TABLE OF CONTENTS

1 •  Choosing a Mortgage Lender
2 •  About Michael Dunsky
3 •  Mortgage Approval Process
4 •  Application Checklist
5 •  Mortgage Approval Guidelines
6 •  Program Descriptions
7 •  Fixed Rate Programs
8 •  First-Time Homebuyer Programs
9 •  Adjustable Rate Programs
10 •  Jumbo Programs
11 •  First and Second Combination Programs
12 •  Two-Step Programs
13 •  Convertible Programs
14 •  Government Programs
15 •  BuyDown Programs
16 •  Non-Conforming Programs
17 •  Glossary of Terms

Choosing a Mortgage Lender

In today's competitive mortgage business, there are all kinds of mortgage providers - banks, credit unions, mortgage companies, mortgage brokers, etc. They operate in different ways, delivering various levels of service and programs. Each has its own policy on locking interest rates and processing loans. Most residential mortgage loans are ultimately sold in the "secondary mortgage market", even by banks and other depository institutions, but some loans may be held in a lender's "portfolio". The type of institution you are dealing with is less important than its reputation for service, reliability and financial stability. The "lowest rate in town" often turns out to be less service, more anxiety and unexpected surprises. It is more important than ever before to choose a lender that can deliver what it promises. These are the factors you should consider:

•  Is the lender financially solid?

•  Does the lender have the ability to fund its loans?

•  What is the lender's reputation for service and follow through?

•  Does the lender specialize in home mortgage loans?

•  Will the lender guarantee turn around time?

•  Is the rate guaranteed in writing?

•  How long is the rate good for?

•  When and where will the closing take place?

•  How much are the other closing costs?

•  Will the mortgage representative compare multiple programs, or are you being sold the "hot" product?

Until these ten questions are answered with satisfaction, dealing with a mortgage lender is like rolling the dice. No one should take that kind of risk with the biggest transaction of their life

About Michael Dunsky

Michael Dunsky has over 16 years of mortgage banking experience and is one of the nation's most successful loan officers. Michael's primary goal is to continually achieve excellence for all of his clients.

Michael has taken a widely different approach to mortgage banking and has put together a team of five highly skilled mortgage professionals dedicated to your loan. He and his team will provide complete consulting, pre-approval, processing, underwriting, closing and funding for your mortgage transaction. From your first meeting with Michael to your closing, you'll be impressed with the aggressive interest rates, the variety of information and loan options available along with the superior service provided by “Team Dunsky”.

Michael and his Team recognize how important it is for the client to understand the mortgage process and the many financing alternatives. An informed customer is our best customer. That is why we deliver enough information and advice for our customers to make the right choices.

“My job is to first listen to your needs and concerns as a client, evaluate your short and long term financial goals, and then provide you with the best possible home loan options.” Michael Dunsky

Testimonials:

“Michael; Thank you so much for helping me reach one of my goals!!” – Rueben Rogers

“Michael did an excellent job making us feel comfortable with what we were doing. Each and every time we needed a question answered, he was very accessible. The customer service provided to us, along with the professional manner in which we were dealt was outstanding. Michael Dunsky was more than a pleasure to work with and we will recommend him to all of our friends” – James and Marryann Hart

“Michael, you are AWESOME! Thanks so much for your help, reassurance and guidance!” Gina and Collin Tobin

Mortgage Approval Process

STEP-BY-STEP WITH

Michael Dunsky

Your Lifetime Mortgage Professional

Step 1 - Pre-Approval

Michael will review your financial information, retrieve and review your credit report, and evaluate your overall finances for your maximum monthly housing payment.

STEP 2 - Program Comparison/Consultation

Michael will then consult with you regarding your short and long-term financial goals in order to provide home loan options that will compliment your financial goals. Together, you and Michael will review several types of mortgage programs and ultimately, you make the decision on which one is the best.

STEP 3 - Purchasing Analysis

Based upon your maximum monthly housing payment, your anticipated home loan program, and other factors such as the amount of down payment and estimated property taxes, Michael will estimate the maximum loan amount and sales price that you qualify for.

