08/23/2018
For all aspiring home owners or current home owners here is something that you will encounter when you engage in the process of buying or selling property. Hope this helps!
Underwriter - If you hear me refer to the underwriter or the underwriting process, what I am referring to is the person or process responsible for making the final loan decision. Think of this as the person who puts the final stamp of approval on your loan.
LTV: The LTV (Loan to Value) ratio is simply a reference to how much you wish to borrow in comparison to how much the home you are purchasing is worth. As an example, let's say you needed a loan of $50,000 on a property that appraised for $100,000. In this instance your LTV would be 50% since you would be borrowing 50% of the value of the property.
DTI - This stands for Debt to Income Ratio. It is one of the primary statistics that determine whether your loan is approved or not. We look at your total debt of the mortgage and divide by the total income. This is known as the "front end" DTI. It measures housing expense. We then look at all debt with the new mortgage divided by your total income. This is known as the "back end" DTI. Generally, when the back end ratio reaches 45%, the loan becomes harder to approve. The factors that determine approval, are loan type, asset reserves and other factors. That is why it is very important that we went through the pre-approval process like we did.
Title Insurance - Title insurance shows up as a cost that must be paid at closing. What is the point of title insurance? This protects both the buyer and seller against legal defects in a home's title. In other words, this policy ensures that the seller has the legal right to transfer title to you, the buyer. If a problem occurs, the title company will pay the legal fees to correct the situation.
PITI - This little acronym stands for "Principal, Interest, Taxes and Insurance". This is the total monthly payment of your mortgage if you include everything - Property taxes, home owners insurance, interest, everything.
APR - This one confuses a lot of people. Your APR is a calculation that factors in the annual cost of a loan when you include all costs to obtain that loan (Closing Costs). This is why the APR will show as a higher rate than your interest rate - It's simple a figure that shows you the overall cost to obtain your loan.
LE - Loan Estimate. As of Oct 3rd, 2015 the Good Faith Estimate (GFE) and Truth In Lending (TIL) you may have seen before were discontinued for most mortgages and merged onto this new form. The information on the form includes your rate, APR, closing costs, payment with and without MI, etc. This is the new comparison form for different loans.
CD - Closing Disclosure. As of Oct 3rd, 2015 the HUD-1 Settlement Statement for most mortgages was discontinued. This Closing Disclosure or CD, is what took its place. It is meant to match up to the Loan Estimate above or LE to show what was disclosed at the start, and the CD shows what you will pay in the end. However one VERY important change was made when this form went into effect: Even after your loan is Cleared to Close, you MUST wait 3 business days (or 7 if if mailed) before you can close. That is why it is very important to sign documents electronically or in person ASAP.
