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HOME MORTGAGE SOLUTIONS, LLC

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1.	How do I know how much house I can afford? Answer
2.	What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3.	How is an index and margin used in an ARM? Answer
4.	How do I know which type of mortgage is best for me? Answer
5.	What does my mortgage payment include? Answer
6.	How much cash will I need to purchase a home? Answer
7.	Is there a simple way to PRE-QUALIFY myself for a home mortgage loan? Answer
8.	What are Credit Scores? Answer
9.	Can I obtain a free credit report? Answer
10.	How do I get my credit scores to increase? Answer
11.	Is there a VOCABULARY list of mortgage loan terms? Answer

Q :	How do I know how much house I can afford?
A :	Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Also, as a rule, the total monthly mortgage payment should not be more that 30% - 35% of your gross monthly income. (The total monthly mortgage payment must include principal, interest, 1/12th the annual property taxes, 1/12th the annual homeowner's insurance, and the monthly private mortgage insurance premium, if required.) In addition, your total monthly debt payments (including the monthly mortgage payment and all monthly payments on any debts) should not exceed 40% - 50%. Give us a call, and we can help you determine exactly how much you can afford.

Q :	What is the difference between a fixed-rate loan and an adjustable-rate loan?
A :	With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.

Q :	How is an index and margin used in an ARM?
A :	An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

Q :	How do I know which type of mortgage is best for me?
A :	There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Home Mortgage Solutions can help you evaluate your choices and help you make the most appropriate decision.

Q :	What does my mortgage payment include?
A :	For most homeowners, the monthly mortgage payments include three separate parts: 1. Principal: Repayment on the amount borrowed. 2. Interest: Payment to the lender for the amount borrowed. 3. Taxes and Insurance: 1/12th of the annual homeowner's insurance and 1/12th of the annual property taxes are normally paid into a special escrow account and paid out when the bill come due. On loans with less than 20% down payment or equity, the monthly paymen will also include a monthly premium to cover the cost of private mortgage insurance. The amount of the monthly premium will be based on the percent of equity - the less the equity or down payment the greater the premium.-

Q :	How much cash will I need to purchase a home?
A :	The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply: Earnest Money: The deposit that is paid to the Realtor when you make an offer on the house Down Payment: A percentage of the cost of the home that is due at settlement Closing Costs: Costs associated with processing paperwork to purchase or refinance a house If you do not have much in savings, you may still be able to buy a home. We have programs that allow you to borrow up to 100% of the sales price. The extra amount over the sales price may be used to pay closing costs, origination fees, property taxes and homeowner's insurance. You can actually buy a home with no money invested. Of course, approval is based on your credit, your employment and income, and the interest rates are higher for these types of loans.

Q :	Is there a simple way to PRE-QUALIFY myself for a home mortgage loan?
A :	Getting pre-approved for a home mortgage loan is a lot easier today than ever before. How do you know if you qualify? The best way to is to get pre-qualified before you look for a home. And, that is where we come in. We will pre-qualify you and, if you qualify, we will give you a pre-approval letter so that Real Estate Brokers and home sellers know you are a qualified buyer. You can also give yourself a little test. The answers will prepare you for the pre-qualification process. Ask yourself these questions: * During the past year, have I been paid all my mortgage payments or rent payments on time or within 30 days after the due date? * Do I have less than six debts with balances outstanding – including credit cards, car loans, personal loans, student loans, etc. * Is my credit history clean – seldom a late payment on loans or credit cards, no collections or judgments and have not had a bankruptcy in the past four years? * Is my balance in savings and checking or my 401k account at least 5% of the purchase price of the home I want to buy? (NOTE: Most people are now able to buy a home with no money down. They can usually either obtain one loan for 100% of the sales price or a first and second mortgage adding up to the sales price.) * If I add up all my monthly payments on my debts (including the new mortgage payment), is the total of my monthly debt payments less than 42% of my family gross monthly income? (Estimate your new monthly mortgage payment (including an amount for Taxes and Insurance) at 1% of the new home loan amount.) * Will the monthly payment on my new home loan be less than 30% of my gross family monthly income? If the answer to all the questions is yes, you have a very good chance of qualifying for a home mortgage loan at the best rates available in the market! In addition, your credit score matters. In fact, it is a major factor in getting approved. Generally your scores must be over 620 to qualify and if you are putting down 5% or less of the sales price, you will probably need a score of over 650. For more on credit scores, see the three questions about credit scores and credit reports in the list of Frequently Asked Questions. What if you have some credit “road bumps” or your income or savings is a little “lite”? There could be good news… you may still qualify. Don’t rule out home ownership. Not everyone will qualify, of course. But, today there are many special programs for purchase loans with little or no down payment and programs for borrowers that have credit scores below 620. The interest rates may be higher, but you may be able buy the home of your dreams. Also… we have 100% loan programs for people that want to buy a home and have little or no money available for a down payment. Of course, there are guidelines you have to meet, but… you will never know if you qualify unless you call us. Give us call at 800-811-9439. You will get answers to your questions and your will get pre-qualified at not cost to you.