STEP 4 – Application… You Found A House and Want To Move Forward

Several things happen all at once at this stage. First, a residential appraisal will be ordered to accurately assess the value of the home you are purchasing. As well, Michael will have already prepared and completed a loan application that will be sent to you to review for accuracy, along with several disclosures to sign and return. And lastly, some personal financial documents will be requested from you in order to expedite the processing of your loan.

STEP 5 - Processing

The processing of a mortgage application comes down to receiving just three sets of documents; a) your personal financial information that may have been previously requested, b) signed application and disclosures that were previously sent, and c) the property appraisal. Once all of these items are received and reviewed, (underwritten), a final mortgage commitment can be issued.

(NOTE: All financial information, relating to employment, other income, expenses, liabilities, bank accounts and other assets must be independently verified in order to meet secondary market requirements. Requests for Verification(s) may be sent to third parties, but often cause delays. In the interest of speed and reliability, we have adopted the Alternative Documentation approach to mortgage processing. Most customers prefer this approach.)

STEP 6- Underwriting, (review of your information)

After all information and verification is and received, the file is analyzed by a trained underwriter for final approval/loan commitment. Unlike other lenders, the underwriter is part of your team and assists in overseeing the file from beginning to end. All files are electronically tracked to ensure a timely commitment and closing.

STEP 7 - Commitments and Conditions

Immediately after approval, your commitment letter is issued. If there are conditions still outstanding they will be stated with the commitment letter. Please note it is important to meet all conditions as soon as possible since the loan closing can not take place until all conditions are satisfied.

STEP 8 - Closing

Michael has made arrangements with a select group of closing attorneys and other settlement agents to provide the highest quality closing services at a reasonable cost. The attorney will coordinate all closing details, including scheduling, final preparations, final figures and instructions, document review and signing. It's good to note that most closings take place at a location and time convenient for you.

Application Checklist

In order to expedite the processing of your loan application, you may be called upon provide some or all of the following documents. This avoids the delays usually encountered when written verifications are sent to third parties (banks, employers, etc.).

Property Information

•  Copy of Purchase and Sales agreement or accepted Offer to Purchase.

•  Copy of listing sheet and possibly evidence of real estate taxes.

Employment

•  Last one or two year's of W-2s.

(If self-employed: 1 or 2 years' complete and signed 1040's may be required).

•  Most Recent Pay-stubs covering a one month period of income.

Liquid Assets

•  Last one or two complete statements on all bank accounts, brokerage accounts, any IRA's and 401(k)'s, (please note that all pages for each statement are required).

•  Verification and evidence of the source of deposit money.

•  Additional documentation may be required to clarify or modify the data gathered from your credit report

Mortgage Approval Guidelines

Banks, mortgage companies and other residential mortgage lenders generally apply the same or very similar guidelines to the mortgage approval process. These guidelines are standardized by the secondary market investors who buy mortgages, particularly the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Michael Dunsky applies these guidelines with flexibility to achieve fairness and maximize customer satisfaction.

PROPERTY - The value, condition and type of property must be verified by an appraiser and approved by the underwriter's review. Other information about the property must be verified through documents such as the Purchase and Sale Agreement and Real Estate Tax bill.

INCOME - All sources and amounts of income must be verified by the employer or other payer. W -2's pay stubs, tax returns and other documents are also used as verification.

ASSETS - The liquid assets needed to close, including the down payment on a purchase, closing costs, and reserves must be verified. Bank statements, deposit statements, gift letters and other written verifications are used.

CREDIT- Payment history and present expenses must be verified. A Credit Report must be obtained and reviewed for this purpose. Also, independent verification is often necessary (cancelled check status letters, letters of explanation, etc.).

If the property, assets and credit are verified and approved, a borrower will be “qualified” to borrow an amount based upon the income that is verified and predictable. The standard guideline is that the monthly housing expense cannot exceed 28% of the gross monthly income and the combined monthly housing, plus debt payments cannot exceed 36% of the gross monthly income. Shelter Mortgage has flexibility to exceed these ratio limits under certain circumstances. Example worksheet:

1.) Gross Monthly Income (Earnings must be consistent) $__________

(Of all borrowers, which can be verified by W-2's, pay stubs, tax returns, Etc.)

