DTI - Debt To Income

The ratio of housing expense to borrower income, which is used along with the expense ration and other factors in qualifying borrowers.
Example: Total income of $3,000 per month; Total Expense, Credit Card, Car Payment ect.. of $500; and Proposed House Payment of $1,000 would be 50 = (50%DTI)

Doc Type

There are many Different Document Types Available.
Full Document - last 2 years w-2's, 2 most recent pay stubs, 2 most recent bank statements.
Bank Statements - Bank Statements can be an alternative form of Full Documentation for specific lenders.
                            (6 - 12 months, NSF and large deposits will be detrimental to underwriting)
SIVA - Stated Income Verify Assets (A documentation requirement where the lender verifies the source of the income but not the amount). 
No Doc (NINA -  No Income No Asset) No documentation requirement where the applicant's assets are not disclosed.
No Ratio Loan - A documentation requirement where the applicant's income is disclosed and verified but not used in qualifying the borrower. 
                       The conventional maximum ratios of expense to income are not applied.

Employment

WE - wage earner (a individual that works for a company and receives a w-2 at the end of the year and receives bi-weekly pay stubs).
SE - self employed borrowers (a individual that works for themselves and does not receive w-2's and pay stubs) will have to provide alternative forms of documentation to obtain loan. Such as 12 months bank statements, Business and or Personal accepted, or Tax Returns with YTD financials.

FICO

Is the score in which the selected program must have to accept the provided conditions. Provided by the uploaded FICO credit report uploaded into the automated underwriting engine.

Ltv/Amt (loan to value / loan amount) example: 100/750000 is 100% Loan Amount up to $750,000.00

Ltv - The Loan Amount that can be loaned on the selected program per the credit grade provided from your uploaded credit report.
Amt - the maximum amount that can be loaned.
The loan amount divided by the lesser of the selling price or the appraised value. Also referred to as LTV.  The LTV and down payment are different ways of expressing the same set of facts. 

MtgLte Mortgage Lates
Allocates the number of times the borrower is allowed a late payment on a mortgage in the last 12 or 24 months.
0X30 = no mortgage lates, or rental lates in the last 12 months. NOTE: A Late is considered 30 days or over! 1X30 one month, UX30 unlimited.
MaxCo Maximum Cash Out allowed
The Dollar amount that the lender will advance to. 150k = $150,000. Depending on states regulation as to how much LTV allowed.
MaxCltv
The combined loan amount of the first and second liens the lenders will go up to.
MaxVac
Maximum loan amount on a vacation property allowed by lender.

Occupancy

The Type of Borrower that is allowed on the Loan Criteria.
O - Owner Occupied (borrow must occupy the property Live in it as homestead)
NO - Non Owner Occupied (borrow can purchase and lease property out also know as investment property)
V - Vacation Property or Second Home (borrower will not occupy property full time but will not lease property out or receive income)

Purpose

The Borrower has 3 different reasons in which they can originate a loan.
P - Purchase a Property
R - Refinance a Property
C - Receive Cash Out of the Equity of the Property also referred to as HELOC for out side second.

Loan Terms

100% loan

A loan with no down payment.  The loan amount equals the property value.

40-Year Mortgage

A mortgage with a term of 40 years.

80/20, 80/10/10, and 80/15/5 loan plans

Combination first mortgages for 80% of sale price or value and second mortgages for 10%, 15%, or 20%.  The purpose is to avoid mortgage insurance, which is required on first mortgages that exceed 80% of value. 

A-Credit

ARM Adjustable Rate Mortgage

A mortgage on which the interest rate, after an initial period, can be changed by the lender. While ARMs in many countries abroad allow rate changes at the lender's discretion ("discretionary ARMs"), in the US most ARMs base rate changes on a pre-selected interest rate index over which the lender has no control. These are "indexed ARMs". There is no discretion associated with rate changes on indexed ARMs.  For articles on ARMs.