Q :	What are Credit Scores?
A :	A credit score is a complex mathematical model that evaluates many types of information in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service –– specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents. Credit scores are calculated by the three credit bureaus. When you obtain a credit report, the company calculates your score as of that date. The score may change each time you order a credit report and the scoring calculations are different for each credit reporting company and different based on the type of credit for which you are applying. The scores range from about 400 to 900. Scores are based on your credit history, amount of debt outstanding, number inquiries on your report, any collections, bankruptcy, etc. The higher the score the better. Too many inquiries from creditors or service companies can lower your score. Most mortgage programs require a score of over 620 to qualify while the 100% programs may require 680 and above. People with scores under 620 may still be able to obtain a mortgage, but the interest rate is usually higher and a higher down payment or equity may be required. For more detailed information about your credit score, Home Mortgage Solutions, LLC.

Q :	Can I obtain a free credit report?
A :	Yes. You may go to the website www.annualcreditreport.com . This site is linked to each credit bureau. You may obtain one free credit report from each bureau each year. The site also allows you to dispute individual items on your report if you feel the item is in error. It is best to obtain one report from one bureau at a time. Look over the report and dispute any items while you are in that bureau, then go to the next bureau. You must dispute the same item in each bureau separately. The bureaus are separate companies and do not share information. Your creditors may report to one, two or all three of the bureaus - so information will vary between bureaus. This free credit report will not give you a credit score. If you want to know your score you are able to purchase it from each bureau. Howerver, the score you purchase will not be the same as the score obtained by a creditor when you apply for a loan. CAUTION: There is a private company that offers free credit reports. They use the website "freecreditreport.com". Their purpose is to sell you an annual service. That service may or not be of benefit to you. Don't mistake this service for the free service "annualcreditreport.com" When you are pre-approved for a home mortgage loan, Home Mortgage Solutions, LLC will usually order all three credit reports with scores for you for free. And, we will review the credit reports with you in detail and suggest what should be disputed and what should be done to improve you scores.

Q :	How do I get my credit scores to increase?
A :	Credit scores are made up of many factors. Each factor will affect your score positively or negatively. To improve your score you may need to pay down or payoff certain debts, increase credit limits on credit cards, payoff collections, or just establish credit history. Your credit report needs to be analyzed and a specific plan should be developed. Call Home Mortgage Solutions, LLC for help in developing a plan for you.