2.) 36% of Gross Monthly Income $_________

3.) Subtract Monthly Debt Payments $_________

(All loan payments and other debt payments with more than

10 months remaining, excluding current mortgage on home.)

4.) Balance Left for Housing Expense $_________

5.) 28% of Gross Monthly Income $_________

6.) Maximum Monthly Housing Expense (lesser of 4 or5) $_________

7.) Subtract Monthly Taxes, Hazard Insurance,

Private Mortgage Insurance, Condo Fees, Etc. $_________

8.) Maximum Monthly Principal and Interest $________

FOR A FREE ANALYSIS

SEE MICHAEL DUNSKY- Your Lifetime Mortgage Professional!!!!

Program Descriptions

The number of different types of mortgage programs has increased dramatically. Michael Dunsky offers over fourteen categories of mortgage programs, each with many different combinations of terms. There are literally hundreds of possible options from which to choose. In order for you to make the right choice, you should be fully informed and have the benefit of an expert opinion. Michael and his Team are available to help you decide which program best suits your needs, and to help you get the best rate possible.

On the following pages we have described some of the different types of mortgage programs. These include fixed rate loans, buydowns, equal and unequal period adjustable rate loans, two-steps, balloons, jumbos, convertibles, first-time homebuyers, constructions, jumbo combos, non-conforming, investor loans, FHA loans, VA loans, and limited verification loans. Despite the wide variety, the most popular loan programs continue to be the Fixed Rate Programs. Although interest rates fluctuate, fixed rates for mortgages are still very low. Rates in general could go up substantially. Most people want the security of a fixed rate mortgage and are unwilling to bet that rates will stay down. For that reason, most homebuyers choose a fixed rate mortgage. Your Mortgage Consultant will help in the decision process.

Fixed Rate Programs

SUMMARY:

Michael Dunsky offers a wide variety of fixed rate mortgage programs. These include 10,15,20,25 and 30 year fixed rates, each with the option of paying 0, 1, 2, or 3 "points." The interest rate is generally higher for the longer term (i.e. a 30 year fixed rate will be higher than a 15 year fixed rate). Also, the number of "points," each representing one percent of the loan amount paid in advance, affects the interest rate. For instance, if a 30 year fixed rate of 8.00% requires 2 points, the 30 year fixed rate with zero points might be at 8.50%. Michael can help you choose which term (length), rate and points are right for your particular situation.

BENEFITS:

When fixed interest rates are low, they are extremely popular mortgage programs. Most home buyers choose the security of a fixed rate mortgage because of the volatile history of interest rates. Even home buyers who expect to move on within a few years often choose a fixed rate mortgage to protect against unforeseen circumstances. The early savings of an adjustable rate mortgage can be dwarfed by the increased cost in later years. With a fixed rate mortgage, both the interest rate and the monthly payment will remain the same for the life of the loan. If rates go up, you are protected; if rates go down, you can refinance. The Fixed rate mortgage loans offered by Michael carry no prepayment penalty. You can add to the principal each month or as often as you like, thereby reducing total interest payments and the life of the loan substantially.

First Time Homebuyer Programs

SUMMARY:

Michael understands how important it is for first-time homebuyers to have access to affordable financing. First-time homebuyer programs address several needs:

•  Down Payment- Lower down payments are allowed on several programs, including a 0% down program.

•  Source of Funds- First-time homebuyers can buy a home with as little as $1,500 of their own funds; the remainder of the funds needed can be in the form of a gift. Some government loans require no money from the borrower.

•  Counseling- Homebuyer counseling available on certain programs.

•  Underwriting Ratios- First-time homebuyers often need to spend a higher percentage (ratio) of their income on monthly housing and debt payments than is normally allowed. This is recognized and programs are available that allow these higher ratios.

•  Initial Monthly Payments- Some programs feature reduced monthly payments for fixed time periods to assist the first-time homebuyer.

•  Credit- Some first-time homebuyers may not have a history of credit references. Guidelines are often relaxed use alternative sources for credit ratings, such as rental and utility payments .

BENEFITS:

These first-time homebuyer programs allow many people who do not meet the standard requirements to be approved for mortgage financing. Without the availability of these programs, many people would simply not be able to buy a home. By selecting the right program, the first-time homebuyer can maximize their purchasing power and minimize their financing costs. Michael Dunsky will help the first-time homebuyer find the right program that best suits their needs.

