The Mortgage Code.

The Mortgage Code

 

Starting a mortgage can be a bit intimidating. It will be one of the biggest purchases many of us will make. We understand that and want this process to be as smooth and friendly as possible. Our Originators are always available to answer questions you might have.

The Mortgage World has it's own lingo and being familiar with the verbiage and acronyms can help you feel more confident in the questions you need to ask.

Below is a list of most common phrases used:

 

  • Debt-to-Income (DTI) - this allows the lender to determine how much monthly debt you can handle. The math equation is monthly debt payment / monthly gross income = DTI ratio

 

  • Equity - Is how much value a consumer owns in a home. The more equity you have the less you owe on the home. 100% equity means you own the home free and clear

 

  • Loan-to-Value (LTV) - this will show the lender how much equity the loan will own. The math equation is loan amount / appraised value = LTV

 

  • Loan Originator (LO) - They will be your person of contact through the whole loan process. You can call or email them any time to ask questions or check on your progress

 

  • Underwriter (UW) - They will be the one to make the approval decision on your loan

 

  • In house/Portfolio - Your lender typically has two options on how to process your loan. If they choose this option, you will stay with them and make your payments after the loan closes to them

 

  • Investor/Secondary Market - This is the second option. A lender will have certain policies on what they sell to the secondary market. In this case after the loan closes you will make your payments to someone else.

 

  • Rate - Is the value of how much interest is charged to your loan each month

 

  • Annual Percentage Rate (APR) - includes the costs of the loan with the rate to let the borrower better compare lenders to one another

 

  • Principal + Interest (P&I) - this is the payment that goes to your lender to pay down the loan. First, interest will be applied to the loan. Second, principal will be applied to the loan to reduce the amount owed.

 

  • Escrow - Borrowers can opt for the lender to pay their property taxes and homeowner's insurance every year for them. This is an account that puts that money back until the bill is due.

 

  • Principal + Interest + Taxes + Insurance (PITI) - this is the payment that includes escrow payments

 

  • Down Payment (DP) - Only on purchases and is the amount the borrower is putting down on the house to create a lower LTV. The more of a DP; the less risky a loan is seen.

 

  • Earnest Money (EM) - Only on purchases; the funds agreed to in the purchase contract that the borrower places on hold with the seller as a sign of good faith.

 

  • Loan Estimate (LE) - A lender has to give you this within 3 days of a full application. It is an educated estimate on loan terms and costs.

 

  • Closing Disclosure (CD) - A lender must give this to you 3 days prior to your closing date. This is the final numbers on your loan terms and costs.

 

  • Appraisal - This is ordered by your lender and is a report completed by a qualified appraiser to form an educated value based on the property and the surrounding neighborhood.

 

  • Title Search - Also ordered by your lender and is a report that shows the history on the property. It will show who owns it and what liens are on the property.

 

  • Right to Rescission - By federal law, on all refinances of a primary residence lenders must give all owners of the property notice of the new lien + loan terms. All owners have 3 days from the closing date to rescind (cancel) the loan.

 

  • Deed of Trust (DOT) - this is the security instrument or document recorded with the county to show the lender's lien on the property.

 

  • Real Estate Owned (REO) - the lender must be made aware of all properties owned by the borrower. This will be listed on the application.