The mortgage industry commonly uses acronyms when discussing home loans with borrowers. Poli Mortgage Group wants to help you become educated on some of the key terminology to enable you to speak with your loan officer more comfortably.
APR - Annual Percentage Rate
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.
ARM - Adjustable Rate Mortgage
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.
CLTV - Combined Loan to Value
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.
CTC - Cleared to Close
The final underwriting status before a loan moves to closing.
DTI - Debt to Income
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.
FHA - Federal Housing Administration
–- The federal agency who oversees the US Housing Market. FHA Mortgages are guaranteed by the Federal Government and offered by lenders and banks.
FICO - Fair Isaac & Company
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).
GFE - Good Faith Estimate
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.
HUD-1 Housing & Urban Development Settlement Statement
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.