Agreement of Sale

A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Alt-A

A mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. Also referred to as "A minus".

Alternative Documentation

Expedited and simpler documentation requirements designed to speed up the loan approval process.  Instead of verifying employment with the applicant's employer and bank deposits with the applicant's bank, the lender will accept paycheck stubs, W-2s, and the borrower's original bank statements.  Alternative documentation remains “full documentation”, as opposed to the other documentation options. 

Amortization Schedule

A table showing the mortgage payment, broken down by interest and amortization, the loan balance, tax and insurance payments if made by the lender, and the balance of the tax/insurance escrow account.

Amount Financed

On the Truth in Lending form, the loan amount less "prepaid finance charges", which are lender fees paid at closing.  For example, if the loan is for $100,000 and the borrower pays the lender $4,000 in fees, the amount financed is $96,000.  A useless number. 

Application

A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision.  In a narrower sense, the application refers to a standardized application form called the "1003" which the borrower is obliged to fill out. 

Application fee

A fee that some lenders charge to accept an application. It may or may not cover other costs such as a property appraisal or credit report, and it may or may not be refundable if the lender declines the loan.

Appraisal

A written estimate of a property's current market value prepared by an appraiser.  A professional with knowledge of real estate markets and skilled in the practice of appraisal.  When a property is appraised in connection with a loan, the appraiser is selected by the lender, but the appraisal fee is usually paid by the borrower.

APR

The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. It is a comprehensive measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges. It is also adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid ten years down the road. However, the APR is calculated on the assumption that the loan runs to term, and is therefore potentially deceptive for borrowers with short time horizons.

Approval

Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.

Authorized user

Someone authorized by the original credit card holder to use the holder’s card. The card-holder is responsible for the charges of the authorized user, but the authorized user is not responsible for paying any charges. This tactic is used when no trade lines are available and lenders require certain amount of existing trades as well as to improve. New Trade Line takes the credit from the original user and the credit rating is reported on the new authorized users account increasing score.

Automated Underwriting

A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the applicant will be approved, or whether the application will be forwarded to an underwriter. The quick decision is based on information provided by the applicant, which is subject to later verification, and other information retrieved electronically including information about the borrower's credit history and the subject property.

Cash Out Refi

Refinancing for an amount in excess of the balance on the old loan plus settlement costs. The borrower takes "cash-out" of the transaction.  This way of raising cash is usually an alternative to taking out a home equity loan.

Closing

On a home purchase, the process of transferring ownership from the seller to the buyer, the disbursement of funds from the buyer and the lender to the seller, and the execution of all the documents associated with the sale and the loan.  On a refinance, there is no transfer of ownership, but the closing includes repayment of the old lender.

Co-Borrowers

One or more persons who have signed the note, and are equally responsible for repaying the loan.  Unmarried co-borrowers who live together are advised to agree beforehand on what happens if they split. 

Correspondent Lender

A lender who delivers loans to a (usually larger) wholesale lender against prior price commitments the wholesaler has made to the correspondent.

Credit Report

A report from a credit bureau containing detailed information bearing on credit-worthiness, including the individual's credit history.

Credit Score FICO

A single numerical score, based on an individual's credit history, that measures that individual's credit worthiness.  Credit scores are as good as the algorithm used to derive them.  The most widely used credit score is called FICO for Fair Issac Co. which developed it. 

Debt consolidation

Rolling short-term debt into a home mortgage loan, either at the time of home purchase or later. For columns on the subject.

Disclosure

The array of laws and regulations dictating the information that must be disclosed to mortgage borrowers, and the method and timing of disclosure.

Documentation requirements

The set of lender requirements that specify how information about a loan applicant's income and assets must be provided, and how it will be used by the lender. 

Down Payment

The difference between the value of the property and the loan amount, expressed in dollars, or as a percentage of the price. For example, if the house sells for $100,000 and the loan is for $80,000, the down payment is $20,000 or 20%. To read articles about the down payment,

Equity

In connection with a home, the difference between the value of the home and the balance of outstanding mortgage loans on the home.

