Common abbreviations and slang -what do they mean?
LTV - Loan to Value
Sometimes you'll hear a loan officer mention LTV. This stands for loan-to-value. LTV is the amount financed as a percentage of the home's value. If you are borrowing $90,000 on your home which is worth $100,000, then your LTV is 90%. In general, the higher the LTV percentage, the higher the interest rates will be.
One common mortgage abbreviation is VOE, which stands for Verification Of Employment. Lenders will generally verify your employment at least once. Although you will be asked for your employer's phone number when you apply, lenders will use a phone directory or directory assistance when verifying your employment. The lender will ask to speak to Human Resources or a Manager. Often, the lender wil verify employment again on the day of closing or one day before.
DTI - Debt to Income Ratio
Another common term you may hear and one of the most important ones, along with LTV, is DTI or Debt to Income ratio. The DTI is used to detrmine if your income will support your new monthly payment on a mortgage. It factors in all of your current monthly debt from credit cards, car loans, etc. and then adds the new mortgage payment plus a monthly amount for property taxes and homeowners insurance. This gives you your new monthly debt which is then divided by your gross monthly income (before deductions). Some programs require a DTI of 40% while other loan programs go as high as 55%. In general, programs offering the best rate will require DTI's under 45%.
PMI - Private mortgage insurance.
This is insurance provided by 3rd-party insurers that protect lenders against loss if a borrower defaults. Typically, a borrower will have to pay for PMI if they are borrowing more than 80% of the home's value.
VOM - Verification of Mortgage
A Verification of Mortgage may be required when you refinance. It is used to determine if you have any late payments, and how many you may have had.
VOR - Verification of Rent
If you have been renting prior to purchasing a home your lender will require proof you have paid your rent on time for at least 12 months.
LOX - Letter of Explanation
If you have any unique aspects to your application, such as frequent job changes, isolated late payments in the past, no rental history, etc the lender may ask for a Letter of Explanation simply explaining the issue. If your explanation makes sense, and is reasonable lenders are often willing to accept your unique circumstances.
CTC - Clear to Close
CTC means your loan approval is clear of all conditions and you are ready to go to the closing table. You have made it to the end of the loan process and it is time to get ready to move into your new house or decide how best to use the cash you took out of your home equity.
VOD - Verification of Deposit
VOD's are often needed on purchases and refinances. The lender wants to make sure that there are sufficient funds to close on purchases. For refinances that lender wants to make sure there are sufficient funds to make mortgage payments.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owner
ARM - adjustable rate mortgage
Good Faith Estimate
An estimate of settlement charges paid by the borrower at closing. The Real Estate Settlement Procedures Act (RESPA) requires a Good Faith Estimate of settlement charges be provided to the borrower.
HELOC - Home Equity Line of Credit
A secured line of credit using the equity built on a home to lend with.
HUD - Department of Housing and Urban Development
A US government agency created to introduce federal housing and community development programs; manages the Federal Housing Administration (FHA).
VOE - Verification of Employment
Verification of employments, both verbal or written is required by lenders to verify the applicant's job status, hire date, title and probability of continued employment and in some cases income amount.
SIVA - Stated income, verified assets
This refers to the documentation required for a loan application. The income is stated and assets are verified. This is a good alternative for self-employed borrowers.
NINA - sometimes known as a No Doc loan
NINA stands for No Income, No Asset. This means that when your loan officer takes your loan application they leave the spots for income and assets blank. Neither income nor assets factor into whether you qualify for the loan because they are not provided. Generally your rate will be higher for a NINA loan.
TIL- Truth In Lending
The truth in lending shows borrowers their APR with certain closing costs calculated in to show them the true cost of their loan. It also lets borrowers know if their loan is a fixed rate or adjustable rate mortgage. An estimated payment schedule is included along with the total interest they would pay if they kept the loan for the duration of the loan term.
APR - Annual Percentage Rate
The annual percentage rate, or APR, is a representation of the cost of a loan. It is expressed as a yearly rate and includes interest, points, and other fees changed in connection with obtaining the loan. Its purpose is to allow the borrower to compare the cost of a cash vs. credit purchase. The Federal Truth-in-Lending Act requires the APR disclosure.
» DISCLAIMER: The information contained in this article on 'Common abbreviations and slang -what do they mean?' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.