GLOSSARY OF TERMS

Adjustable Rate Mortgage (ARM): A loan with an interest rate that can be changed periodically, based on increases or decreases in a specified economic index.

Amortization: The process of reducing the principal loan amount by making regularly scheduled payments of principal and interest according to the terms of the mortgage note.

Amount Financed: A term used in the Truth in Lending Statement that refers to the loan amount less the cost of obtaining the loan.

Annual Percentage Rate (APR): A measure of the cost of credit expressed as a yearly percentage rate. This is a federally required formula, designed to help the owner compare the cost of credit.

Appraisal: An estimate of the fair market value of the property conducted by a certified appraiser and approved by MoneyMae Lending Group

Assessed Value: A home or piece of real estate property has more than one value; the assessed value generally refers to that value set on the land by tax authorities for purposes of determining real estate taxes.

Buy-Down: A borrower may pay additional “points” on a loan in order to reduce, or “buy down”, the initial interest rate, thereby lowering the monthly payments.

Closing/Settlement: The conclusion of the transaction, including the signing of a mortgage and the disbursement of funds.

Closing/Settlement Costs: All of the costs to the buyer and the seller, which are associated with the purchase, sale or refinance of a home. These include points, the cost of title insurance, recording fees, escrows and attorney’s fees.

Commitment: A pledge by MoneyMae Lending Group to make mortgage funds available to a buyer for buying or refinancing a home. This agreement is conditioned on the buyer having provided accurate information and satisfying all conditions and requirements.

Condominium: Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.

Contract of sale: Contract in which seller agrees to sell and buyer agrees to buy under certain specific terms and conditions spelled out in writing and signed by both parties.

Cooperative: A structure of two or more units in which the right to occupy a unit is obtained by the purchase of stock in the cooperation which owns the building.

Credit report: A report issued by one or more national credit bureaus for the purpose of aiding lenders in determining the overall credit standing of a loan applicant.

Down Payment: Also known as “earnest money”. An amount of money deposited by the buyer in accordance with the terms of the contract, which is applied to the purchase price at the time of closing. The down payment may be forfeited if the buyer defaults.

Equity: An owner’s equity is the difference between the property’s fair market value and the current amount owed on the property.

Escrow: A portion of monthly payments held by the lender on the borrower’s behalf to pay taxes and insurance and other charges when they become due.

Federal Housing Administration (FHA) : A federal agency within the Department of Housing and Urban Development (HUD): that provides mortgage insurance for residential mortgages and sets standards for construction and underwriting. The FHA does not lend money, nor does it plan or construct housing.

Federal National Mortgage Association (FNMA) : The nation’s largest mortgage investor. Created in 1968 by an amendment to title III of the National Housing Act (12USG 1716 et seq.), this stockholder-owned corporation, a portion of whose board of directors is appointed by the president of the united states, supports the secondary market in mortgages on residential property with mortgage purchase and securitization programs. Also called Fannie Mae.

Fixed-Rate Mortgage (FRM) : A loan with an interest rate that remains the same throughout the life of the loan usually 15 or 30 years.

Homeowner’s Insurance: An insurance policy required for the buyer that will compensate the insured for a loss on the property due to specified hazards (e.g., fire, theft, etc.).

Index: The interest rate on an ARM (adjustable rate mortgage) is tied to a specific, published index rate. At the end of each adjustment period, the lender is authorized to adjust the mortgage note rate depending on the movement of the index since the last time of adjustment. Most lenders use indexes based on U. S. Treasury Securities. Others use cost-of-funds indexes.

Joint Tenancy with Right of Survivorship: One of the most common methods of home ownership. In the event of the death of one owner, the ownership interest held by that owner transfers to the other joint tenant(s).

Lien: A legal hold or claim placed upon the property of another as security for some debt or charge.

Loan-to-value Ratio (LTV) : The relationship of the loan amount to the appraised value of the property or the sale price, whichever is lower.

Margin: On an adjustable rate mortgage, the margin is added to the index rate to determine the interest rate to be charged during the next adjustment period. Margins are usually constant for the life of the loan and generally reflect the lender’s cost of doing business.

Mortgage Banker: An individual, firm or corporation that originates, sells and/or services loans secured by mortgages on real property.

Mortgage Broker: A firm or individual who, for a commission, matches borrowers and lenders. A mortgage broker does not retain servicing, does not use its own funds and is not a principal.

Mortgagee: The lender in a transaction.

Mortgagor: The borrower.

Negative Amortization: A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal.

Points: Prepaid interest. One point equals 1% of the loan amount.

Private Mortgage Insurance (PMI) : This insurance permits a borrower who has less than 20% as down payment to purchase a home because it protects a mortgage lender against the borrower’s potential default on a mortgage.

RESPA: Real Estate Settlement Procedures Act is a federal consumer protection law that requires lenders to provide borrowers with information on known or estimated settlement costs.

Tenancy by the Entirety: A form of ownership by husband and wife whereby each owns the entire property. In the case of death, the survivor owns the property.

Title Insurance: A type of insurance, which can protect MoneyMae Lending Group and the borrower against any title defects when a new home is purchased. Protection for the borrower requires the payment of additional premiums.

Title Search: An examination of public records, laws and court decisions to disclose the facts regarding ownership of the property.

Truth in Lending Statement: Required by federal regulations, this statement tells purchasers the cost of financing their loan for the purpose of comparing loan programs.

Underwriting: The analysis of risk that will determine the ability of the borrower to repay a loan, and the matching of that risk to an appropriate amount, rate and term on the mortgage loan.

Veterans Administration (VA) : The Department of Veterans’ Affairs, a cabinet-level agency of the federal government. The servicemen’s Readjustment Act of 1944 authorized the agency to administer a variety of benefits programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the VA Home Loan Guaranty Program, which encourages mortgage lenders to offer long-term, low down payment financing to eligible veterans by partially guaranteeing the lender against loss