Getting a mortgage soon? Then you’d also better get ready learning a little bit of mortgage lingo, too. Lenders, like most any industry, have their own set of terms used when processing and approving a mortgage loan. There are a lot of them, but here are some of the most important to understand and getting a mortgage.

Annual Percentage Rate- The annual percentage rate, or APR as it’s commonly referred as, is the cost of the amount of money borrowed expressed as an annual rate. The APR includes your note rate along with additional closing fees needed in order to close your loan. The greater the difference between the note rate and the APR means there are more closing fees associated with the mortgage.

Automated Underwriting System- An automated underwriting system, or AUS, is an application that electronically issues a conditional loan approval after evaluating a loan application. The lender then follows the instructions listed on the AUS.

CLTV- CLTV is the acronym for Combined Loan to Value and compares the amount of money borrowed to the current market value of the property. If a sales price is $300,000 and there is a first mortgage of $240,000 and a second at $30,000, the total amount financed is $270,000, or 90 percent of $300,000. The CLTV is 90.

Debt to Income Ratios- Debt to income ratios, or debt ratios, compare monthly payments with gross monthly income. If a mortgage payment that includes principal and interest, taxes and insurance equals $3,000 and gross monthly income is $9,000, the debt ratio is .33.

Desktop Underwriter- Desktop Underwriter is an AUS developed by Fannie Mae and is the most used AUS of any. Freddie Mac’s version of an AUS is called Loan Prospector.

FHA- This is the Federal Housing Administration, first introduced in 1934 and today requires a 3.5 percent down payment and available to any qualified buyer and not limited to first time home buyers or special geographic considerations.

PITI- Principal, Interest, Taxes and Insurance.

Private Mortgage Insurance- PMI is an insurance policy that covers the difference between your down payment and the amount borrowed. If your first mortgage balance is greater than 80 percent of the sales price of the home, PMI will be required.

For more information or questions about mortgage loans,
Please visit Majestic Home Loan

Or Call  (855) 757-8748

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