Home Loan Workbook

Escrow Disbursements - The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due. Escrow Payment - The part of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance mortgage insurance, lease payments and other items as they become due. Fannie Mae - A congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds. FHA Mortgage - A mortgage that is insured by the Federal Housing Adminstration (FHA). This also known as a government mortgage. FICO Score - FICO scores are the most widely used credit score in U.S. mortgage loan underwriting. This three-digit number, ranging from 300-850, is calculated by a mathematical equation that evaluates many types of information that are on your credit report. Higher FICO scores represent lower credit risks, which typically equate to better loan terms. First Mortgage - The primary lien against a property. Fixed installment - The monthly payment due on a mortgage loan including payment of both principal and interest. Fixed Rate Mortgage (FRM) - A mortgage interest that is fixed throughout the entire term of the loan. Freddie Mac - Nickname for the Federal Home Loan Mortgage Corp (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. Fully Amortized ARM - An adjustable - rate mortgage (ARM) with a monthly payment that is sucient to amortize the remaining balance, at the interest accrual rate, over the amortization term. GNMA - A government - owned corporation that assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae. Growing-Equity Mortgage (GEM) - A fixed-rate mortgage that provides scheduled payment increases over an established period of time. The increased amount of the monthly payment is applied directly toward reducing the remaining balance of the mortgage. Guarantee Mortgage - A mortgage that is guaranteed by a third party. Housing Expense Ratio - The percentage of gross monthly income budgeted to pay housing expenses. HUD-1 Statement - A document that provides an itemized list of the funds payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and intial escrow amounts. Each item on the statement is represented by a separate number withing a standardized numbering system. The totals at the bottom of the HUD-1 define the seller’s net proceeds and the buyer’s net payment at closing. Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM) - A combination fixed rate and ajustable rate loan - also called 3/1, 5/1, 7/1 - can oer the best of both worlds: lower interests rates (like ARMs) and a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable rate loan, based on then-current rates for the reaming 25 years. It’s a good choice for people who expect to move or refinance, before or shortly after, the adjustment occurs. Index - The index is the measure of interest rate changes a lender uses to decide the amount an interest rate on an ARM will change over time. The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. Some index rates tend to be higher than others and some more volatile. Initial Interest Rate - This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM) It’s also known as a “start rate” or “teaser”. Installment - The regular periodic payment that a borrower agrees to make to a lender. Insured Mortgage - A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI) Interest - The fee charged for borrowing money. Interest Accrual Rate - The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

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