residential and commercial

• Legal Plan ( offer credit repairing for those with challenged credit who are looking or needing to increase their scores. Dispute letters are sent via an attorney allowing your clients the convenience of not having to mail out letters themselves)

• Business Strategy services ( this is offered through Dee and will require a consultation. If the client purchases the services, you earn a 40% commission on the client net purchase price. Business strategy services include either all or a la carte services such as business plan creation with financial projections, project management and scope of work, customized services , for the client)

• Rental reporting through Equifax and Transunion 

• Realtor referral- we will pair the client with a realtor in our network

• Gift at closing - for homebuyers, we can gift them services beneficial for their new home

• Business Opportunities- your client can join our team as a Mortgage Loan Officer or Loan Advisor subject to approval.

• Virtual call center services- Your client for as little as $120 a month can have a full scale call center US Based to answer their customer calls. This service is subject to a minimum of a 3 month contract maximum of 3 years  and retainer based at ½ of the total of the contract. 

We are adding more services.