Adjustable Rate Programs

ADJUSTMENT PERIODS SUMMARY:

The Adjustable Rate program menu includes numerous ARM programs that feature initial adjustment periods and shorter recurring adjustments. These include the 3/1, 5/1, and 7/1 programs. The initial interest rate is fixed until the first adjustment (i.e.- 3 years, 5 years, or 7 years). After the first adjustment, the interest rate adjusts annually. As with other ARM's, the interest rate adjustment is based upon an index (usually the 1 year Treasury Bill or the LIBOR index), plus a margin (e.g. 2.75-3.00%). There are also limitations (caps) on the amount of rate changes. However, for many of these programs, the full lifetime cap applies to the first interest adjustment, with period caps thereafter.

BENEFITS:

These programs are very popular with borrowers who are certain that they will be selling their home before the first adjustment date. Therefore, they will have the benefit of a reduced rate for several years, without the risk (or with minimal risk) of having to pay higher interest in later years. The downside risk is that circumstances can change, and the borrower may be forced to pay much more in interest payments over the life of the loan. Also "payment shock" can be quite real with this type of mortgage program, since the interest rate can often be increased by 5-6% at the first adjustment. As with other ARM's, these programs should only be selected after full disclosure and consultation with Michael Dunsky.

Jumbo Programs

JUMBO LOAN SUMMARY:

The term "Jumbo" refers to mortgage loans that exceed the maximum loan amount that Fannie Mae or Freddie Mac will purchase or guarantee. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) purchase and guarantee certain types of mortgages, up to a maximum of $333,700 (2004 limit for single family homes- higher for 2-4 unit properties). Because these agencies are considered to have the backing of the U.S. Government, their bonds and mortgage-backed securities carry little risk for investors. This translates into lower mortgage rates for these "conventional" mortgages.

"Jumbo" mortgages are not purchased or guaranteed by Fannie Mae or Freddie Mac, and therefore carry a higher risk for investors. This higher risk results in a higher interest rate (or points) for "jumbo" mortgage loans. Michael Dunsky has established relationships with multiple private investors for competitive rate jumbo mortgages.

BENEFITS:

As a result of its private investor relationships, Michael has a wide variety of Jumbo loans, including fixed and adjustable rate loans. The secondary market for Jumbo loans has grown, and now offers more diversified programs than ever before. Many of these programs include beneficial features that are not available for conventional loans. Michael Dunsky will explain the features that are appropriate.

First & Second “Combo” Programs

BLENDED MORTGAGE SUMMARY:

Michael Dunsky offers these combination of “blended” or “piggy-back” loans as a way of reducing financing costs for some homebuyers. As the name implies, these programs consist of two mortgages a first and a second. The first mortgage is usually in the amount of the Fannie Mae/Freddie Mac maximum presently $333,700 (2004 limit). This mortgage loan carries the lower interest rate that results from the Fannie Mae/Freddie Mac backing. This interest rate is often 1/4 -1/2% below the rate on a "Jumbo" loan. The difference is made up in the form of a second mortgage, with an adjustable rate. The blended cost of the first and second mortgage is usually significantly less than the cost of a jumbo mortgage.

For example, assuming a loan of $380,000:

Combined Savings of $88.70/month
(on a 30 year term, you just saved over $31,500)

BENEFITS:

For certain homebuyers, the First and Second Combination can be the "best of both worlds"- a reduced rate on the amount of the first mortgage and limited risk on the smaller amount of the second mortgage. The ultimate savings can be substantial. Even homebuyers who want the ease and simplicity of one mortgage may be willing to accept the risk of two loans as the cost savings can be significant. The First and Second Combination is not the right program for every "Jumbo" borrower, but it can make sense for many. Michael Dunsky will provide the financial comparisons needed to help you decide whether this program is appropriate.

Two-Step Programs

TWO STEP or BALLOON SUMMARY:

These mortgage programs offer a reduced rate (lower than the fixed rate programs) for a specified time (usually five years or seven years). The interest rate adjusts once after the initial period (the first step) to a rate that is fixed for the remaining term (the second step). The adjustment is automatically made on the date specified, and is usually limited by a cap (e.g. 5% over the initial rate). The index and margin used are generally tied to the FNMA (Fannie Mae) yield. The adjusted rate is approximately equal to (sometimes greater than) the interest rate on a zero point fixed rate mortgage at the time of adjustment.