Escrow

An agreement that money or other objects of value be placed with a third party for safe keeping, pending the performance of some promised act by one of the parties to the agreement.  It is common for home mortgage transactions to include an escrow agreement where the borrower adds a specified amount for taxes and hazard insurance to the regular monthly mortgage payment.  The money goes into an escrow account out of which the lender pays the taxes and insurance when they come due. 

Foreclosure

Foreclosures are allowed with specific lenders. You will be able to determine which loans will fit your matrix by selecting this filter. Programs will change as well as rates depending on the degree of risk. The more recent a Foreclosure to higher the degree of risk.

FNMA

One of two Federal agencies that purchase home loans from lenders. (The other is Freddie Mac).  Both agencies finance their purchases primarily by packaging mortgages into pools, then issuing securities against the pools.  The securities are guaranteed by the agencies.  They also raise funds by selling notes and other liabilities. 

FHA Mortgage

A mortgage on which the lender is insured against loss by the Federal Housing Administration, with the borrower paying the mortgage insurance premium. The major advantage of an FHA mortgage is that the required down payment is very low, but the maximum loan amount is also low.  For articles on FHA.

First Mortgage

A mortgage that has a first-priority claim against the property in the event the borrower defaults on the loan.  For example, a borrower defaults on a loan secured by a property worth $100,000 net of sale costs.  The property has a first mortgage with a balance of $90,000 and a second mortgage with a balance of $15,000.  The first mortgage lender can collect $90,000 plus any unpaid interest and foreclosure costs.  The second mortgage lender can collect only what is left of the $100,000. 

Fixed Rate Mortgage

A mortgage on which the interest rate and monthly mortgage payment remain unchanged throughout the term of the mortgage. 

Forbearance agreement

An agreement by the lender not to exercise the legal right to foreclose in exchange for an agreement by the borrower to a payment plan that will cure the borrower’s delinquency.  

Full Index Rate

The current index value plus the margin on an ARM.  Usually, initial interst rates on ARMs are below the fully indexed rate.  If the index does not change from its initial level, after the initial rate period ends the interest rate will rise to the fully indexed rate after a period determined by the interest rate increase. For example, if the initial rate is 4% for 1 year, the fully indexed rate 7%, and the rate adjusts every year subject to a 1% rate increase cap, the 7% rate will be reached at the end of the third year. 

Gift of equity

A sale price below market value, where the difference is a gift from the sellers to the buyers.  Such gifts are usually between family members.  Lenders will usually allow the gift to count as down payment. 

GFE Good Faith Estimate

The form that lists the settlement charges the borrower must pay at closing, which the lender is obliged to provide the borrower within three business days of receiving the loan application.

Hazard Insurance

Insurance purchased by the borrower, and required by the lender, to protect the property against loss from fire and other hazards. Also known as "homeowner insurance".

Homeowners Insurance

Insurance purchased by the borrower, and required by the lender, to protect the property against loss from fire and other hazards. It is the second "I" in PITI.

Home equity line of credit (HELOC) 

A mortgage set up as a line of credit against which a borrower can draw up to a maximum amount, as opposed to a loan for a fixed dollar amount. For example, using a standard mortgage you might borrow $150,000, which would be paid out in its entirety at closing.  Using a HELOC instead, you receive the lender’s promise to advance you up to $150,000, in an amount and at a time of your choosing.  You can draw on the line by writing a check, using a special credit card, or in other ways.

HUD1 form

The form a borrower receives at closing that details all the payments and receipts among the parties in a real estate transaction, including borrower, lender, home seller, mortgage broker and various other service providers.

Hybrid ARM

An ARM on which the initial rate holds for some period, during which it is "fixed-rate", after which it becomes adjustable rate. Generally, the term is applied to ARMs with initial rate periods of 3 years or longer.

