CSI Mortgage Corp. - Borrowers

Demystifying the loan application process begins by learning the language used in the business. Therefore, the following is a list of commonly used terms in the mortgage industry and their definitions. Click on the appropriate link to move directly to the definition.

Account Servicing	Amortization	Amount Financed	APR
Beneficiary	Credit Score	Debt Ratio	Deed of Trust
Escrow	Hold Back	Lien	Loan to Value
Mortgage Insurance	Principal Balance	Promissory Note	Qualification
Right of Recission	Trustee	Trustor	Wholesale Lender

Account Servicing

is the company to whom payments are sent. Since Mortgage Brokers cannot service their loans directly, third-party companies such as these simply receive payments (which sometimes include monthly taxes and insurance), process them and send them to the appropriate Beneficiary. Account Servicers also hold all original documents in their files.

Amortization

is a calculation which consists of four parts; the Principal Balance, Interest Rate, Term of Repayment and the Payment Amount. As described in the graph, when you begin to repay a loan, the payment goes almost entirely to interest. As the loan progresses, more and more of the monthly payment goes toward the Principal Balance until the balance is zero.

Amount Financed

is the Principal Balance minus any fees incurred by using a mortgage professional such as Mortgage Points, Inspection Fees, Processing Fees and Document Preparation Fees. Fees not included in this calculation include Title Fees, Recording Fees, Homeowners Insurance, Property Taxes and Servicing Set up Fees.

APR (Annual
Percentage Rate)

is a calculation performed on the interest rate due to charges incurred by using a mortgage professional when financing your property. Mathematically, this calculation is a substitution of the Principal Balance with the Amount Financed. Then, simply recompute the interest rate. With a lesser amount in the Principal Balance category due to these fees, the same term of payment and payment amount, the interest rate can only increase. The difference between the APR and the quoted Interest Rate on the Promissory Note is what is important, as well as the final APR figure. (Obviously, a financial calculator such as an HP-12C is necessary)

Beneficiary

is the person or company lending the money to the Borrower. It is the Beneficiary who receives payments from the Account Servicer and, upon the full repayment of the Principal Balance, will release the lien.

Credit Score

is a numeric value obtained when a credit report is ordered on a borrower. This score is a compilation of the borrower's past credit history by weighting the number of late and current accounts, amount of credit available, number of open lines of credit and the person's willingness to repay debts. A higher score normally means a better credit rating. For example, most lenders will require a FICO score of 640 or greater to qualify for a conforming loan, which yields the lowest interest rates.

Debt Ratio

is a calculation of your expected monthly Principal and Interest payment, monthly Taxes and Insurance impounds (PITI) all divided by your Gross Monthly Income (GMI). (PITI)/(GMI)

Deed of Trust

is the lien instrument used to secure the Principal Balance on a particular property and is recorded in the County Recorder's office of the County in which the property lies. This document includes descriptions of the Trustor, Trustee and Beneficiary, the legal description of the property, lien amount and terms of property maintenance which the Borrower must comply or face foreclosure action.

Escrow

is a term to describe the Title Company's process of obtaining necessary documents and monies to satisfy the lender and borrower's requirements and the recording of particular documents to secure a real estate transaction. Issued at the time of close is a Title Insurance Policy which insures the lender for the amount of the Principal Balance in case title problems arise in the future which were unseen at the time the loan was closed.

Hold Back

describes monies held in an escrow account for the purpose of paying contractors for work completed on a property after the closing of a loan. To obtain reimbursement, an inspector is sent to the property to verify the completion of the work, then appropriate funds are made payable to the Borrower or the sub-contractor.

Lien

is an instrument describing a debt which is recorded through a Recording Office in the County which a property resides. Lien priority is determined by recording date. However, Tax liens always take priority.

Loan to Value (LTV)

is the amount of the loan(s) against the property divided by the estimated (or appraised) value of the property. The result is a percentage which is used to determine both the equity in the property and loan programs which your present LTV allows you to qualify.

Mortgage Insurance

insures the lender for loans above 80% loan to value. If for some reason the borrower defaults on the loan, the mortgage insurance company will pay the lender the amount lent above 80% LTV. The borrower pays for this insurance in small, monthly increments along with their monthly payment. If not for this insurance, wholesale companies lending money would be much more strict to whom they give loans and conventional lending as we know it would not exist.

Principal Balance

is the amount of the loan. In an amortized loan, the principal balance will decrease slowly over time until the balance is zero.

Promissory Note

is the document that describes the terms of repayment of the loan. Signed by the borrower, this document also contains stipulations describing late payments, interest acceleration, rights of transfer, etc.

Qualification

is the process of obtaining information necessary to fund a loan. This process is described in more detail here. To the borrower, this process is very stressful because of the scrutiny which companies view their private information and rate them accordingly. Sometimes referred to as "jumping through hoops".

Right of Recission

is the three day period a borrower must wait after signing the loan documents until the loan is funded and closed. These three days are required by the Federal Government to allow borrowers to decide whether they want to continue with the loan even after the final documents are signed. Only days of business can be used as recission days, although Saturday can be used most of the time. This only applies to owner occupied refinance loans on one to four family properties.

Trustee

most of the time the Servicing company or Title company used during the loan transaction. The trustee is responsible for being a neutral third party during the transaction between borrowers and lenders or to authorize the release of a lien after the beneficiary has signed their release.

Trustor

is the person(s) or company borrowing the money and required to make payments, whether they be monthly, bi-monthly, semi-annually or annually.

Wholesale Lender

is a company who provides the loan programs for which borrowers must qualify. These companies acquire blocks of loans, all meeting the same qualifications, and sell them to larger organizations such as Fannie Mae or FHLMC, both are Quasi-Federal agencies which acquire blocks of loans and provide mortgage-backed securities.

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CSI Mortgage Corp.^tm
9832 N. Hayden Rd., Ste. 213, Scottsdale, AZ 85258
(480) 860-4028

(800) 758-1793

FAX (480) 451-4516
Arizona Mortgage Banker #0906107