Common Mortgage Acronyms
- APR Annual Percentage Rate
- ARM Adjustable Rate Mortgage CNDO Condominium
- COE Certificate of Eligibility (VA loans)
- DPLX Duplex
- DTI Debt‐to‐Income Ratio (Front end/ Back End)
- ECOA Equal Credit Opportunity Act
- Escrow Funds held in a borrowers account to pay taxes and insurance
- Escrow Holdback Funds held in escrow for repair work on a property not completed prior to closing
- FHA Federal Housing Administration
- GFE Good Faith Estimate
- GNMA Government National Mortgage Association
- HELOC Home Equity Line of Credit
- HOI Homeowners (Hazard) Insurance (EOI Evidence of Insurance)
- HUD Housing and Urban Development
- LTV Loan‐to‐Value Ratio (LTV/CLTV Loan‐to‐Value/ Combined Loan‐to‐Value)
- MIP Mortgage Insurance Premium
- PI/PITI Principal and Interest/ Principal/ Interest/ Taxes/ Insurance
- PMI Private Mortgage Insurance (conventional)
- REPC Real Estate Purchase Contract
- SFR Single Family Residence (detached)
- UFMIP Up‐Front Mortgage Insurance Premium
- USDA United States Department of Agriculture
- UW Underwriting/ Underwriter
- VA Veteran’s Administration
- VOD Verification of Deposit
- VOE Verification of Employment (VVOE Verbal Verification of Employment
- VOM Verification of Mortgage
- VOR Verification of Rent

Terms
Acquisition cost ‐
Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs.

A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

Literally to "kill off" (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.

A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add‐on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.
Annuity ‐
A series of income payments of receipts over a period of years.

A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more.

The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.

The determination of property value based on recent sales information of similar properties.

These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

Buying property and assuming the responsibility of the existing mortgage.

Increases in property value due to fluctuations in the market, inflation, et al.

Valuable items, encumbered or not, owned by a person, corporation, or entity.

Behaves like a fixed‐rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.

The final lump sum that is paid at the end of the balloon mortgage.

A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loans until after two years after declaration and a re‐establishment of credit.

An estimate of the total costs for securing a real estate loan, that is given to borrowers prior to closing.
Bill of Sale ‐
A written document that transfers a title to personal property.

Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.

A veteran's evidence of entitlement for a VA‐guaranteed loan.

A title that is free of liens or any legal question as to the ownership of the property.

Final arrangements to transfer title of property as well as allocate charges and credits.
Closing Costs ‐
Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non‐recurring," and "pre‐paid." Non‐recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre‐paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate.

A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

A loan for up to and including $417,000 in the continental United States (Alaska and Hawaii limits are higher).

A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.
Credit Loan ‐
A credit loan is a mortgage that is issued on only the financial strength of a borrower, without great regard for collateral.

Borrowers are rated by lenders according to the borrower's credit‐worthiness or risk profile. Credit ratings are expressed as letter grades such as A‐, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge‐offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.

A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

The ratio of aggregate monthly debt to aggregate monthly income.

A legal document which affects the transfer of ownership of real estate from the seller to the buyer.

Synonymous to a mortgage. A deed of trust or mortgage is obtained, depending on the state in which the borrower will reside.
Default ‐
The failure to make payments on a loan.
Delinquency ‐
Late‐ or non‐payments of principal, interest, taxes, or insurance.
Deposit ‐
A lump sum given in advance as security. A deposit is always paid of a larger amount to be paid in the future. In mortgage and real estate terms, this is called the "earnest money deposit."
Depreciation ‐
In real estate and mortgage terms, the decline in the property value.

A term used in government subsidized loans, such as FHA and VA loans. Refers to any "points" (one percent of the loan amount) paid in addition to the one percent loan origination fee.
Down Payment ‐
Money paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.

A deposit made by a potential home buyer to show that they are serious about purchasing the property.
Equity ‐
The difference between the current market value of a property and the principal balance of all outstanding loans.
The Federal National Mortgage Association is a congressionally chartered, shareholder‐owned company. This organization is the nation's largest supplier of home mortgage funds.
Federal Housing Administration (FHA) ‐
An agency under the U.S. Department of Housing and Urban Development (HUD), it insures loans made by approved lenders to qualified borrowers, in accordance with its regulations.
Fees ‐
Up‐front costs associated with a loan. Clicking on the word VIEW shown under the "Fees Detail" column on the quotes results page will display detailed information about the financial institution's fees and requirements pertaining to that rate.

A government‐backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD).

The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.

A lender's agreement to provide a loan to a specific borrower on a specific property.

A mortgage that has priority over other mortgages.

A mortgage where the interest rate does not change for the life of the loan.

The postponement for a limited time of a portion or all the payments on a loan when a borrower is delinquent.
Foreclosure ‐
A legal procedure in which real estate is sold by the lender to pay a defaulting borrower's debt .

A loan that can be taken against the amount accumulated in the 401(k)/403(b) plans, if so allowed by the plan administrator. Loans against these plans are an acceptable source of down payment for most types of other loans.

An estimate of charges which a borrower is likely to incur in connection with a loan closing.

A type of mortgage insured by the FHA (Federal Housing Authority), VA (Veteran's Administration), or RHS (Rural Housing Authority).

Provides funds for government loans and takes over special assistance and liquidation functions of Fannie Mae.
Gross Monthly Income ‐
The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.
Hazard Insurance ‐
A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes.

