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GLOSSARY

While the information contained on this page is intended to be useful, it should in no way be

viewed as a replacement for the professional advice any consumer should seek. For the best

description of mortgage terms as well as lending practices, talk with your mortgage professional,

a lawyer, or other mortgage finance professional.

ACCELERATION CLAUSE - allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

ADJUSTABLE RATE MORTGAGE (ARM) - Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Mortgage Loans (AML'S), Flexible Rate Loans, Variable Rate Loans.

ADJUSTMENT INTERVAL - on an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

AMORTIZATION - Payment of a debt in equal installments of principal and interest, rather than interest only payments.

ANNUAL PERCENTAGE RATE (APR) - an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. This APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

APPRAISAL - an estimate of the value of property, made by a licensed qualified professional called an "appraiser. "

APPRAISER - A professional with knowledge of real estate markets and skilled in the practice of appraisal. When a property is appraised in connection with a loan, the appraiser is selected by the lender, but the appraisal fee is usually paid by the borrower.

APPROVAL - Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.

ASSESSED VALUE - Value placed upon property for property-tax purposes by the tax assessor.

ASSUMPTION - the agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market-rate interest charges will apply.

BALANCE - The amount of the original loan remaining to be paid. It is equal to the loan amount less the sum of all prior payments of principal

BALLOON (PAYMENT) MORTGAGE - usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

BANKRUPT - One who is adjudicated a bankrupt by a court having proper jurisdiction. The bankruptcy may be voluntary (petitioned by the bankrupt) or involuntary (petitioned by the creditors of the bankrupt).

BANKRUPTCY - Proceedings under federal bankruptcy statutes to relieve a debtor (bankrupt) from insurmountable debt. The bankrupt's property is distributed by the court to the creditors as full satisfactions of the debts, in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned by the debtor for, involuntary by the creditors.

BENEFICIARY - The Person who is entitled to receive funds of property under the terms and provisions of a will, trust, insurance policy or security instrument. In connection with a mortgage loan the beneficiary is the lender.

BIWEEKLY - Also known as accelerated mortgages. Biweeklies reduce interest expense and build home equity faster than monthly payments.

BROKER - an individual in the business of assisting in arranging, funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

BUY-DOWN - when the lender and/or the homebuilder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

CAPS (INTEREST) - The maximum which an adjustable rate mortgage may increase, regardless of index changes.

CAPS (PAYMENT) - consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

C C & Rs - An acronym for Covenants, Conditions and Restrictions.

CHAPTER 7 BK - A Chapter 7 BK is a straight liquidation bankruptcy where the debtor submits all of their non-exempt assets to the trustee for liquidation; proceeds are disbursed to creditors

CHAPTER 13 BK - Chapter 13 is a debt reorganization plan where debts are repaid under a court-supervised repayment plan. Debtors submit part of their income for distribution among creditors. Also known as the wage-earner plan.

CLOSING- the meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement.

CLOSING COSTS - usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3 percent to 6 percent of the mortgage amount.

CLOSING STATEMENT - summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.

COFI (Cost of funds Index): The ratio of the dollar amount paid in interest during the month to the average dollar amount of the funds for that month constitutes the weighted average cost of funds ratio for that month.

COMBINED LOAN TO VALUE (CLTV) - The total of all liens on the subject property divided by the appraised value of the property.

COMMITMENT- an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

CONSTRUCTION LOAN - a short-term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

CONVENTIONAL LOAN - a mortgage not insured by FHA or guaranteed by the VA or Farmers Home Administration (FMHA).

CREDIT REPORT - a report documenting the credit history and current status of a borrower's credit standing.

CREDIT SCORE - A single numerical score, based on an individual's credit history, that measures that individual's credit worthinessThe most widely used credit score is called FICO for Fair Issac Co. which developed it.

DEBT-TO-INCOME RATIO - the ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.

DEED OF TRUST - in many states, this document is used in place of a mortgage to secure the payment of a note.

DEFAULT - failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

DEFERRED INTEREST - see negative amortization.

DELINQUENCY - failure to make payments on time. This can lead to foreclosure.

DEPARTMENT OF VETERANS AFFAIRS (VA) - an independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

DISCOUNT POINT - The fee associated with the note rate for your loan, the more discount points you pay the lower the rate you can buy, the fewer you pay, the higher your rate. If the rate is high enough, the loan is priced above par and these premium points are available to pay closing costs creating a no or low fee loan.

DOWNPAYMENT - money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on conventional loans, and no money down up to 5 percent on FHA and VA loans.

