Every industry has its own language, industry-specific terms and acronyms. These can be confusing to anyone who is not part of the daily operations of a specific sector, and the mortgage industry is no exception.
To help you understand, First Fidelity Mortgage, Inc. has created this handy reference guide. Here you’ll find valuable information allowing you to comprehend and communicate your mortgage and financial needs effectively.
Loan Estimate (LE)
A loan estimate is a three-page form that you receive after applying for a mortgage. It provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan.
Closing Disclosure (CD)
A closing disclosure is a form that provides final details about the mortgage loan you have selected. It includes the terms you have agreed to, your projected monthly payments, and how much you will pay in fees and other costs.
Loan-to-value (LTV)
The loan-to-value ratio or LTV is a ratio of the loan amount you can obtain given the market value of your property. Generally, the LTV for a loan against property ranges between 40% and 75% of your property’s appraised value.
Debt-to-income (DTI)
The debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments and is used by lenders to determine your borrowing risk. A low debt-to-income ratio demonstrates a good balance between debt and income.
Private mortgage insurance (PMI)
Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender in the event you stop making payments on your loan.
Lender paid mortgage insurance (LPMI)
Lender-paid mortgage insurance (LPMI) is private mortgage insurance arranged and paid for by your mortgage lender. With lender-paid mortgage insurance, your mortgage insurance is either built into the closing costs or paid via a higher interest rate.
Borrower paid mortgage insurance (BPMI)
The most common type of private mortgage insurance is borrower-paid mortgage insurance (BPMI). BPMI comes in the form of an additional monthly fee that you pay with your mortgage payment.
Principal, interest, taxes, and insurance (PITI)
Principal, interest, taxes, insurance (PITI) refers to mortgage payments made by an individual. It includes payments made towards loan insurance premiums and property taxes (municipal taxes).
Adjustable-rate mortgage (ARM)
An adjustable-rate mortgage (ARM) is a mortgage with a variable interest rate. With an ARM, the initial interest rate is fixed for a period of time. After that, the interest rate applied on the outstanding balance resets periodically, at yearly or even monthly intervals.
Federal National Mortgage Association (Fannie Mae)
The Federal National Mortgage Association, commonly known as Fannie Mae, is a United States government-sponsored enterprise. Fannie Mae purchases mortgages from lending institutions in an effort to increase affordable lending activity at those institutions.
Federal Home Loan Mortgage Company (Freddie Mac)
Freddie Mac is the officially recognized nickname for the Federal Home Loan Mortgage Corp. (FHLMC). The role of Freddie Mac is to buy a large number of loans from mortgage lenders, then combine them and sell them as mortgage-backed securities.
Federal Housing Administration (FHA)
The FHA’s primary function is to ensure home mortgage loans are made by banks and other private lenders, thereby encouraging them to make more loans to prospective home buyers. FHA loans allow for easier qualification, lower down payment, the financing of closing costs, savings for the borrower and more affordable mortgage insurance.
The Department of Veterans Affairs (VA)
The Department of Veterans Affairs (VA) is responsible for providing vital services to America’s veterans. Through VA, veterans can avail of business loans as well as housing and home loan guarantees.
If you’re looking for mortgage solutions, reach out to the experts at First Fidelity Mortgage, Inc. As the best mortgage firm in Louisville, Kentucky, we render quality and efficient services and help you find some of the lowest mortgage rates and closing costs in the industry. Whether we’re helping with a home purchase, refinance, debt consolidation, cash out, or financing home improvements, our industry-leading turn-times get what you need faster. Our mortgage brokers will help you get the right mortgage for you.
Please view our complete list of services here, or get in touch with us here.
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