Acronyms & Definitions
Equity
Equity is the amount your property is currently worth minus the amount of any existing mortgage on your property
Credit Report
A credit history is a record of a borrower's responsible repayment of debts
Co-signer or co-borrower
A second applicant for the loan
LOX- Letter of Explanation
A Internal document provided to a lender by the borrower to explain information provided on the application in more detail.
Solar Lien / UCC-1 Filing
A legal form that a creditor files to give notice that it has or may have an interest in the personal property of a debtor. Usually NOT against the Real Estate itself, but the property affixed to the home. i.e. Solar Panels will have a UCC-1 Filing against the Panels and Equipment, NOT the home.
Contractors / Mechanic’s Lien
A security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. Often used when work is completed, and Contractor is not paid in full by the homeowner.
Right of Rescission
On Owner Occupied Mortgage Refinance transactions. The borrowers are provided 3 business days after closing to "cool off" and ensure the refinance is in their best interest. Otherwise, they can rescind the transaction within the timeframe.
Purchase Agreement / Contract for Sale
An agreement between a buyer and seller of Real Estate
Loan Term
The length of a mortgage loan
Subordination
A Lienholder's agreement to retain their position once a primary lien is paid off via a refinance.
Promissory Note
The terms of the Agreement stated above. Rate and Term (15, 20, 30 years) are expressed and publically recorded
VOE - Verification of Employment VVOE and WVOE
A internal verification obtained by a lender to ensure the employment and income provided by a borrower is consistent and that they actively are recieving it
Lien
A Burden placed on a piece of collateral (property) to ensure that loaned funds are repaid. Once the loan is paid in full, the lien is often released
Deed of Trust
A Publically Recorded Agreement between a borrower and lender for financing on a purchase or refinance of a property
Qualification
A review of a borrower's ability to repay a mortgage loan. You either qualify or you don't. No points for extra credit
Appraisal
A Valuation of Real Estate. Full appraisals and Drive-by Apprasials are common versions.
LTV - Loan to Value
The percentage of the mortgage loan to the value of the home. Lenders MUST qualify loans based upon the LESSOR of purchase price or Appraised Value
Freddie Mac
A Government Sponsored Entitiy that is the other 1/2 of all Conventional Loan. Provides the Loan Prospector (LP) AUS System.
Fannie Mae
A Government Sponsored Entitiy that is 1/2 of all conventional loans. Provides the Desktop Underwriter (DU) AUS System
TBD Approval - “To Be Determined”
Prior to having a purchase contract signed, the application is reviewed and underwritten to ensure a majority of any issues are caught early.
Pre-Approval
An estimate of a borrower's ability to qualify for a loan based upon information provided on the loan application
Conditional Approval
A commitment to lend provided by a lender via their underwriter, once all conditions are met, naturally.
Clear to Close
Also known as a final approval. Once conditions are met by a borrower, the loan can move toward the closing and balancing of figures with the title company.
FICO - Fair Issac Corporation. Eg. Credit Scores
A Borrower's ability to repay debt reflected in a numerical fashion
AUS - Automated Underwriting System
Algorythmic systems provided by Fannie Mae and Freddie Mac to review a loan application and provide a decision on whether or not a loan is saleable on the secondary market.
Processor
Both a borrower and lender's best friend. They assist with document collection, retention, review, and submission to underwriting
Underwriter
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Loan Level Pricing Adjustment (LLPAs)
Brackets on the rate sheets cooresponding to the borrower's individual paramenters. Down payment, credit score, occupency, and housing type are common LLPAs
Overlay
Lender specific Guidelines for qualification beyond what is required by Fannie Mae, Freddie Mac, FHA, VA or USDA
2-1 and 1-0 Buydown
Loan Products where the interest is paid upfront to lower the borrower's monthly mortgage payments. 2-1 = 2% lower for year 1 and 1% lower for year 2
IRRRL - Interest Rate Reduction Refinance Loan - VA
A VA specific product that lowers the veteran's burden of interest rate without the need of income or home valuation documents
DPA - Down Payment Assistance
A Loan product offered by State Sponsored Entities to assist borrower's with down payment requirements. Often the Down Payment Assistance comes in the form of a Silent 2nd Lien
203k - Renovation Loan
A Loan product to purchase a home with the intent of occuping it and refurbish/renovate it.
