MIP Mortgage Insurance Premium
This protects the lender against potential loan default. The policy is paid by the borrower on FHA loans. There is an upfront payment required, followed by monthly payments.
It can be overwhelming shopping for a Mortgage, particularly when industry lingo includes more acronyms than the average person would care to remember! We have organized an explanation of important acronyms to help you stay informed.
LTV Loan-to-Value Ratio
This ratio is used to help the lender determine the amount of risk involved with the loan. It is the mortgage amount divided by the purchase price (or Appraised Value) of the home.
PITI Principal, Interest, Tax, and Insurance
This is the total monthly mortgage payment expected from the borrower.
RESPA The Real Estate Settlement Procedures Act
This is the Federal legislation that governs the mortgage industry, it was created to help protect consumers. It requires that lenders provide a borrower with a Loan Estimate 3 business days after applying for a loan. It also requires that the lender provide the borrower with a Closing Disclosure three days prior to closing.
LE Loan Estimate
This is a detailed estimate of the total loan costs. It is to be delivered to the borrower three business days following the loan application. It includes lenders fees, escrow, title insurance, appraisal fee (in some cases), taxes and any other expenses. It gives the borrower an idea of how much they need to bring to the closing table.
TILA Truth in Lending Act
This piece of Federal legislation covers all credit transactions including mortgages. It requires lenders to provide the borrower with clear and accurate terms and costs. This protect the public, allowing borrowers to make more informed decisions.
PMI Private Mortgage Insurance
This insurance protects the lender against potential default on a loan. It must be paid by the borrower when the Loan-to-Value Ratio is over 80%.
DITI Debt-to-Income Ratio
This formula is used to determine what monthly mortgage payment will be affordable to the buyer. The borrower's monthly liabilities are divided by the borrower's monthly income, which equals the percentage of monthly gross income that goes toward paying debts.
CD Closing Disclosure
This document is delivered to the borrow by the lender three days prior to closing. It is the final itemized list of loan costs. It will include the same items listed in the Loan Estimate, provided prior. This form should be compared to the Loan Estimate, to ensure that the lender terms are the same.