DUE-ON-SALE-CLAUSE - a provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

EARNEST MONEY - money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

EQUAL CREDIT OPPORTUNITY ACT (ECOA) - is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

EQUITY - the difference between the fair market value and current indebtedness, also referred to as the owner's interest.

ESCROW - refers to a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or "closing." Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments.

Encroachment -A building or some portion of it - a wall or fence for instance - that extends beyond the land of the owner and illegally intrudes on some land of an adjoining owner or a street or alley.

Equity -The interest or value that an owner has in property over and above any indebtedness.

Escrow -The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered upon the performance of certain conditions outlined in the escrow instructions.

Escrow account -The trust account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction.

Escrow instructions -A document that sets forth the duties of the escrow agent, as well as the requirements and obligations of the parties, when a transaction is closed through an escrow.

Exclusive agency listing -A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, for a commission. The owner reserves the right to sell without paying anyone a commission if he or she sells to a prospect who has not been introduced or claimed by the broker.

Exclusive-right-to-sell listing -A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner or another broker.

Fair Housing Act -The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status and national origin.

Fannie Mae -See Federal National Mortgage Association (FNMA).

Farmer's Home Administration (FmHA) -An agency of the federal government that provides credit assistance to farmers and other individuals who live in rural areas.

Federal Deposit Insurance Corporation (FDIC) -An independent federal agency that insures the deposits in commercial banks.

Federal Home Loan Mortgage Corporation (FHLMC) -A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market.

Federal National Mortgage Association (FNMA) -A quasi-governmental agency established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders.

Federal Reserve System -The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates.

FHA loan -A loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA's regulations.

Fiduciary -One in whom trust and confidence is placed; a reference to a broker employed under the terms of a listing contract or buyer agency agreement.

Fiduciary relationship -A relationship of trust and confidence, as between trustee and beneficiary, attorney and client or principal and agent.

Foreclosure -A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.

General warranty deed -A deed in which the grantor fully warrants good clear title to the premises. Used in most real estate deed transfers, a general warranty deed offer the greatest protection of any deed.

Graduated-payment mortgage (GPM) - A loan in which the monthly principal and interest payments increase by a certain percentage each year for a certain number of years and then level off for the remaining loan term.

Grantee -A person who receives a conveyance of real property from a grantor.

Grantor - The person transferring title to or an interest in real property to a grantee.

Gross Lease - A lease of property according to which a landlord pays all property charges regularly incurred through ownership, such as repairs, taxes, insurance and operating expenses. Most residential leases are gross leases.

Growing-equity mortgage (GEM) -A loan in which the monthly payments increase annually, with the increased amount being used to reduce directly the principal balance outstanding and thus shorten the overall term of the loan.

Home equity loan -A loan (sometimes called a line of credit under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property.

Homeowner's insurance policy -A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability and other common risks.

Homestead -Land that is owned and occupies as the family home. In many states a portion of the area or value of this land is protected or exempt from judgements for debts.

Independent contractor -Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. Unlike an employee, and independent contractor pays for all expenses and social security and income taxes and receives no employee benefits. Most real estate salespeople are independent contractors.

Installment contract -A contract for the sale of real estate whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until a future date, which may be not until final payment. Also called a contract for deed or articles of agreement for warranty deed.

Installment Sale -A transaction in which the sales price is paid in two or more installments over two or more years. If the sale meets certain requirements, a taxpayer can postpone reporting such income until future years by paying sales tax each year only on the proceeds received that year.

Interim financing -A short-term loan usually made during the construction phase of a building project (in this case referred to as a construction loan.)

INITIAL INTEREST RATE - The number of months for which the initial rate holds, ranging from 1 month to 10 years.

INTEREST ONLY RATE - A mortgage on which for some period the monthly mortgage payment consists of interest only. During that period, the loan balance remains unchanged.

INTEREST PAYMENT - The dollar amount of interest paid each month. It is the same as interest due so long as the scheduled mortgage payment is equal to or greater than than the interest due. Otherwise, the interest payment is equal to the scheduled payment.

INTEREST RATE - The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A rate of 6%, for example, means a rate of 1/2% per month. A mortgage interest rate is a rate on a loan secured by a specific property.

INTEREST RATE ADJUSTMENT PERIOD - The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, a 3/3 ARM is one in which both periods are 3 years while a 3/1 ARM has an initial rate period of 3 years after which the rate adjusts every year.

INTEREST RATE CEILING -The highest interest rate possible under an ARM contract; same as "lifetime cap." It is often expressed as a specified number of percentage points above the initial interest rate.

INTEREST RATE CAP- The maximum allowable increase in the interest rate on an ARM each time the rate is adjusted. It is usually 1 or 2 percentage points, but may be 5 points if the initial rate period is 5 years or longer.