Cash-Out Refinance
A Refinance loan to consolidate debt or obtain home equity as cash over $2,000
Rate/Term Refinance
A Refinance loan with less than $2,000 cash back to the borrower.
Piggyback/SIMO
HELOC products offered either as part of a conventional loan closing to avoid Jumbo or High-Balance loan products.
HELOC - Home Equity Line of Credit
A Secondary mortgage loan that is often a Revolving line of credit and not a primary mortgage lien.
VA - Veterans Affairs
A Goverment backed loan offered exclusively to Veteran's and their surviving spouses who have VA Entitlement established.
Non-QM - Portfolio/ Non-Qualified Mortgages
A Mortgage Product that is non-conforming and will be retained by the lender for servicing rather than sold on the MBS secondary market
Jumbo
Non-Qm Loans for amounts higher than the Conventional/Conforming Loan Limit
QM - Qualified Mortgages
The Big 5 Conventional (Fannie Mae and Freddie Mac, FHA, VA, USDA)
USDA - United States Department of Agriculture
A Government backed loan for Rural Home Purchases, the Property Address must be within established boundries.
FHA - Federal Housing Administration
A Government backed loan with both an upfront and monthly mortgage insurance expense
Conventional
One of the most common Loan products.
Multi-Unit Residence
A Building with multiple residences under 1 roof. i.e. duplex, triplex, 2-4 unit, etc.
Condo
A residence with a communal building that has residences above and below it.
SFR - Single Family Re
A Standalone, site/stick-built residence.
Manufactured Home
A Property that is built in a factory and shipped to the site in which it will reside
Occupancy
A borrower's intent to reside within a property or not.
SOFR - Standard Overnight Funds Rate
Also known as the Fed Funds Rate. The cost for banks to transfer funds between each other. NOT A PRIMARY DRIVER OF MORTGAGE RATES
Re-Price
Inter-day Interest Rate adjustements based upon market conditions. Can get better or worse
Par Rate
No Buydown/discount cost for the Interest Rate or Credit toward Closing Costs.
Taxes
1 of Two Guarantees in Life. Guaranteed to increase annually when Democrats are elected.
HOI - Homeowners Insurance
Borrower chosen Homeowner's insurance. Provider and Premium CAN be decided by Borrower. Coverage is decided by the Lender
Buy Down/Discount Point
Upfront Cost to obtain mortgage loan financing at a particular rate.
Earnest Money
Funds on Deposit (often with the settlement agent/title company) to show, in earnest, a borrower's intent to purchase a property.
PMI - Private Mortgage Insurance
Upfront or Monthly Mortgage Insurance charged when borrowers are above a certain Loan to Value Threshold.
MBS - Mortgage Backed Securities
The Primary Driver behind Mortgage Interest Rates. Inversly correlated to the rates. i.e. Bonds go Up, Rates go Down
APOR - Average Prime Offer Rate
The Industry Average at the Time of the Rate Lock. Qualified Mortgages must stay within a certain percentage of the industry average
ARM - Adjustable Rate Mortgage
A Mortgage loan with an adjusting Rate. 10/1,7/1,5/1,and 3/1 are common versions. The first number is the years prior to adjustment and the second one is how often it can adjust thereafter. (3/1 will adjust after 3 years and can adjust annually thereafter.
PITI(A) - Principal, Interest, Taxes and Insurance (HOA)
The total monthly payment for the average mortgage loan. (HOA dues are included to qualify, but not collected on the monthly statement)
Rate Lock
An agreement between the borrower and lender to lock the current rate sheet at a point in time. Protects the borrower against future rate increases.
APR - Annual Percentage Rate
The Annual Percentage Rate (APR) is the cost you pay each year to borrow money, including fees, expressed as a percentage.
HOA - Homeowners Association
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