Also known as the reverse annuity mortgage. This mortgage provides that instead of making payments to a lender, the lender makes payments to the individual. Older homeowners are able to convert home equity into cash this way, in the form of monthly payments. Borrowers don't qualify on the basis of income, but on the value of his or her home. Such a loan does not have to be repaid until the borrower no longer occupies the property.

A mortgage loan in second position that allows a borrower to obtain cash drawn against home equity, up to a certain amount.

A thorough assessment by a professional regarding the structural and mechanical condition of a property.

An insurance policy that combines personal liability insurance and hazard insurance for a home and its contents.

The ratio of the monthly housing payment to total gross monthly income. Also called Payment‐to‐ Income Ratio or Front‐End Ratio.
Department of Housing and Urban Development; regulates Fannie Mae and Ginny Mae.
Index ‐
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one‐ three‐, and five‐year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs‐of‐Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share, or title in property.

The percentage of an amount of money that's paid for its use over a specified time period.

A loan for $417,001 or more in the continental United States (Alaska and Hawaii limits are higher). These limits are set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

A written agreement between a property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is assumed to be the purchase price, for refinances the value is determined by an appraisal.
Loan ‐
The principal, or amount of total borrowed money, that is repaid with interest.

The amount of money that you intend on borrowing from a financial institution for the purchase of your home. Subtracting the down payment from the purchase price of the home will provide you with the loan amount.
Loan Origination ‐
What the process of obtaining new loans is called.
Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

A legal document that pledges property to a creditor for the repayment of the loan, and is the term used to describe the loan itself. Some states use the term First Trust Deeds to refer to mortgage loans.

The lender in a mortgage agreement.


A mortgage company that originates loans, joining the borrower and lender for a real estate loan, earning a placement fee.

The factor used for rapid computation of the annual payment needed to amortize a loan.

Insurance that covers the lender against losses incurred as a result of a default on a home loan. This is usually required on all loans that have a loan‐to‐value higher than eighty percent. Mortgages that have an 80% LTV that do not require mortgage insurance have higher interest rates. The lenders then pay the mortgage insurance themselves. In addition, FHA loans and some first‐time homebuyer programs require mortgage insurance regardless of the loan‐to‐value.
Negative Amortization ‐
Essentially occurs when a borrower makes a minimum payment that may not cover the interest that is due. Loan balance then increases as a result.

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.

PITI stands for principal, interest, taxes, and insurance. An "impounded" loan means that the monthly payment covers all of these, and perhaps mortgage insurance, if your loan so calls for it. If one does not have an "impounded" account, then the lender still calculates these amounts separately and uses it as part of determining one's debt‐to‐income ratio.

A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI (principal, interest, taxes, and insurance) must equal the amount that the borrower would have to pay for PITI for a determined number of months.

A type of ownership where individuals actually own the building or unit they reside in, but shared areas are owned jointly with the other members of the development or established association.

A term used to mean that a borrower has completed a loan application and provided debt, income, and savings information that has been reviewed and pre‐approved by an underwriter.
Pre‐Paids ‐
Expenses such as taxes, insurance, and assessments, which are paid in advance of their due date, and on a prorated basis at closing.
Pre‐Payment ‐
Any amount paid so as to reduce the principal before the due date.
Prepayment Penalty ‐
Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule.
Pre‐Qualification ‐
After a loan officer has made inquiries about a borrower's debt, income, and savings, he or she can write a written statement (pre‐qualification) about the borrower's chances for qualifying for a home loan.
Principal ‐
The amount of debt, not counting interest, left on a loan.

Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan‐to‐Value Ratio is greater than 80%.

A written promise to repay a specified amount over a specified period of time.

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

A person licensed to negotiate and transact the sale of real estate.

A real estate agent, broker, or associate that holds an active membership in a local real estate board that is affiliated with the National Association of Realtors.

Determining the final estimate of value by weighing the results of the various approaches in an appraisal.

The clause in a trust deed that gives the title back to the borrower when the loan is paid in full.

The formal filing of documents affecting a property's title.

The process of paying off one loan with the proceeds from a new loan, using the same property as security.
A credit arrangement that allows a customer to borrow against a pre‐approved line of credit used to purchase goods and services. The borrower is responsible for the actual amount borrowed plus any interest due.
A mortgage that has a lien position subordinate to the first mortgage.
Secured Loan ‐
A loan that is backed by collateral.
Servicer ‐
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
A drawing or map the shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Tax Lien ‐
A claim against real estate for the amount of its unpaid taxes.
Title Insurance -
Title insurance policies typically insure a home buyer against any title-search errors or mistakes, and against loss due to disputes over property ownership.
Title ‐
A legal document showing a person's right to or ownership of a property.
Title Company ‐
A company that specializes in examining and insuring titles to real estate.
Total Debt Ratio ‐
Monthly debt and housing payments divided by gross monthly income. Also known as Back‐End Ratio.
Transfer of Ownership ‐
The means by which the ownership of a property changes hands. Examples of such include the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchases, and any exchange of possession of the property under a land sales contract or any other land trust device.
Truth‐in‐Lending Law ‐
Provision that requires lenders to reveal the actual costs of borrowing.
VA Loan ‐
A government‐backed mortgage loan supported by the US Veterans Administration.
Zero Percent Financing ‐
A loan with no interest in the contract. The IRS imputes 10 percent for both borrower and lender.
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