Key Mortgage Terms & abbreviations

[kb9tbq]

By FirstSource (charles):

Here is a list of common abbreviations and what they mean.
APR: Annual Percentage Rate. If you are purchasing a home, this will be the same rate as your loan rate. If this is a refinance, it will be the same if you are paying all of the closing costs up front, if you are financing all or some of them into the loan, then this rate will be higher than the loan amount. Because you are paying for the closing costs over time, so if you add up all of the payments made, and divide it out, that gives you the true rate.

DTI: Debt To Income ratio. Take your total minimum payments, plus if this is a purchase, the proposed PITI, and divide that into your pre tax income, that gives you your DTI. The lower the better.

HELOC: Home Equity Line Of Credit. This is a credit line, so you are approved for a certain dollar amount, and you get checks to write. As you "take out money" by writing a check, you pay interest on that money, and you can pay back and take out again as you wish. There are two types of HELOC's, one is fixed rate, the other is adjustible rate, typically rate changes every month-based on a margin plus the prime rate.

LTV: Loan To Value: What percentage you are borrowing, of the total appraised value of the home. If this is a purchase, then you can borrow based on the lower of the sales price or the appraised value.

MI: Mortgage Insurance. (Sometimes called by a brand name PMI) Loans are packaged into 80% LTV or less loans. If you exceed this percentage, you will pay MI. Either hidden in the rate or upfront.

PITI: the total housing cost. Principal Interest Taxes Insurance.

[kb9tbq]

By Kristy:

Here's a link to all the mortgage info on the site, including a pretty big mortgage 'dictionary':

www.creditinfocenter.com/mortgage/

[sisflomi]

Huge Mortgage Dictonary from ameriquest.

http://www.ameriquestmortgage.com/learn/dictionary.cfm?section=learn&srv=srv2&CFID=6554746&CFTOKEN=47d28f2-ac7e45ea-9991-45a8-9941-f9518e125823

[sisflomi]

Really good glossary

http://callbrani.com/glossary.htm

[Charl]

By FirstSource (charles):

Here is a list of common abbreviations and what they mean.
APR: Annual Percentage Rate. If you are purchasing a home, this will be the same rate as your loan rate. If this is a refinance, it will be the same if you are paying all of the closing costs up front, if you are financing all or some of them into the loan, then this rate will be higher than the loan amount. Because you are paying for the closing costs over time, so if you add up all of the payments made, and divide it out, that gives you the true rate.

No, your APR is not the same as your interest rate no matter whether it is a purchase or a refinance. The APR is simply a tool consumers can use to to compare loans - it is the cost of your credit expressed as a yearly rate. What will be added into the APR are "pre-paid" finance charges (such as but not limited to points). The only time your APR will be the same as your interest rate is if there are absolutely $0 closing costs charged or if your lender discloses it incorrectly.

Your APR will be disclosed on your Truth-in-Lending Statement, along with the Finance Charge, Amount Financed, and Total of Payments. Don't let your Truth-in-Lending Statement fool you into thinking you have a great loan - get a Good Faith Estimate AT THE SAME TIME. Get a calculator and do your numbers, make sure they add up correctly.

Sorry for the correction, but it's there's an important distinction between Interest Rate and APR. A LO can send out a rate lock with 5% on it, and a TIL with 5.50% and their customer, thinking the APR is their interest rate, will think they're getting the old bait and switch when in reality the loan is being disclosed correctly as per Federal regulation. :D

[amortgageman]

On a purchase or refinance, an APR WILL be the same as the note rate if the closing costs are paid by the seller on a purchase or if it is a no closing cost loan (closing costs have been paid by yield spread). This may well be the way Charles structures his loans.

A Truth in Lending Disclosure and APR takes into consideration the following loan charges from the Good Faith Estimate.
1) Loan Origination Fee, 2) Discount Points (paid by borrower), 3) Tax Registration Fee, 4) Underwriting Fees, 5) Processing Fees 6) Prepaid Interest (paid at closing, and determined by the remaining days from the date the loan closes until the end of the month, (usually calculated as 15 days on the preliminary TIL)), 7) All interest paid over the life of the loan, 8) Mortgage Insurance Premiums/ Private Mortgage Insurance (this includes upfront fees on FHA/VA loans as well as monthly insurance premiums.

If none of these fees are charged on the loan, then the APR will be the same as the Note Rate. even though the consumer pays a small charge for prepaid interest.

Personally, with so many ways to hide charges on a loan through yield spread or whatever, the most important factor is the monthly payment amount and total of payments, because this is what the consumer will be paying on the loan. APR goes right out the window if a consumer terminates the loan before the loan has reached maturity. (How many loans are actually held for a full thirty years?)

[Charl]

On a purchase or refinance, an APR WILL be the same as the note rate if the closing costs are paid by the seller on a purchase or if it is a no closing cost loan (closing costs have been paid by yield spread).

hmmm...Technically, even if they are paid by the seller, they are still disclosed on the GFE and TIL, since the GFE should give all charges paid by both purchaser and seller. So, it still gets added into the APR. I think most LOS systems work the same - pull up an old borrower, put all of their closing costs as paid by seller and then calculate your TIL. You'll see the APR has added in the charges. Because it's still the costs of the credit being extended, no matter who is paying it.

Personally, with so many ways to hide charges on a loan through yield spread or whatever, the most important factor is the monthly payment amount and total of payments, because this is what the consumer will be paying on the loan. APR goes right out the window if a consumer terminates the loan before the loan has reached maturity.

Agreed and too bad that's not stressed enough :?

[amortgageman]

If the seller is paying the closing costs on a loan, the interest fees and other fees are not part of the buyers expenses. Therefore, if it is not a part of the buyer's expenses, how can it be an added fee (which will go into the TIL calculation)?

Put the scenario into your LOS system and let us know how your calculation comes out. Be sure to put checkmarks into all closing costs being paid by the seller. I already know.

[Charl]

If the seller is paying the closing costs on a loan, the interest fees and other fees are not part of the buyers expenses. Therefore, if it is not a part of the buyer's expenses, how can it be an added fee (which will go into the TIL calculation)?

Because it's part of the cost of the credit. No matter who pays, it's still a cost.

Put the scenario into your LOS system and let us know how your calculation comes out. Be sure to put checkmarks into all closing costs being paid by the seller

Well...I already do, but for example...just looking at one now here's how it works out:
Loan Amount $75,000
Interest Rate: 5.875
Fees, including points, etc - marked as PFC & paid by Seller: $1172.24
APR: 6.692%

I use Point but I think they all calculate the same.