Uniform Residential Loan Application.
Automated Underwriting System; A computer application that streamlines the processing of loan applications and provides a recommendation to the lender to approve the loan, or to refer it to manual underwriting. Also referred to as DU (Desktop Underwriter), DO (Desktop Originator) and LPA (Loan Product Advisor). DU and DO are driven by Fannie Mae guidelines and LPA is driven by Freddie Mac guidelines.
Debt-to-income Ratio (Back-End Ratio)
The total of all monthly financial obligations, divided by the total gross monthly income.
Total monthly primary housing expense divided by the total gross monthly income.
Combined loan-to-value ratio; The overall mortgage debt, expressed as a percentage of the home's fair market value. This is calculated by dividing the combined loan amount by the purchase price or the appraised value (whichever is less). Also referred to as total loan-value ratio (TLTV).
Example: Someone with a $50,000 first mortgage and a $20,000 home equity loan secured against a $100,000 house would have a CLTV ratio of 70%. When refinancing a mortgage, the loan-to-value ratio is computed using the appraised value of the home, not the sale price.
A lien, charge or liability against a property that affects or limits the ability to file a fee simple title, or affects the value of the property, for example, mortgages or easements.
Freddie Mac; Federal Home Loan Mortgage Corporation.
Fannie Mae; Federal National Mortgage Association.
Homeowners Association; An elected group that governs a subdivision or planned community. It collects fees from owners to maintain common areas and enforce covenants, conditions and restrictions set by the developer and the association itself.
A trust-like account established by a lender to accumulate funds for payment of property taxes, hazard insurance, and mortgage insurance. The funds are collected monthly with the mortgage payment and the taxes/insurance are paid, when due, by the lender.
A form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation, e.g., mortgages, judgments, taxes, deed of trust, etc.
One who holds a lien has the right to sell the property to obtain the money, or to recover the money when the property is sold. Valid liens are filed with county recorders' offices.
Loan-to-value ratio; The ratio of loan to fair market value of the home. This ratio is calculated by dividing the loan amount by the purchase price or the appraised value (whichever is less).
Example: On a $100,000 house, if the buyer makes a $20,000 down payment and borrows $80,000, the mortgage is 80% of the price of the house. Therefore, the loan-to-value ratio is 80%.
When refinancing a mortgage, the loan-to-value ratio is computed using the appraised value of the home, not the sale price.
Mortgage Insurance; A policy that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan.
Although mortgage insurance protects the lender, it is paid monthly by the borrower. Mortgage insurance is required on conventional loans when the loan-to-value ratio is less than 80 percent.
Also known as PMI; Private Mortgage Insurance.
A term used to describe the difference between a borrower's current housing expense and the proposed housing expense, when the proposed expense constitutes an increase in monthly debt obligation for housing.
Principal and Interest; The portion of a borrower's monthly mortgage payment that represents repayment of the amount borrowed plus interest charges.
PITI (Principal, Interest, Taxes and Insurance)
Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance, representing the total sum of these components. This amount would also include any Homeowners Association (HOA) dues.
Private Mortgage Insurance; See MI.
1. The amount of interest paid at the time of closing to cover the period from the day the loan is funded through the end of that month.
2. Interest that a borrower pays before it is due, usually to save taxes.
Planned Unit Development; A real estate project in which individuals hold title to a residential lot and home while the common facilities are owned and maintained by a homeowners association.
Total loan-to-value ratio; See CLTV.
Trust Account; A legal entity set up to transfer assets/property/income from the Trustor (creator) to the beneficiary. The administration of the transfer is done by a third party (Executor or Trustee).
Verification of Deposit; A form completed by a banking institution to confirm a borrower's account balances and history, including information such as the current account balance, average balance, and the date the account was opened.
Verification of Employment; A form completed by a borrower's employer to confirm the borrower's employment history and salary, including information such as the borrower's rate of pay, current year-to-date earnings, position and date of hire.
Verification of Mortgage; A form completed by a lender to confirm information regarding a borrower's mortgage, including the borrower's payment history, monthly payment, interest rate, etc.