How to Speak Mortgage - Infographic
- Rachel Scott
- Home Loans
Do you know what a buy-down is? Or what CLTV stands for? Here's some key phrases and acronyms to help you speak mortgage with confidence!
AMORTIZATION: Loan payment divided into equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance
APPRAISED VALUE: An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property
APR: The annual percentage rate is the interest rate on the loan combined with other fees
ARM: An Adjustable Rate Mortgage is one where the interest rate can change
ASSUMABILITY: An assumable mortgage can be transferred from the seller to the new buyer
BAH: Basic Allowance for Housing is given to military members to provide housing for them and their family members
BASIS POINT: One 100th of 1%
BUY-DOWN: When the lender subsidizes the mortgage to lower the interest rate during the first few years of the loan
CD: Closing Disclosures are documents a lender is required to give the borrower three days before closing
COE: The Certificate of Eligibility declares that a borrower is eligible to participate in the VA loan program
CLTV: Combined Loan to Value ratio is used when a property has multiple mortgages
COLLATERAL: Property pledged as security for a debt
CONFORMING LOAN: A loan that is eligible for purchase by FNMA or FHLMC
CONVENTIONAL LOAN: A mortgage not insured by FHA or guaranteed by VA
CRV: A Certificate of Reasonable Value sets the max loan amount on a VA loan and is issued by the Department of Veteran Affairs
DEBT TO INCOME RATIO (DTI): One of several criteria used to qualify a loan, takes into consideration all current indebtedness. Expressed as a percentage and calculated by dividing a borrower’s monthly liabilities by monthly gross income
EARNEST MONEY: Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment
Fannie Mae (FNMA) & Freddie Mac (FHLMC): Federal National Mortgage Association & Federal Home Loan Mortgage Corporation, respectively, are 2 government sponsored enterprises created by Congress to make mortgages available to a wide group of people
FHA: the Federal Housing Administration is a federal agency that oversees the housing market. FHA insured mortgages are back by the Federal Government
FICO (often pronounced [fahy-koh]): A FICO Score is a credit score generated by Fair Isaac Corp. They range from 300-850.
FIXED RATE MORTGAGE: The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage
FSBO: For sale by owner
FUNDING: Providing cash for the loan. Funds provided by the lender at settlement
GROSS INCOME: For qualifying purposes, the income of the borrower before taxes and expenses are deducted
HELOC (often pronounced [hee-lock]): A Home Equity Line Of Credit lets the homeowner borrow cash against their home equity. The homeowner can take what they need and return for extra funds, unlike a 2nd mortgage
HUD (pronounced [hu-d]): Housing and Urban Development is a part of the federal government and oversees the housing market
IRRRL: The Interest Rate Reduction Refinance Loan, also known as a VA Streamline, is a refinance for veterans to get a lower rate mortgage
JUMBO LOAN: A loan which is larger than conforming loan limits
LE: The Loan Estimate is something the lender puts together within three days of a borrower applying for a mortgage. LEs outline the details about the mortgage.
LO: the Loan Officer is the person who receives the mortgage application and works with the borrower.
LOCK: A lender’s guarantee that the mortgage rate quoted will be good for a specific number of days from the day of application
LTV: Loan to Value is a ratio lenders use to assess the risk of a loan. It is calculated by dividing the mortgage amount by the purchase price or appraised value of the property
MIP: A Mortgage Insurance Premium is the insurance payment a borrower pays on an insured loan.
MLS: Multiple Listing Service is an online system used by Real Estate Agents to house hunt
NMLS: The Nationwide Mortgage Licensing System assigns an identification number to registered Mortgage Loan Officers.
Principal Interest Taxes Insurance PITI: These elements are added together to calculate the total monthly payment for a borrower.
PMI: Private Mortgage Insurance is required on mortgages where the borrower pays less than a 20% down payment.
PREAPPROVAL: The process of determining how much money you will be eligible to borrow before you apply for a loan
RESCISSION: The cancellation of a contract
SERVICER: An organization that collects principal and interest payments from borrowers and manages borrower escrow accounts
TITLE: A document that gives evidence of an individual’s ownership of property.
UNDERWRITER: 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.
USDA: the United States Department of Agriculture/Rural Housing offer home loans insured by the federal government.
VA: With Government insured VA (Veterans Administration) mortgages, veterans and military personnel may secure a home purchase loan with no down payment and no monthly mortgage insurance premiums.
VOR: Verification Of Rent
VOM: Verification Of Mortgage
VOD: Verification Of Deposit
VOE: Verification of Employment