Index ARM

An ARM on which the interest rate adjusts mechanically based on changes in an interest rate index, as opposed to a "discretionary ARM" on which the lender can change the rate at any time subject only to advance notice.  All ARMs in the US are indexed. 

Interest-only mortgage

A mortgage on which for some period the monthly mortgage payment consists of interest only.  During that period, the loan balance remains unchanged.

Interest payment

The dollar amount of interest paid each month.  It is the same as long as the payment is equal to or greater than than the interest due.  Otherwise, the interest payment is equal to the scheduled payment.

Inertest Rate

The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A rate of 6%, for example, means a rate of 1/2% per month.  A mortgage interest rate is a rate on a loan secured by a specific property. 

Interest Adjustment Period

The frequency of rate adjustments on an ARM after the rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, a 3/3 ARM is one in which both periods are 3 years while a 3/1 ARM has an initial rate period of 3 years after which the rate adjusts every year.

Internet mortgages

Mortgages delivered using the internet as a major part of the communication process between the borrower and the lender. 

Investor

In real estate, a borrower who owns or purchases a property as an investment rather than as a residence.

Jumbo mortgage

A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac, $333,700 in 2004. However, some lenders use the term to refer to programs for even larger loans, such as, e.g., greater than $500,000.

Late Payment

A payment received after the grace period stipulated in the note. Most mortgage grace periods are 10 or 15 days.

Lease-to-own purchase

A transaction in which a hopeful home buyer leases a home with an option to buy it within a specified period.

Lien

The lender’s right to claim the borrower’s property in the event the borrower defaults. If there is more than one lien, the claim of the lender holding the first lien will be satisfied before the claim of the lender holding the second lien, which in turn will be satisfied before the claim of a lender holding a third lien, etc.

Loan Amount

The amount the borrower promises to repay, as set forth in the mortgage contract. It differs from the amount of cash disbursed by the lender by the amount of points and other upfront costs included in the loan.

Margin

The amount added to the interest rate index ranging generally from 2 to 3 percentage points, to obtain the fully indexed interest rate on an ARM.

Minimum down payment

The minimum allowable ratio of down payment to sale price on any program. If the minimum is 10%, for example, it means that you must make a down payment of at least $10,000 on a $100,000 house, or $20,000 on a $200,000 house.   For articles on down payment.

Mortgage

A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan.  The term “mortgage” or “mortgage loan” is used loosely to refer both to the lien and the loan.  In most cases, they are defined in two separate documents: a mortgage and a note.

Mortgage Broker

An independent contractor who offers the loan products of multiple lenders. A mortgage broker counsels on the loans available from different wholesalers and processes the loan.  When the file is complete, but sometimes sooner, the lender underwrites the loan. 

Mortgage Company

A mortgage lender who sells all loans in the secondary market. Mortgage companies may or may not service the loans they originate.

MI

Insurance against loss provided to a mortgage lender in the event of borrower default.  In most cases, the borrower pays the premiums.  For articles on mortgage insurance.

Mortgage insurance premium

The up-front and/or periodic charges that the borrower pays for mortgage insurance. There are different mortgage insurance plans with differing combinations of up-front, monthly and annual premiums.  The most widely used premium plan is a monthly charge with no upfront premium.

The party who disburses funds to the borrower at the closing table.  The lender receives the note evidencing the borrower's indebtedness and obligation to repay, and the mortgage which is the lien on the subject property.

Mortgage Payment

The monthly payment of interest and principal made by the borrower.

Mortgage program

A bundle of mortgage characteristics that lenders see fit to distinguish as a distinct instrument.  These include whether it is an FRM, ARM, or Balloon; the term; the initial rate period on an ARM; whether it is FHA-insured or VA-guaranteed; and if is not FHA or VA, whether it is "conforming" (eligible for purchase by Fannie Mae or Freddie Mac) or "non-conforming".

Negative AM

A rise in the loan balance when the mortgage payment is less than the interest due.  Sometimes called "deferred interest."  Negative amortization arises most frequently on ARMs.  