Q :	Is there a VOCABULARY list of mortgage loan terms?
A :	HOME OWNER VOCABULARY The potential home buyer and mortgage loan borrower will find this Vocabulary helpful for understanding words and terms used in real estate transactions. There are, however, some factors that may affect these definitions: Terms are defined, as they are commonly understood in the mortgage and real estate industry. The same terms may have different meanings in another context. The definitions are intentionally general, non-technical and short. They do not encompass all possible meanings or nuances that a term may acquire in legal use. State laws, as well as custom and use in various states or regions of the country, may modify or completely change the meanings of certain terms defined. Before signing any documents or depositing any money prior to entering into a real estate contract, the purchaser should consult with an attorney of his/her choice to ensure that his/her rights are properly protected. ABSTRACT (OF TITLE) A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects that must be cleared before a buyer can purchase clear, marketable and insurable title. ACCELERATION CLAUSE Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage. AGREEMENT OF SALE Known by various names -- such as Offer to Purchase, Contract of Purchase, Purchase Agreement, or Sales Contract -- according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties. AMORTIZATION A payment plan that enables the borrower to reduce the debt gradually through monthly payments of principal and interest over a stated period of time. ANNUAL PERCENTAGE RATE (APR) The interest rate plus all points and financing charges expressed as a percentage of the original principal amount of the loan. Lenders are required to provide the APR within three days of accepting a loan application or in any advertisements that refer to interest rate. The APR is usually greater than the interest rate stated on the mortgage note. APPRAISAL An expert judgment or estimate of the quality and value of real estate as of a given date. ASSUMPTION OF MORTGAGE An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor (borrower) in the mortgage instrument and the original mortgagor is released from further liability under the mortgage. Since the mortgagee's (lender) consent is usually required, the original mortgagor should always obtain a written release from further liability if he/she desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchase subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent to the sale is not required unless consent is specifically required within the mortgage instrument. Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure. BINDER A binder is a document that is used by insurance agents to represent the existence of hazard insurance on the property until such time as the actual policy of insurance can be obtained from the insuring company. BORROWER The person applying for a home mortgage loan. On the loan application this will be the primary person on the loan, i.e., the person having the highest income. The borrower will always sign the note and mortgage. BROKER See Real Estate Broker. BUILDING LINE OR SETBACK Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat or subdivision, by restrictive covenants in deeds or leases, by building codes or by zoning ordinances. CERTIFICATE OF TITLE A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable title to the property that is being offered for sale. A certificate of title offers no protection against any hidden defects in the title that an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy. CLOSING COSTS The numerous expenses that buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to the price of the property and are items prepaid on the closing day. This is a typical list: Buyer's Expenses: Seller's Expenses: Documentary Stamps on Notes Cost of Abstract Recording Deed and Mortgage Documentary Stamps on Deed Escrow Fees Escrow Fees Attorney's Fee Attorney's Fee Lender's Title Insurance Real Estate Commission Survey Charge Recording Deed Appraisal and Inspections Mortgage Processing Fees The Offer to Purchase agreement negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs. CLOSING DAY The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract and deed are generally prepared for the closing by an attorney. This cost is charged to the buyer. The buyer signs the mortgage and the closing costs are paid. The final closing confirms the original agreement reached in the agreement of sale. CLOUD (ON TITLE) An outstanding claim or encumbrance which adversely affects the marketability of title. COMMISSION Money paid to a real estate broker or agent by the seller as compensation for finding a buyer and completing the sale. Unusually it is a percentage of the sale price -- 6 to 7 percent on house sales and 10 percent on land sales. CONDEMNATION The taking of private property for public use by a government, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be determination by a governmental agency that a particular building is unsafe or unfit for use. CONDOMINIUM Individual ownership of a dwelling unit and an individual interest in the common areas and facilities that serve the multi-unit project. Conforming Loan A home loan that meets the regulations and restrictions established by the Federal Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Also referred to as a "standard" loan. CONTRACT OF PURCHASE See Agreement of Sale and Offer to Purchase CONTRACTOR In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building and others. CONVENTIONAL MORTGAGE A mortgage loan not insured by HUD or guaranteed by the Veterans Administration (VA). It is subject to conditions established by the lending institution and state statutes. The mortgage Interest rates may vary with different institutions and between states. (States may have various interest rate limits.) COOPERATIVE HOUSING An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation, which entitles him/her to occupy a unit in the building or property owned by the cooperative. While the resident does not own the unit, he/she has an absolute right to occupy the unit for as long as the stock is owned. CO-BORROWER The second person applying for a mortgage loan. This can be a relative or non-relative of the borrower. This person usually has less income or no income showing on the application. This person always signs both the note and the mortgage. CO-SIGNOR A person added to the application to provide extra financial support to the borrower. This person will usually sign the note but will not sign the mortgage and will not be on the title of the property. CREDIT SCORE While a credit report can be considered your detailed financial history, a score is an objective summary of that information. It represents your creditworthiness as a number. Numerical weights are placed on different aspects of your credit report and a mathematical formula or computation is used to arrive at a final score. There are literally thousands of score models used in the credit industry which consider different variables for