Have you ever talked to a lender and had no idea what they were talking about because they used so many industry acronyms? Here’s a list of the most common mortgage acronyms to help you translate what you’re hearing.
1003 (pronounced ten-oh-three) = a loan application. The official name for a mortgage loan application is the Uniform Residential Loan Application, but no one wants to say that, so we refer to it by the number of the form, which is 1003.
AMI = area median income. The median income of everyone living in a certain area. Some loans require you to earn less than the AMI to qualify for the loan.
ARM = adjustable rate mortgage. A mortgage that has a fixed rate for a period of time, and after that period, the rate changes.
CHFA (pronounced chaffa) = Colorado Housing and Finance Authority. CHFA offers down payment assistance mortgages.
DTI = debt-to-income ratio. The ratio lenders use to determine if you earn enough to qualify for a mortgage.
FHA = Federal Housing Administration. A government agency that is part of HUD (see below), and which insures mortgages that have low interest rates and low down payment requirements.
FICO = Fair Isaac Corporation. This is the first company to offer credit scores. Many companies offer credit scores, but a FICO score is the one that mortgage lenders use.
FRM = fixed rate mortgage. A mortgage that has the same rate for the life of the loan.
HELOC = home equity line of credit. A line of credit (like a credit card) that is backed by the equity you have in your house. They usually have much lower interest rates than credit cards, and much higher credit limits.
HUD = Department of Housing and Urban Development. A government agency that oversees the housing policies of the United States.
LIBOR = London Interbank Offered Rate. The rate that banks charge each other when they lend money to another bank. The LIBOR is often used as the index for ARMs (see above).
LTV = loan-to-value. The loan amount divided by the value of the house. If you only are getting one loan, the loan to value + the down payment equals 100%. If you put 10% down, the LTV is 90%.
MI = mortgage insurance. An insurance policy that borrowers pay for, that benefits the lender if the house goes into foreclosure. Often referred to as PMI, which stands for private mortgage insurance.
PITI = principal, interest, taxes, and insurance. The four main components of a borrower’s mortgage payment.
PUD = planned unit development. A housing development that has a home owner’s association (HOA).
REO = real estate owned. Properties that a borrower owns in addition to the subject property (the property being purchased or refinanced).
TILA = Truth in Lending Act. A federal law that protects the rights of borrowers.
VA = US Department of Veterans Affairs. The government agency that oversees VA loans.
We hope this list of mortgage acronyms is helpful. Many lenders use industry jargon with their borrowers all the time. If this happens to you, don’t be afraid to ask the lender to explain what they are talking about. To keep things simple and clear, we try not to use too many mortgage acronyms when we talk to our borrowers, but if you ever need us, we’ll help translate.
Contact us if you have any questions.