Non-Conforming

A mortgage that does not meet the purchase requirements of the two Federal agencies, Fannie Mae and Freddie Mac, because it is too large or for other reasons such as poor credit or inadequate documentation.

Non-Permanent resident alien

A non-citizen without a green card who is employed in the US. As distinct from a permanent resident alien, who has a green card and who lenders do not distinguish from US citizens. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than US citizens.

Non-warrantable condo

A condominium that does not meet meet lender requirements.

Option ARM

An adjustable rate mortgage with flexible payment options, monthly interest rate adjustments, and very low minimum payments in the early years. They carry a risk of very large payments in later years.

Origination Fee

An upfront fee charged by some lenders, usually expressed as a percent of the loan amount.  It should be added to points in determining the total fees charged by the lender that are expressed as a percent of the loan amount.  Unlike points, however, an origination fee does not vary with the interest rate.

Payment period

The period over which the borrower is obliged to make payments.  On most mortgages, the payment period is a month, but on some it is biweekly.

Payment shock

A very large increase in the payment on an ARM that may surprise the borrower.  Also used to refer to a large difference between the rent being paid by a first-time home buyer, and the monthly housing expense on the purchased home.

Per diem interest

Interest from the day of closing to the first day of the following month. In some cases, however, the borrower can get a credit at closing by making the first payment a month earlier.

Piggyback mortgage

A combination of a first mortgage for 80% of property value, and a second for 5%, 10%, 15%, or 20% of value. These combinations are designated as 80/5/15, 80/10/10, 80/15/5, and 80/20/0, respectively. Piggybacks are a substitute for mortgage insurance for borrowers who cannot put 20% down.

PITI

Shorthand for principal, interest, taxes and insurance, which are the components of the monthly housing expense.

PMI

Private mortgage insurance, as distinguished from insurance provided by government under FHA and VA. 

Points

An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "3 points" means a charge equal to 3% of the loan balance. It is common today for lenders to offer a wide range of rate/point combinations. On a negative point loan the lender contributes cash toward meeting closing costs. Positive and negative points are sometimes termed "discounts" and "premiums," respectively. 

Pre-approval

A commitment by a lender to make a mortgage loan to a specified borrower, prior to the identification of a specific property.  It is designed to make it easier to shop for a house. Unlike a pre-qualification, the lender checks the applicant's credit.

Predatory lending

A variety of unsavory lender practices designed to take advantage of unwary borrowers.

Prepayment penalty

A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment, or a specified number of months interest. 

Primary residence

The house in which the borrower will live most of the time, as distinct from a second home or an investor property that will be rented. 

Processing

Compiling and maintaining the file of information about a mortgage transaction, including the credit report, appraisal, verification of employment and assets, and so on. The processing file is handed off to underwriting for the loan decision.

Qualification

The process of determining whether a prospective borrower has the ability, meaning sufficient assets and income, to repay a loan.  Qualification is sometimes referred to as "pre-qualification" because it is subject to verification of the information provided by the applicant. Qualification is short of approval because it does not take account of the credit history of the borrower. Qualified borrowers may ultimately be turned down because, while they have demonstrated the capacity to repay, a poor credit history suggests that they may be unwilling to pay. 
Standards imposed by lenders as conditions for granting loans, including maximum ratios of housing expense and total expense to income, maximum loan amounts, maximum loan-to-value ratios, and so on.  Less comprehensive than underwriting requirements, which  take account of the borrower's credit record. 

Refinance

Paying off an old loan while simultaneously taking a new one. This may be done to reduce borrowing costs under conditions where the borrower can obtain a new loan at an interest rate below the rate on the existing loan.  It may be done to raise cash, as an alternative to a home equity loan.  Or it may be done to reduce the monthly payment.