INTEREST RATE INDEX - The specific interest rate series to which the interest rate on an ARM is tied, such as "Treasury Constant Maturities, 1-Year," or "Eleventh District Cost of Funds." All the indices are published regularly in readily available sources

Involuntary lien -A lien placed on property without the consent of the property owner.

JUMBO LOAN - a loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

LATE FEES - Fees that lenders are entitled to collect from borrowers who don't pay within the grace period. Most mortgage notes offer borrowers a 10 or 15-day grace period, with a late charge of about 5% on payments received on the 16th or later

LATE PAYMENT - A payment received after the grace period stipulated in the note. Most mortgage grace periods are 10 or 15 days.

London Inter Bank Offered Rate ( LIBOR ) - the rate on dollar-denominated deposits, also know as Eurodollars, traded between banks in London.

LIEN - a claim upon a piece of property for the payment or satisfaction of a debt or obligation.

LIS PENDENS - A notice filed or recorded for the purpose of warning all persons that the title or right to the possession of certain real property is in litigation; literally "suit pending"; usually recorded so as to give constructive notice of pending litigation.

LOAN-TO-VALUE RATIO - the relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

MARGIN - the amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

MARKET VALUE - the highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MORTGAGE INSURANCE - money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.

MORTGAGEE - the lender.

MORTGAGOR - the borrower or homeowner.

NEGATIVE AMORTIZATION - occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.

Negative amortization cap - The maximum amount of negative amortization permitted on an ARM, usually expressed as a percentage of the original loan amount (e.g., 110%). Reaching the cap triggers an automatic increase in the payment, usually to the fully amortizing payment level, overriding any payment increase cap.

NET EFFECTIVE INCOME - the borrower's gross income minus federal income tax.

NONASSUMPIION CLAUSE - a statement in a mortgage contract forbidding the assumption of the mortgage with out the prior approval of the lender.

No-Cost mortgage - A mortgage on which all settlement costs except per diem interest, escrows, homeowners insurance and transfer taxes are paid by the lender and/or the home seller

Non-conforming mortgage - A mortgage that does not meet the purchase requirements of the two Federal agencies, Fannie Mae and Freddie Mac, because it is too large or for other reasons such as poor credit or inadequate documentation.

Non-Permanent resident alien - A non-citizen without a green card who is employed in the US. As distinct from a permanent resident alien, who has a green card and who lenders do not distinguish from US citizens. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than US citizens.

Option ARM - An adjustable rate mortgage with flexible payment options, monthly interest rate adjustments, and very low minimum payments in the early years. They carry a risk of very large payments in later years.

ORIGINATION FEE - the fee charged by the lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

PITI - principal, interest, taxes and insurance. Also called monthly housing expense.

POINTS (LOAN DISCOUNT POINTS) - prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

POWER OF ATTORNEY - a legal document authorizing one person to act on behalf of another.

PREPAIDS - expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

PREPAYMENT - a privilege in a mortgage permitting the borrower to make payments in advance of their due date.

PREPAYMENT PENALTY - money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

PRINCIPAL - the amount of debt, not counting interest, left on a loan.

PRIVATE MORTGAGE INSURANCE (PMI) - in the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on your loan's structure. On a $75,000 house with a 10 percent down payment, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30.

RATIO - Calculated as a percentage. The lower the percentage the better the ratio. It is the sum of all monthly payments (excluding food,gas,electric,medical, insurance) divided by the gross (pre-tax) income.

REALTOR - a real estate broker or an associate holding active membership in a local real estate

board affiliated with the National Association of Realtors.

RECISION - the cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

RECORDING FEES - money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

REFINANCE - Paying off an old loan while simultaneously taking a new one. This may be done to reduce borrowing costs under conditions where the borrower can obtain a new loan at an interest rate below the rate on the existing loan. It may be done to raise cash, as an alternative to a home equity loan. Or it may be done to reduce the monthly payment.

RESPA - short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish the information after application only.

REVERSE MORTGAGE (HECM - HOME EQUITY CONVERSION MOPRTGAGE) - a form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security. A Special type of loan made to older homeowners to enable them to convert the equity in their home to cash to finance other needs.

SECOND MORTGAGE - A loan with a second-priority claim against a property in the event that the borrower defaults. The lender who holds the second mortgage gets paid only after the lender holding the first mortgage is paid.

SERVICING - all the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

SETTLEMENT/SETTLEMENT COSTS - see closing/closing costs.

STATED ASSETS - A documentation requirement where the borrower discloses assets, but they are not verified by the lender.

STATED INCOME - A type of loan where the lender verifies the source of the income but not the amount.

