GLOSSARY

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Calculations used to determine if a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time.

A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

A real estate broker or an associate who is an active member in a local real estate board that is affiliated with the National Association of Real Estate Agents.

The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

Paying off one loan with the proceeds from a new loan using the same property as security.

A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services.

Where existing mortgages are bought and sold.

The property that will be pledged as collateral for a loan.

An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See Owner Financing.

An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.

A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.

When a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Total obligations as a percentage of gross monthly income including monthly housing expenses plus other monthly debts.

An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. Based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.

An adjustable-rate mortgage (ARM) with one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.

A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.

A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the "Wrap Around" mortgagee, who then forwards the payments on the first mortgage to the first mortgagee. These mortgages may not be allowed by the first mortgage holder, and if discovered, could be subject to a demand for full payment.

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