Required cash

The total cash required of the home buyer to close the transaction, including down payment, points and fixed dollar charges paid to the lender, any portion of the mortgage insurance premium that is paid up-front, and other settlement charges associated with the transaction such as title insurance, taxes, etc. The total required cash is shown on the GFE that every borrower receives.

RESPA

The Real Estate Settlement Procedures Act, a Federal consumer protection statute first enacted in 1974.  RESPA was designed to protect home purchasers and owners shopping for settlement services by mandating certain disclosures, and prohibiting referral fees and kickbacks. 

Reverse Mortgage

A loan to an elderly home owner on which the balance rises over time, and which is not repaid until the owner dies, sells the house, or moves out permanently. 

Right of rescission

The right of refinancing borrowers, under the Truth in Lending Act, to cancel the deal at no cost to themselves within 3 days of closing.

Seller contribution 2nd Lien

A contribution to a borrower's down payment or settlement costs made by a home seller, as an alternative to a price reduction.  

Self-employed borrower

A borrower who must document income using tax returns rather than information provided by an employer.  This complicates the process somewhat. 

Seller Financing

Provision of a mortgage by the seller of a house, often a second mortgage, as a condition of the sale.

Silent second

A second mortgage offered at preferential (subsidized) terms to those who qualify.  For example, a labor union may offer members who are first-time home buyers a silent second to finance closing costs or the down payment.  The second might bear no interest, and might not be repayable until the first mortgage is repaid or the property is sold.

Subordinate financing

A second mortgage on the property which is not paid off when a new loan is taken out.  The second mortgage lender must allow subordination of the second to the new first mortgage.

Subordination policy

The policy of a second mortgage lender for allowing a borrower to refinance the first mortgage while leaving the second in place.  

Sub-prime borrower

A borrower with poor credit, who can borrow only from sub-prime lenders who specialize in dealing with borrowers who have poor credit. Such borrowers pay more than prime borrowers, and are sometimes taken advantage of. Not all borrowers who deal with sub-prime lenders, however, are sub-prime borrowers. Some could obtain loans from mainstream lenders if they properly shop the market.

Sub-prime lender

A lender who specializes in lending to sub-prime borrowers.

Term

The period used to calculate the monthly mortgage payment. The term is usually but not always the same as the maturity. On a 7-year balloon loan, for example, the maturity is 7 years but the term in most cases is 30 years. For articles on the subject.

Title insurance

Insurance against loss arising from problems connected to the title to property.  

Total expense ratio

The ratio of Total housing expenseto borrower income.

Total interest payments

The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include up-front cash payments, and it is not adjusted for the time value of money.

Total Expense Ration

The ratio of housing expense plus current debt service payments to borrower income, which is used (along with the housing expense rations and other factors) in qualifying borrowers.

Truth in Lending (TIL)

The Federal law that specifies the information that must be provided to borrowers on different types of loans.  Also, the form used to disclose this information. 

Underwriting

The process of examining all the data about a borrower's property and transaction to determine whether the mortgage applied for by the borrower should be issued.  The person who does this is called an underwriter. 

Underwriting Requirements

The standards imposed by lenders in determining whether a borrower qualifies for a loan. These standards are more comprehensive than qualification requirements in that they include an evaluation of the borrower’s creditworthiness.  

VA mortgage

A mortgage with no down payment requirement, available only to ex-servicemen and women as well as those on active duty, on which the lender is insured against loss by the Veterans Administration. 

Waive escrows

Authorization by the lender for the borrower to pay taxes and insurance directly. This is in contrast to the standard procedure where the lender adds a charge to the monthly mortgage payment that is deposited in an escrow account, from which the lender pays the borrower’s taxes and insurance when they are due. On some loans lenders will not waive escrows, and on loans where waiver is permitted lenders are likely either to charge for it in the form of a small increase in points, or restrict it to borrowers making a large down payment. 

Wholesale Lender

A lender who provides loans through mortgage brokers or correspondents. The mortgage broker or correspondent initiates the transaction, takes the borrower's application, and processes the loan.