Understanding Mortgage Acronyms
The mortgage industry commonly uses acronyms when discussing home loans with borrowers. Poli Mortgage wants to help you become educated on some of the key terminology to enable you to speak with your loan officer more comfortably.
Measures the cost of credit on an annual basis. The APR allows one to compare various kinds of mortgages based on the annual cost of each loan. The APR calculates the total cost for the mortgage by taking the total amount borrowed, subtracting certain loan fees from the transaction and then figuring the APR using the interest paid on the net loan amount.
This mortgage program will have a fixed rate for a specific time period. After the fixed timeframe expires, the interest rate on the loan will change depending on the rate of the applicable index (LIBOR or the US Treasury rate) at the time of each change. The fixed rate timeframe will range from one month to 10 years.
The ratio of the sum of a 1st and 2nd mortgage, divided by the lower of the purchase price or the appraised value of a home.
The final underwriting status before a loan moves to closing.
Ratio of a borrower’s gross housing and/or consumer debt divided by their monthly income. This is an important metric used to evaluate a borrower’s creditworthiness.
The federal agency who oversees the US Housing Market. FHA Mortgages are guaranteed by the Federal Government and offered by lenders and banks.
Credit score reporting was developed by this company. The FICO score is a way of measuring an individual’s creditworthiness without requiring access to income history or employment status. A FICO score ranges on a scale from approximately 300 to 850. Normally, lenders use the middle score received from the 3 national credit bureaus (Experian, Transunion, and Equifax).
A summary document that an applicant should receive, according to RESPA guidelines, within three business days from the date of an application. The GFE is an estimate of what the various closing costs are for a mortgage transaction.
This is the closing form used by the settlement agent and it itemizes all charges for a real estate transaction. It gives each party a complete list of incoming and outgoing funds.
This replaces the HUD-1 and final Truth in Lending. It documents the final loan terms, cost and funds needed for closing. It must be provided 3 days prior to closing.
This replaces the prior Good Faith Estimate and initial Truth in Lending. It documents the initial loan terms, cost and funds needed for closing. It can be used to shop for the best mortgage by allowing a compare of cost from lender to lender.
The total amount of interest that you will pay over the loan term as a percentage of your loan amount (if loan goes to full term) This is a new calculation noted on the Closing Disclosure.
Real Estate Terminology
Real estate ads are usually full of acronyms and terms that are unfamiliar to many first-time home buyers. Here’s a helpful cheat sheet to guide you through the lingo.
An addition or change to a contract.
A secondary bid for a property the seller will accept if the first offer fails.
An agent representing a buyer in a home purchase.
The final act of a transaction wherein papers are signed, monies are exchanged and the title is transferred.
Comparative market analysis or competitive market analysis. A CMA is a report that shows prices of homes whichare comparable to a subject home and were recently sold, are currently on the market or were on the market but not sold within the listing period.
A provision of an agreement that must be satisfied before the contract is binding. Examples are a buyer’s right to obtain a satisfactory professional home inspection before purchasing the home and a buyer’s right to obtain a mortgage commitment.
A new offer as to price, terms and/or conditions made in reply to and superseding a prior offer.
A deficiency in a property that is easy or inexpensive to fix, such as chipping paint.
Also called an initial deposit. Something of value given as part of the purchase price to show “good faith” and to secure an agreement.
anything of value that is permanently attached to or a part of real property. (Real estate is legally called “real property,” while movables are called “personal property.”) Examples of fixtures include installed wall-to-wall carpeting, light fixtures, window coverings (may or may not be fixtures; most probably aren’t) landscaping and so on. Fixtures are a frequent subject of buyer and seller disputes. When in doubt, get it in writing.
Also called homeowner’s insurance. A policy that protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer.
Low homeowner’s association dues, but find out how “low” the dues are compared to other dues in the area.
Locked key-holding device affixed to a for-sale home so real estate professionals can gain entry into the home after obtaining permission from the listing agent
Leased parking area. This may come with additional cost.
A written contract between an owner (principal) and an agent (broker) authorizing the agent to sell, lease or rent the owner’s property in exchange for compensation.
The price for a property that a willing buyer and a willing seller would agree upon when neither is under abnormal pressure.
A highly designed residential project that features relatively dense clusters of houses which are usually surrounded by areas of commonly owned open space maintained by a non-profit community association.
Expansion potential, meaning there is extra space on the lot or the possibility of adding a room or even an upper level, subject to local zoning restrictions.
Also called a purchase and sale agreement. A legal document which binds a buyer to purchase a piece of property for a set price and also binds the seller to sell that property to the buyer.
The act of entering the written record of title to real property into the public records.
Multiple Listing Service : An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members who are real estate brokers. Membership isn’t open to the general public, although selected MLS data may be sold to real estate listing websites. MLS’s are local or regional. There is not an MLS which covers the entire country.
A real estate broker or sales associate who is a member of the National Association of REALTORS®. Not all real estate agents are REALTORS®.
an insurance policy which protects a lender’s or owner’s interest in real property from assorted types of unexpected or fraudulent claims of ownership. It is customary for the buyer to pay for the lender’s title insurance policy, which is almost always required, and it is customary for the owner to pay owners’ title insurance, which while not required, is almost always bought at the time of purchase.