BENEFITS:

This type of mortgage allows the borrower to qualify at a lower rate than fixed rate programs, but without the uncertainty of multiple rate adjustments. The one-time rate adjustment can be automatic and gives the borrower certainty for the remainder of the term. The borrower may have to requalify for the mortgage at the “second step” depending on the degree of change in rate. Please note that these mortgages can result in serious "payment shock," at the time of the adjustment. The initial rate is typically lower than fixed rates, approximately the same as the 5/1 or 7/1. As with any loan that can have an interest rate change, be careful. The one time adjustment in the "two-step" mortgage program can very quickly offset the initial period's savings.

This type of mortgage allows the borrower to qualify at a lower rate than fixed rate programs, but without the uncertainty of multiple rate adjustments. The one-time rate adjustment is contingent upon the following conditions:

•  The property is owner-occupied.

•  There are no second liens on the property.

•  The new rate is not greater than 5% above the initial rate.

•  There have been no late mortgage payments in the past twelve months. If any of these conditions have not been met at the time of adjustment, the remaining principle balance must be paid in full.

Convertible Programs

CONVERTIBLE LOAN SUMMARY:

Many Adjustable Rate Mortgages have an option to convert the loan to a fixed rate. If and when the option is exercised, the interest rate becomes fixed for the remainder of the life of the loan. The interest rate that is fixed is generally the equivalent of a zero point fixed rate at the time of conversion (it is usually based upon the Fannie Mae net yield plus the specified margin). Some Convertibles can be exercised at any time from the first month's payment to the fifth year; others have more restrictive time frames. Most Convertible ARM's require written notice and the conversion is "free." Some Convertibles require a fee (usually $250) at the time of conversion.

BENEFITS:

The Convertible ARM gives the borrower more flexibility and more security. It allows the flexibility to switch from an ARM to a fixed rate if that seems more advantageous in the future. This could be accomplished by refinancing in most cases, but a declining property value or credit issues could preclude a later refinance. Also, the cost of refinancing, even with a zero-point rate, will be more. The Convertible gives the borrower some security and more peace of mind that they might not otherwise have with an ARM. However, the rate of a Convertible ARM is often higher than a non-convertible ARM. Michael Dunsky can help you decide which is best for you.

Government Programs

GOVERNMENT LOAN SUMMARY:

There are so many varied mortgage programs supported by the government that you should review with Michael Dunsky. The following is a brief overview:

•  FHA - Federally Insured Mortgages offer lower down payments than conventional mortgages. FHA mortgages offer flexibility in income requirements and seller assistance. We can assist you in applying for a FHA Insured Mortgage, if you determine this to be the best option.

•  VA Mortgages require no down payment and are available to eligible military personnel, veterans, and widows or widowers of veterans. You must have a Certificate of Eligibility to apply. The rate is set by the VA and is competitive.

•  State Housing Authority Mortgages are available throughout New England to help low to moderate income residents buy a home. Many programs allow small down payments, and the interest rate or loan costs are generally lower than those associated with a conventional fixed rate mortgage program.

There are requirements set by the agencies on geographic area and eligibility. Funds are limited and subject to availability. Some of the recent programs you may have heard of include MHFA Funds, The New Hampshire Housing Funds, and Rhode Island Housing Funds.

During your initial prequalification, Michael Dunsky will highlight these government programs, advise you of your eligibility, and help you determine which type of loan would be best for you.

BuyDown Programs

BUYDOWN LOAN SUMMARY:

The term "buydown" is used to describe some mortgage programs that allow for an advance payment to reduce monthly payments in the early years. The "buydown" money (usually a number of "points") is paid in advance and used to subsidize or reduce the monthly payments. For instance, a 2-1 buydown would require 3 additional points to be paid in advance. The first year's payments would then be reduced by approximately 2/3 of the buydown amount (divided by 12 months), and the second year's payments would be reduced by approximately 1/3 of the buydown amount (divided by 12 months). The remaining payments would be at the full payment amount. There are also "lender-funded buydowns." These mortgages are at a higher interest rate than regular fixed rates. In exchange for a slightly higher rate over the life of the loan, the lender reduces the borrower's payments in the early years.

