When you do research for a new home loan, it is not
uncommon to hear industry "shorthand" being used.
You may not always choose to have the person
explain the terms for fear of looking uninformed.
Here are some common acronyms and terms that
may help you better understand what you are
hearing.
APR The Annual Percentage Rate gives the
borrower a basis for comparing competing
interest rate and fee quotes by taking into
account the effect of the finance charges
expressed as an effective interest rate.
AUS An Automated Underwriting System is a
web-based program available to mortgage
lenders. With proper data input, it renders
an underwriting decision based on the
compatibility of the loan request to FNMA
and FHLMC guidelines.
CLTV Combined Loan to Value ratio is the
comparison of the loan amounts on the
first loan plus the second loan in relation to
the value of the home. For example, a first
loan amount of $300,000 combined with a
second loan amount of $100,000 on a
property valued at $500,000 represents a
CLTV of 80%.
FHA The Federal Housing Administration is part
of the Department of Housing and Urban
Development. FHA provides a system for
insurance of loans with lesser down payments.
FHLMC Known as "Freddie Mac", the Federal Home
Loan Mortgage Corporation was created in
1970 as a Government Sponsored Enterprise
to purchase loans from lenders and provide
liquidity to the mortgage market.
FICO FICO stands for Fair Isaac Corporation and
Scores has become the generic label applied to
credit scoring models. Through proprietary
modeling, each of the three repositories -
Experian, TransUnion and Equifax - produce
scores ranging from 300 to 850. Higher
scores are designed to be predictive of
more credit-worthy borrowers.
FNMA Known as "Fannie Mae", the Federal National
Mortgage Association was created in 1938 as
a Government Sponsored Enterprise to
purchase loans from lenders and provide
liquidity to the mortgage market.
GFE The Good Faith Estimate is a required
disclosure from lenders to the borrower, and
is to be provided within 3 business days from
receipt of a loan application. It's purpose is
to provide an estimate of fees and costs in
obtaining the home loan.
LTV Loan to Value ratio is the comparison of the
loan amount on the first loan in relation to the
value of the home. For example, a loan
amount of $400,000 on a property valued at
$500,000 represents an LTV of 80%.
Points A point equals 1 percent of the loan amount.
For example, on a loan amount of $200,000,
one point equals $2,000. When interest rates
are quoted there is often an origination fee
disclosed based on a certain number of points.
Pricing Refers to a combination of interest rate and
origination fee quoted on your transaction.
For example, you may hear pricing models
such as 4.5% with a loan fee of 1 point (see
above) or 4.75% with a loan fee of zero points.
TIL The Truth-In-Lending disclosure is designed
to show the borrower an effective interest
rate based on the combination of interest rate
and finance charges. The most significant part
of the disclosure is the Annual Percentate Rate.
VA The Home Loan Guaranty division of the
Department of Veterans Affairs guarantees
home loans to lenders for loans made to eligible
veterans. Loans made under this program often
allow the veteran to purchase a home with no
down payment.
uncommon to hear industry "shorthand" being used.
You may not always choose to have the person
explain the terms for fear of looking uninformed.
Here are some common acronyms and terms that
may help you better understand what you are
hearing.
APR The Annual Percentage Rate gives the
borrower a basis for comparing competing
interest rate and fee quotes by taking into
account the effect of the finance charges
expressed as an effective interest rate.
AUS An Automated Underwriting System is a
web-based program available to mortgage
lenders. With proper data input, it renders
an underwriting decision based on the
compatibility of the loan request to FNMA
and FHLMC guidelines.
CLTV Combined Loan to Value ratio is the
comparison of the loan amounts on the
first loan plus the second loan in relation to
the value of the home. For example, a first
loan amount of $300,000 combined with a
second loan amount of $100,000 on a
property valued at $500,000 represents a
CLTV of 80%.
FHA The Federal Housing Administration is part
of the Department of Housing and Urban
Development. FHA provides a system for
insurance of loans with lesser down payments.
FHLMC Known as "Freddie Mac", the Federal Home
Loan Mortgage Corporation was created in
1970 as a Government Sponsored Enterprise
to purchase loans from lenders and provide
liquidity to the mortgage market.
FICO FICO stands for Fair Isaac Corporation and
Scores has become the generic label applied to
credit scoring models. Through proprietary
modeling, each of the three repositories -
Experian, TransUnion and Equifax - produce
scores ranging from 300 to 850. Higher
scores are designed to be predictive of
more credit-worthy borrowers.
FNMA Known as "Fannie Mae", the Federal National
Mortgage Association was created in 1938 as
a Government Sponsored Enterprise to
purchase loans from lenders and provide
liquidity to the mortgage market.
GFE The Good Faith Estimate is a required
disclosure from lenders to the borrower, and
is to be provided within 3 business days from
receipt of a loan application. It's purpose is
to provide an estimate of fees and costs in
obtaining the home loan.
LTV Loan to Value ratio is the comparison of the
loan amount on the first loan in relation to the
value of the home. For example, a loan
amount of $400,000 on a property valued at
$500,000 represents an LTV of 80%.
Points A point equals 1 percent of the loan amount.
For example, on a loan amount of $200,000,
one point equals $2,000. When interest rates
are quoted there is often an origination fee
disclosed based on a certain number of points.
Pricing Refers to a combination of interest rate and
origination fee quoted on your transaction.
For example, you may hear pricing models
such as 4.5% with a loan fee of 1 point (see
above) or 4.75% with a loan fee of zero points.
TIL The Truth-In-Lending disclosure is designed
to show the borrower an effective interest
rate based on the combination of interest rate
and finance charges. The most significant part
of the disclosure is the Annual Percentate Rate.
VA The Home Loan Guaranty division of the
Department of Veterans Affairs guarantees
home loans to lenders for loans made to eligible
veterans. Loans made under this program often
allow the veteran to purchase a home with no
down payment.
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