Mortgage Glossary
| 1003 | Uniform Residential Loan Application |
| AUS | 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. |
| Back-end ratio | The total of all monthly financial obligations, divided by the total gross monthly income. |
| CLTV | 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.
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%. |
| Front-end ratio | Total monthly primary housing expense divided by the total gross monthly income. |
| HOA | Homeowner’s 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. |
| Impounds/Escrows | An 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. |
| Lien | A form of encumbrance which usually makes a 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 recorder’s offices. |
| LTV | Loan-to-Value ratio; The percentage of the home’s price that is paid for by a mortgage. This ratio is calculated by dividing the loan amount by the purchase price of the appraised value.
Example: On a $100,000 house, if the buyer makes a $20,000 down payment and borrows 480,000, 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. |
| MI | 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 l3ender, it is paid monthly by the borrower. Mortgage insurance usually is required if the down payment is less than 20 percent of the sale price. Also known as PMI; Private Mortgage Insurance |
| P & I | Principal and Interest; The portion of a borrower’s monthly mortgage payment that represents repayment of the amount borrowed plus interest charges. |
| PITI | 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 HOA dues. |
| PMI | Private Mortgage Insurance; See MI. |
| Prepaid Interest | 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. |
| TLTV | Total loan-to-value ratio; See CLTV. |
| VOD | 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, the date the account was opened. |
| VOE | 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. |
| VOM | 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. |