BENEFITS:

Buydown loans are used to reduce the initial payments and to allow a borrower to "qualify" for a larger loan. These programs have the benefit of reduced initial payments in the early years while still receiving the security of a fixed interest rate. They can be the right choice for some, although the upfront payment is often prohibitive (unless it is a lender-funded buydown). Sometimes a third party, such as the seller or builder, can pay the buydown.

Non-Conforming Programs

NON-CONFORMING LOAN SUMMARY:

A “conforming” loan is one which conforms to the standards established by Fannie Mae and Freddie Mac. A "non-conforming" loan is one that does not meet these standards. One reason that a loan may not meet the standards is that it is higher than the maximum loan amount established ("Jumbos'). Other loans do not meet the underwriting guidelines of the secondary agencies (Fannie Mae and Freddie Mac) and therefore are considered "non-conforming." These mortgage loans are deemed to carry more risk than "conventional" loans, and therefore can not be sold in the conventional secondary market. The primary reasons for non-conforming status are poor credit and high ratios of debt payments-to-income, or the borrowers do not have the ability to verify their income. Michael Dunsky has mortgage programs that are intended for the non-conforming borrower.

BENEFITS:

There are many people who have encountered difficult times and, for one reason or another, have imperfect credit histories or too much debt, or, have stable income that may not be able to be documented for various reasons. Depending upon the nature of the problem, these borrowers are classified according to "risk":

"A" is almost perfect

"B" has slightly greater deficiencies;

"C and "D" borrowers have more serious problems, or several risk factors combined, i.e. sub par credit and income that is not able to be verified.

These borrowers may still be able to obtain a mortgage in many of these cases, although the interest rate and down paymentrequirements may be different for each level of risk. Both adjustable rate programs and fixed rate programs are available. It is very important to note that the homebuyer who has suffered previous financial setbacks is no longer automatically denied mortgage financing.

Glossary of Terms

Helping you understand the loan process is important to us. An informed decision is always the best decision, and it ensures that you get the financing that best meets your needs.

Please feel free to utilize this glossary as a resource to familiarize yourself with a few terms that are widely used in the industry. If you ever have any questions about financing a home, please feel free to give me a call.

Michael Dunsky Your Lifetime Mortgage Professional Office: 508.850.4124

A

Acquisition Costs

Cost of acquiring property other than purchase price, for example, attorney fee, title insurance, lender's fees.

Addendum

Something added. A list or other material added to a document, contractual agreement, appraisal etc.

Adjustable Rate Mortgage (ARM)

A Mortgage in which the interest rate is adjusted periodically according to a pre-selected index.

Amortization

Payment of a dept in regular, periodic installments of principal and interest as opposed to interest only payments.

Annual Percentage Rate (APR)

A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. The APR reflects the cost of your mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes, in addition to the interest rate, loan discount points and fees, and mortgage insurance.

Application

A printed form used by a mortgage lender to record necessary information concerning a prospective mortgage.

Application Fee

A sum of money paid toward the estimate initial mortgage processing expenses such as appraisal and credit report.

Appraisal

A report made by a qualified person setting forth an opinion or estimate of property value. The term also refers to the process by which this estimate is obtained.

Appreciation

An increase in the value of property due to either a positive improvement of the area or the elimination of negative factors. Commonly, and incorrectly, used to describe an increase in value through inflation.

Assessed Valuation

The value that a taxing authority places on real property for the purpose of taxation.

Assessment

A charge against a property for purposes of taxation. This may take the form of a levy for a special purpose or a tax in which the property owner pays a share of the cost of community improvements according to the valuation of his or her property.

Assumption

Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust.

B

Balloon Loan

A loan which calls for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.

Buydown or Optional Discount Points

A payment to the lender from the seller, buyer, or third party, in order to reduce the interest rate.

C

Cap

The maximum increase of an Adjustable Rate Mortgage. Example: The original loan is made at 10% with a 5% cap. The interest rate on the loan may not exceed 15% regardless of index changes.