STREAMLINE LOAN - Refinancing that omits some of the standard risk control measures, and is therefore quicker and less costly.

SUBORDINATE FINANCING - A second mortgage on the property which is not paid off when a new loan is taken out. The second mortgage lender must allow subordination of the second to the new first mortgage.

SURVEY - a measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any buildings.

TEASER RATE - The initial interest rate on an ARM, when it is below the fully indexed rate.

TERM - The period used to calculate the monthly mortgage payment. The term is usually but not always the same as the maturity. On a 7-year balloon loan, for example, the maturity is 7 years but the term in most cases is 30 years.

Three-Day Cancellation Rule - Once you apply for a personal loan or if you are considering it and you plan on using your home as a payment guarantee, you should be aware of the fact that the federal credit law provides you with three days to reconsider or change your mind about a signed credit agreement or cancel the agreement without receiving a penalty. The Truth In Lending Act assures that your have a right to cancel or rescind the agreement.

In the event that you decide to rescind you can do so under the condition that you are using your provincial residence as collateral; it may be a house, a condominium or a mobile home. However it cannot be a cottage or a second residence. You have until midnight of the third business day to cancel the agreement. Day one will begin after the following take place:

You must sign the credit contract.
You will receive the Truth in Lending disclosure form, which contains key information concerning a credit contract. It includes the annual percentage rate, any finance charges, amount financed, as well as the payment schedule.
You will also be given two copies of a Truth in Lending notice that explains your right to rescind.

For the purposes of cancellations, business days do consist of Saturdays but not Sundays or legal public holidays. For instance, if the events mentioned above occur on a Friday, this means that you will have time up until midnight on the Tuesday of next week to cancel.

Throughout this waiting period, any activated that are linked to the contract cannot take place. Also, the creditor cannot give you any of the money for the loan. In the event that your loan is for home improvement, the contractor cannot deliver any materials or start work on the house.

In the case that you cancel/annul/rescind your loan, it is absolutely necessary for you to notify the creditor in writing. You cannot annul your loan through a telephone conversation or a conversation in person with the creditor. The written notice has to be mailed, filed for telegraphic transmission or sent through any other written way before midnight on the third business day. Once you cancel the contract then the security interest on your home is cancelled as well and you will not have to pay any money, including any finance charges.

The creditor has up to 20 days to return all your money and property that you paid for as apart if the transaction and he or she must cancel any security interest on your home. Once you get the money and/or property from the creditor, you might want to hold on to it until the creditor shows you proof that your home is not being used as collateral anymore and returns to you all the

money that you paid. Only then you must offer to return any property belonging to the creditor or any of his or her money. However, if the creditor does not pick up their things in 20 days then you are free to keep them.

If you experience a serious personal financial emergency such as a natural disaster or the damage to your home occurs because of a storm or a break-in. The law will let you surrender your right to rescind and will remove the three-day period. For you to waive this right, you will need to submit a written statement that explains the emergency and that clearly states that you are waiving your right to cancel. This statement will need to be signed by you and anyone who shares the ownership of the home as well as it will need to be dated. By waiving your right to cancel, you will need to go ahead with the transaction.

You should be aware of the fact that the right to rescind does not apply in all situations when your home is being used as collateral. Some of these exceptions are:

When you are applying for a loan to buy or build your main residence.
When you refinance your loan with the same creditor who holds your current loan and you do not borrow any more money.
In the event that a state agency is the creditor for your loan.

TITLE- a document that gives evidence of an individual's ownership of property.

TITLE INSURANCE - a policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually based on the value of the property, and is often borne by the purchaser and/or seller.

TITLE SEARCH - an examination of municipal records to determine the legal ownership of property which is usually performed by a title company.

TRUTH-IN-LENDING - a federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan.

UNDERWRITING- the decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

VA LOAN - a long-term, low- or no down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA MORTGAGE FUNDING FEE - a premium of up to 1 7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 30-year fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

VARIABLE RATE MORTGAGE (VRM) - see adjustable rate mortgage.

VERIFICATION OF DEPOSIT (VOD) - a document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VERIFICATION OF EMPLOYMENT (VOE) - a document signed by the borrower's employer verifying his/her position and salary.

WRAPAROUND - results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

80/10/10, 80/15/5, and 80/20 loans - Combination first mortgages for 80% of sale price or value and second mortgages for 10%, 15%, or 20%. The purpose is to avoid mortgage insurance, which is required on first mortgages that exceed 80% of value.

MTA - An interest rate index that is used on some ARMs. It is the average of the most recent 12 monthly values of the Treasury One-Year Constant Maturity series.

100% loan - A loan with no down payment. The loan amount equals the property value.

125% loan - A loan for 125% of property value