FIRST HORIZON ASSET SECURITIES INC. MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2005-AA7 TERMS AGREEMENT (to Underwriting Agreement, dated October 25, 2004 between the Company and the Underwriter)

EXECUTION

FIRST HORIZON ASSET SECURITIES INC.

MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2005-AA7

TERMS AGREEMENT

(to Underwriting Agreement,

dated October 25, 2004

between the Company and the Underwriter)

First Horizon Asset Securities Inc.	New York, New York
4000 Horizon Way	July 25, 2005
Irving, Texas 75063

Credit Suisse First Boston LLC (the “Underwriter”) agrees, subject to the terms and provisions herein and of the captioned Underwriting Agreement (the “Underwriting Agreement”), to purchase such Classes of Series 2005-AA7 Certificates specified in Section 2(a) hereof (the “Offered Certificates”). This letter supplements and modifies the Underwriting Agreement solely as it relates to the purchase and sale of the Offered Certificates described below. The Series 2005-AA7 Certificates are registered with the Securities and Exchange Commission by means of an effective Registration Statement (No. 333-119657). Capitalized terms used and not defined herein have the meanings given them in the Underwriting Agreement.

Section 1. The Mortgage Pools: The Series 2005-AA7 Certificates shall evidence the entire beneficial ownership interest in two pools (the “Mortgage Pools”) of adjustable rate, first lien, fully amortizing, one- to four-family residential mortgage loans (the “Mortgage Loans”) having the following characteristics as of July 1, 2005 (the “Cut-off Date”):

(a) Aggregate Principal Amount of the Mortgage Pools: Approximately $605,071,250 aggregate principal balance as of the Cut-off Date, subject to an upward or downward variance of up to 5%, the precise aggregate principal balance to be determined by the Company.

(b) Original Terms to Maturity: The original term to maturity of each Mortgage Loan included in Mortgage Pool I shall be between 300 and 360 months. The original term to maturity of each Mortgage Loan in Mortgage Pool II shall be between 240 and 360 months.

Section 2. The Certificates: The Offered Certificates shall be issued as follows:

(a) Classes: The Offered Certificates shall be issued with the following Class designations, interest rates and principal balances, subject in the aggregate to the variance referred to in Section 1(a) and, as to any particular Class, to an upward or downward variance of up to 5%:  

	Class			Principal Balance			Interest Rate			Class Purchase Price Percentage
	Class I-A-1		$	72,200,000.00			5.4506%	(0)		000.000000000	%
	Class I-A-2		$	3,406,000.00			5.4506%	(0)		000.000000000	%
	Class I-A-R		$	100.00			5.4506%	(0)		000.000000000	%
	Class II-A-1		$	468,900,000.00			5.4698%	(0)		000.000000000	%
	Class II-A-2		$	27,286,000.00			5.4698%	(0)		000.000000000	%
	Class B-1		$	14,219,000.00			5.4672%	(0)		00.000000000	%
	Class B-2		$	6,353,000.00			5.4672%	(0)		00.000000000	%
	Class B-3		$	4,841,000.00			5.4672%	(0)		00.000000000	%

(1) The interest rates for these classes of Certificates are variable and will be calculated as described in the Prospectus Supplement.

(b) The Offered Certificates shall have such other characteristics as described in the related Prospectus.

Section 3. Purchase Price: The Purchase Price for each Class of the Offered Certificates shall be the Class Purchase Price Percentage therefor (as set forth in Section 2(a) above) of the initial Class Certificate Principal Balance thereof plus accrued interest at the per annum initial interest rate applicable thereto from and including the Cut-off Date up to, but not including, July 29, 2005 (the “Closing Date”).

Section 4. Required Ratings: The Offered Certificates shall have received Required Ratings of (i) at least “AAA” from Fitch Ratings (“Fitch”) and “Aaa” from Xxxxx’x Investors Service, Inc. (“Moody’s), in the case of the Class I-A-1, Class I-A-2, Class I-A-R, Class II-A-1 and Class II-A-2; (ii) at least “AA” from Fitch, in the case of Class B-1 Certificates; (iii) at least “A” from Fitch, in the case of the Class B-2 Certificates; and (iv) at least “BBB” from Fitch, in the case of the Class B-3 Certificates.

Section 5. Tax Treatment: One or more elections will be made to treat the assets of the Trust Fund as a REMIC.

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to the undersigned a counterpart hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Underwriter and the Company.

Very truly yours,

CREDIT SUISSE FIRST BOSTON LLC

By:  

Name:
Title: 

The foregoing Agreement is hereby confirmed and accepted as of the date first above written.

FIRST HORIZON ASSET SECURITIES INC.

By:

Name: Xxxxxx Xxxxx

Title: Vice President

FIRST HORIZON HOME LOAN CORPORATION

By:

Name: Xxxxx XxXxx

Title: Executive Vice President