Cash-out Refinance (also Equity-out)

A refinancing of the original mortgage loan that also includes a portion of the borrower's equity taken out in cash.

Cash to Close

Liquid assets that are readily available to be used to pay the closing cost involved in a closing of a mortgage transaction..

CC&Rs (Convenants, Condition and Restrictions)

A term used in some areas to describe the restrictive limitations which maybe placed on a property. In other areas, simply call restrictions.

Certificate of Occupancy

A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied.

Closing

The consummation of a real estate transaction. The closing includes the delivery of a deed, financial adjustments, the signing of a note and the disbursement of funds necessary to complete the sale and loan transaction.

Closing Costs

Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination fee, discount points, appraisal, credit report, title insurance, attorney's fees, survey and prepaid items such as taxes and insurance escrow payments.

Closing Statement

A form used at clo9sing that gives an account of the funds received and paid at the closing, including the escrow deposits for taxes, hazard insurance and mortgage insurance.

Co-Borrower

Additional Borrower(s) whose income contributes to qualifying for a loan and whose name(s) appears on all documents with equal legal obligations.

Collateral

Property pledged as security for a dept, such as the real estate pledged as security for a mortgage.

Commitment (Loan)

A binding pledge made the lender to the borrower to make a loan, usually at a stated interest rate within a given period of time for a given purpose, subject to the compliance of the borrower to stated conditions.

Commitment Fee (Loan)

Any fee paid by a potential borrower to a lender for the lender's promise to lend money at a specified rate and within a given time.

Comparable

Properties used a comparison to determine the value of a specific property.

Condominium

A structure of tow or more units, the interior space of which is individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finished) of the exterior walls, floors, and ceiling. The balance of the property is called the common areas.

Conforming Loan

Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). These agencies generally purchase traditional fixed-rate level payment first mortgages up to loan amounts mandated by Congressional directive.

Conventional Mortgage

A mortgage not obtained under a government insured program (such as FHA or VA)

Credit Report

A report detailing an individual's credit history.

D

Deed of Trust

An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and reconvened upon payment in full.

Default

The failure to perform an obligation as agreed in a contract.

Delinquency

A loan payment that is overdue but within the period allowed before actual default is declared.

Deposit

A sum of money given to bind a sale of real estate. Also known as earnest money.

Depreciation

A loss of value in real property brought about by age, physical deterioration, functional or economic obsolescence.

E

Ernest Money

A portion of the down payment delivered with a purchase offer by the purchaser of real estate to the seller or an escrow agent as evidence of good faith. Also known as a deposit.

Equal Credit Opportunity Act (ECOA) A federal

A federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income form public assistance programs or past exercising of rights under the Consumer Credit Protection Act.

Equity

The ownership interest—that portion of a property's value over and above the liens against it.

Escrow

In general, a procedure whereby a disinterested third party handles legal documents and/or funds on behalf of a seller or buyer. An escrow account can be created by an attorney to handle the buyer's deposit on the property, by the lender to cover repairs that will not be completed before the closing or by the lender to pay the property taxes and insurance premiums.

Fair Credit Reporting Act (FCRA)

A federal law which requires a lender who is rejecting a loan request because of adverse credit information to inform the borrower of the source of such information.

F

Federal Home Loan Mortgage Corporation –FHLMC (FREDDIE MAC)

A corporation authorized by Congress. It purchases residential mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration as well as conventional home mortgages. It sells participation certificates whose principal and interest are guaranteed by FHLMC.

Federal National Mortgage Association-FNMA (FANNIE MAE)

A tax-paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration as well as conventional home mortgages.

First Mortgage

A real estate loan that has priority over any subsequently recorded mortgages.

G

Gift Letter

A written explanation signed by the individual giving the gift stating, “This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time.”

H

Hazard Insurance

A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards (i.e. fire).

Homeowners Association Dues

The fees imposed by a condominium or homeowners association for maintenance of common areas.

I

Interest

Consideration in the form of money paid for the use of money—also a right, share or title in property.

Interest Rate

The percentage of an amount of money which is paid for borrowing it for a specified time.

Investment Property

Real estate owned with the intent of supplementing income and not intended for owner occupancy.