different types of credit. Credit scores generally range from a low of 400 to a high of 900. The higher the score the better. Most standard mortgage programs require a score of 620 or higher to qualify. Programs for people with scores below 620 are usually at higher interest rates. DEED A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, and must be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also Deed of Trust, General Warranty Deed, Quitclaim Deed, and Special Warranty Deed.) DEED OF TRUST Like a mortgage, a deed of trust is a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If however, he/she defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having the property sold without benefit of legal proceedings. A few states have begun in recent years to treat the deed of trust like a mortgage. DEFAULT Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust. DEPRECIATION Decline in value of a house due to wear and tear, adverse changes in the neighborhood or any other reason. DOCUMENTARY STAMPS A state tax, in the form of stamps, required on deeds and mortgages when real estate title passes form one owner to another. The amount of stamps required varies with each state. DOWN PAYMENT The amount of money required to be paid by the purchaser to the seller upon the completion of the sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down payment, if paid at signing. Down payment is the difference between the sales price and total mortgage amount. Normally, the down payment is fully paid at the closing day and only an earnest money deposit is paid at the signing of the agreement of sale. If the down payment is paid at the signing of the agreement of sale, it may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the down payment to be refundable, a clause must be inserted in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such a clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down payment or deposit and to pay interest and expenses incurred by the purchaser. EARNEST MONEY The deposit money given to the seller or agent by the potential buyer upon the signing of the agreement of sale to show that the buyer is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable. EASEMENT RIGHTS A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example. ENCROACHMENT An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line. ENCUMBRANCE A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrance. EQUITY The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as the mortgage balance is paid off or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full, the homeowner has 100-percent equity in the property. ESCROW Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In VA, FHA and most conventional mortgage transactions, an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust account, provided by the lender for the buyer. Such funds should be adequate to cover annual anticipated expenditures for mortgage insurance premiums, property taxes, hazard insurance premiums and special assessments. FORECLOSURE A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession. FREDDIE MAC - FEDERAL HOME LOAN CORPORATION One of two national private corporation that purchases home mortgage loans from financial institutions. The mortgage loans become collateral for mortgage backed securities to be sold to investors in the capital market. This process assures a continual flow of funds available for home mortgage loans on a national basis. Freddie Mac and Fannie Mae establish the guidelines and standards for home mortgage loans originated by financial institutions throughout the county. It is estimated that Fannie Mae and Freddie Mac purchase over 80% of all mortgage loans originated in the United States. FANNIE MAE - FEDERAL NATIONAL MORTGAGE ASSOCIATION One of two national private corporation that purchases home mortgage loans from financial institutions. The mortgage loans become collateral for mortgage backed securities to be sold to investors in the capital market. This process assures a continual flow of funds available for home mortgage loans on a national basis. Fannie Mae and Freddie Mac establish the guidelines and standards for home mortgage loans originated by financial institutions throughout the county. It is estimated that Fannie Mae and Freddie Mac purchase over 80% of all mortgage loans originated in the United States. GENERAL WARRANTY DEED A deed that not only conveys all the grantor's (seller's) interests in and title to the property to the grantee (buyer), but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments or mechanic's liens), the grantee may hold the grantor liable. GOVERNMENT LOAN A common term used to identify a mortgage loan that is insured by HUD or guaranteed by the VA. GRANTEE That party in the deed who is the buyer or receiver. GRANTOR That party in the deed who is the seller or giver. HAZARD INSURANCE Protects against damages caused to property by fire, windstorms and other common hazards. Sometimes this is referred to as Fire Insurance or Homeowners Insurance. HUD U.S. Department of Housing and Urban Development. The Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes. INTEREST A charge paid for borrowing money, usually stated as an annual percentage to be calculated on the outstanding loan amount. (See Mortgage Note.) LIEN A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied; judgments; and/or unpaid taxes, materials or labor. (See also Special Lien.) MARKETABLE TITLE A title that is free or clear of objectionable liens, clouds or other title defects. A title that enables an owner to sell the property freely to others and that others will accept without objection. MORTGAGE A lien or claim against real property given by the borrower to the lender as security for money borrowed. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off. The interest rate may be fixed or adjustable. MORTGAGE COMMITMENT A written notice from the lending institution saying it will advance mortgage funds in a specified amount and at specified terms to enable a buyer to purchase a house or for the refinancing of an existing mortgage. MORTGAGE INSURANCE PREMIUM The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA-insured mortgages, this represents an up-front premium and an annual premium of one-half of one percent paid by the mortgagor on a monthly basis. On non-government loans (referred to as conventional mortgage loans) that are in excess of 80-percent of the value or sales price of the property, private mortgage insurance (PMI) may be required. This insurance coverage is paid for by the borrower either in one large mortgage insurance premium up-front or in a smaller up-front premium and an annual renewal premium. The annual renewal premium is collected monthly in the mortgage escrow payment. MORTGAGE NOTE A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness and states the manner in which it shall be paid, including the annual stated interest rate to be paid by the mortgagor. The note states the actual amount of the debt (the original principal balance) that the mortgage secures and renders the mortgagor personally