J

Joint Tenancy

An undivided interest in property, taken by two or more joint tenants. Upon the death of a joint tenant, the interest passes to the surviving join tenant(s), rather than to the heirs of the deceased.

L

Lease

An agreement by which an owner of real property (lessor) gives the right of possession to another (lessee), for a specified period of time (term) and for specific consideration (rent).

Lien

A legal claim or attachment against property as security for payment of an obligation.

Loan-to-Value Ratio

The ratio of the loan amount divided into the sales price or appraised value, which ever is less.

M

The most probable price which a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed under no pressure to act. The market value may be different from the price a property can actually be sold for a given time (market price).

Maturity

The termination or due date on which final payment on a loan must be paid in full.

Monthly Payment

Usually, the amount of PITI (principal, interest, taxes and insurance) paid each month on a mortgage loan.

Mortgage

The conveyance of an interest in realty property given as security for the payment of a loan.

Mortgagee

The lender in a mortgage transaction

Mortgage Insurance Premium (MIP).

The consideration paid by a mortgager (borrower) or mortgage insurance – either to the FHA or to a private mortgage insurer.

Mortgage Note

A written promise to pay a sum of money at a stated interest rate during specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.

N

Negative Amortization

A condition created when the loan payment is less than the interest due on the loan. Even though payments are made on time, the amount owing on the loan increases because the payment made is not sufficient to cover the entire mount of interest due.

Non-conforming Loan

Conventional home mortgages not eligible for sale and delivery to either FNMA or FHLMC because of various reasons, including loan amount, loan characteristics or underwriting guidelines.

O

Occupancy

The use of property as a full time residence, either by the title holder (owner-occupancy) or by another party through a formal agreement (rental).

Over Improvement

An improvement, excessive in cost or size in relation to land value or the value of surrounding improvements.

P

One percent of the loan amount or a measure of the interest rate.

Personal Property

Any property which is not designated by law as realty property. Examples of personal property which cannot be included in the mortgage are furniture, boat docks, barbecues and lawn furniture.

PITI (Principal, Interest, Taxes and Insurance)

The most common components of a monthly mortgage payment.

Preliminary Title Report

The results of a title search by a title company prior to issuing a title binder or commitment to ensure clear title.

Primary Residence

A residence which the borrower intends to occupy as the principal residence.

Private Mortgage Insurance

Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.

Processing

The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

PUD (Planned Unit Development)

A planned combination of diverse land uses, such as housing, recreation and shopping in one contained development or subdivision. A major feature of a PUD includes areas of common land for use by the housing unit owners; the association of unit owners generally owns, pays fees and maintains the common areas.

Purchase Contract (Agreement/Offer)

An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a sales contract.

R

Real Estate Settlement Procedure Act (RESPA)

A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also established guidelines for escrow account balances and the disclosure of settlement costs.

Real Property

Land and that which is affixed to it.

Refinancing

The repayment of a dept from the proceeds of a new loan using the same property as security.

Rescission

Annulling a contract and placing the parties to it in a position as if there had not been a contract.

Satisfaction of Mortgage

The recordable instrument issued by the lender verifying full payment of a mortgage dept.

Second Home (vacation home, weekend home)

A residence other than the borrower's primary residence which the borrower intends to occupy for a portion of each year. Must be suitable for year-round occupancy.

Security

In lending, the collateral given, deposited, or pledged to secure the payment of a dept.

Settlement Services

Services provided by the lender at the closing of a loan.

Subordinate

To make subject or junior to. For example: A loan on vacant land is made subject to a subsequent construction loan.

Survey

The measurement and description of land by a registered surveyor.

T

Title

The legal evidence of ownership rights to real property.

Title Insurance Policy

A contract in which an insurer, usually a title insurance company, agrees to pay the insured party a specific amount of any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee or otherwise.

Title Search

An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate.

Truth-in-Lending Act

A federal law requiring a disclosure of credit terms using a standard format. This intended to facilitate comparisons between the lending terms of financial institutions.

U

Underwriting

An analysis of the risk in order to determine loan approval or loan rejection on a given property for given borrowers.

Z

Zoning

The division of city or county by legislative regulations into areas (zones), specifying the uses allowable for the real property in these areas.