responsible for repayment. MORTGAGE (OPEN-ENDED) A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure. MORTGAGEE The lender in a mortgage. MORTGAGOR The borrower in a mortgage. NON-CONFORMING OR NON-STANDARD A loan that does not meet the requirements or restrictions of Fannie Mae or Freddie Mac. Sometimes referred to as "B" or "B-C-D" loans. NOTE See Mortgage Note. OFFER TO PURCHASE A preliminary agreement, secured by the payment of earnest money, between a buyer and seller to purchase real estate. An offer to purchase secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer backs out or is unable to purchase, the earnest money is forfeited unless the agreement expressly provides that it is to be refunded. See Agreement of Sale. PLAT A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. POINTS Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $60,000, one point is $600. Points are charged by a lender to raise the yield on the loan while leaving the annual stated interest rate unchanged. In essence, points represent the pre-payment of interest up-front at closing day. PREPAYMENT Payment of mortgage loan in full or in part before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or by charging a penalty for prepayment. PRINCIPAL The dollar amount of the mortgage loan on which interest is paid. The amount borrowed by the mortgagor. Also, that portion of the monthly payment that is applied to reduce or retire the debt. PRIVATE MORTGAGE INSURANCE Insurance coverage that guarantees the lender against loss due to foreclosure resulting from default by the borrower. The amount of the coverage is limited to a percentage of the debt and may vary by the loan-to-value of the mortgage. The coverage is issued by specially licensed private mortgage insurance companies. The borrower pays the mortgage insurance premium. PURCHASE AGREEMENT See Agreement of Sale. QUITCLAIM DEED A deed that transfers whatever ownership interest the maker of the deed may have in a particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the grantee assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the grantee whatever interest the grantor has. (See Deed.) REAL ESTATE BROKER An agent or middleman who assists sellers of real estate in the marketing and completion of the sale of the property. A real estate broker or agent may be a company, firm or individual, and is usually compensated on a commission basis (percentage of the sales price paid at closing day). A real estate broker is usually the agent of the seller and does not represent the interests of the buyer. REFINANCING The process in which the present mortgagor pays off one mortgage loan with the proceeds from a new mortgage loan, not necessarily from the same lender that holds the existing mortgage. A refinance loan may be obtained for the purpose of lowering the interest rate or to obtain cash from the equity in the property. RESTRICTIVE COVENANTS Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties and the law in the state where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.) SALES AGREEMENT See Agreement of Sale. SPECIAL ASSESSMENTS A special tax imposed on the property, individual lots or all property in the immediate area, for road constructions, sidewalks, sewers, street lights, etc. SPECIAL LIEN A lien that binds a specified piece of property, unlike a general lien that is levied against all of a person's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See Lien.) SPECIAL WARRANTY DEED A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor (as well as those persons whose right to assert a claim against the title arose during the period the grantor held title to the property). In a special warranty deed the grantor guarantees to the grantee that nothing has been done to the property while holding title which has, or which might in the future, impair the grantee's title. STATE STAMPS See Documentary Stamps. SURVEY A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries and its relationship to surrounding tracts of land. A survey is often required by the lender to assure that a building is actually situated on the land according to its legal description. TITLE As generally used, the rights of ownership and possession of a particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate. TITLE INSURANCE Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to either the mortgagor, as an "owner's title policy," or to the mortgagee, as a "mortgagee's or lender's policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy" if protection of title insurance is desired. The borrower usually pays the premium for the lender's title insurance policy while the seller usually pays the premium for the owner's policy. The responsibility for payment of the premium for either title insurance policy may be negotiated by the buyer and seller and provided for in the Agreement of Sale. TITLE SEARCH OR EXAMINATION A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments or other claims or outstanding restrictive covenants filed in the record that would adversely affect the marketability or value of title. TRUSTEE A party who is given legal responsibility to hold property in the best interest of, or "for the benefit of," another. The trustee is placed in a position of responsibility enforceable in a court of law. (See Deed of Trust.) UNDERWRITING The analysis of risk by the lender to determine if the loan can be made in accordance with lender guidelines and requirements. USURY Charging a higher interest rate than allowed by state law. VA See Veterans Administration. VERIFICATION OF DEPOSIT (VOD) Information obtained on a form completed by a financial institution or depository institution that provides balances and other information relating to savings and checking deposits or outstanding loans of the applicant for a mortgage loan. VERIFICATION OF EMPLOYMENT (VOE) Information obtained on a form completed by employers that provides income, employment status, employment dates and other information relating to the employment of the applicant for a mortgage loan. VETERANS ADMINISTRATION (VA) An agency of the federal government that establishes the regulations for administration of the VA mortgage program and guarantees the eligible loans in the event of default by the borrower. WARRANTY DEED See Special Warranty Deed. WASHOUT A loan application that is canceled prior to closing. This may result from the borrower withdrawing the application, or from the lender declining the loan for credit or property reasons prior to loan underwriting. YIELD The effective annual interest and other income received on a loan by the lender or investor expressed as a percentage of the loan amount. It would include the interest rate plus any points received on the loan. ZONING ORDINANCES The acts of an authorized local government establishing building codes and setting forth regulations for property land usage. THIS IS NOT THE END. . . Of course, there are many many more terms that are not included in this vocabulary list. If you other terms that you are not sure about, please give us a call. We will be happy to help define them.