makeitmissoula.com
It seems to me that the English language is going through a change. We are all speaking in shorthand-a verbal onslaught of acronyms. Some have to do with everyday conversation-LOL, BTW, and BFF.
More and more I am noticing that business professionals are throwing out the acronyms of their trade to be absorbed and sorted through by industry outsiders-in other words, people who would have no idea what those scrambled letters mean. For example here are some of the acronyms of the mortgage industry:
APR, CFPB, DTI, PITI, MIP, PMI, AMC, GFE, TIL, RESPA, ARM, HELOC, and of course my personal favorites the "Vee" triplets, VOR, VOD, and VOE.
OMG indeed. private-person.com
I have seen the glazed look come over the faces of people who are being acronymed by other mortgage loan professionals. Really people-why would anyone outside of this crazy industry care to learn a VOE from an AMC. But-just in case you get caught in an acronym windstorm let me translate the ones you are most likely to run into in a mortgage transaction in case you run into a mortgage loan originator who has forgotten how to speak their native tongue.
AMC-this is a new one that has come out of the mortgage melt down. It stands for Appraisal Management Company. AMC's are the government's way of keeping appraisers, lenders, real estate agents and title companies from colluding on the value of a home. Each lender has an association with an AMC. Appraisers sign up to accept assignments for appraisals from the AMC. Lenders place the order and an appraiser can choose to accept the appraisal or leave it for the next guy. (Which is why in our area, counties outside of Tippecanoe can have a longer wait time for appraisals.) By law the lender is not allowed to choose the appraiser or communicate to the appraiser directly. All communication must go through the AMC so no undue pressure can be placed on the appraiser to establish a value that is inflated.
GFE- This means Good Faith Estimate. Often real estate agents toss this acronym around. When they tell a buyer to get a GFE what they really mean is to get a worksheet with the closing cost breakdown of the loan they are considering-which is an excellent idea. The actual Good Faith Estimate can only be presented once the property has been identified, credit has been pulled, income has been documented, employment has been presented and an interest rate is used to create the payment-so essentially you get the official Good Faith Estimate once you have a property under contract. What can be given to a potential borrower is a worksheet upon which the GFE is based. For the most part, the fees should not change appreciably. Third party fees are allowed a 10% shift, all lender related fees such as underwriting, lender compensation, processing and administration fees are fixed. Typically I find borrowers can follow the worksheet much better than the GFE but the GFE was put in place as an attempt for transparency to try to alleviate buyer confusion on the total cost of fees. In my opinion and apparently also the opinion of the Consumer Financial Protection Bureau (CFPB) it is more confusing than what it replaced. The CFPB has recreated the forms for the GFE as well as the Truth in Lending form (TIL)into an easier format to be used beginning next year.
TIL-Truth in Lending. This is a form that expresses the lending fees in another manner-evaluating the interest rate plus some of the finance costs as a percentage rate-the APR-annual percentage rate. The APR takes the note rate or the interest rate you will receive on your loan and adds in certain finance fees then does a calculation and expresses these fees as a percentage over 12 months time. It is a complicated, confusing process, but the upshot is the APR is a comparative number-not the actual rate you pay on the mortgage. I often have buyers call asking what our APR is that day. The have confused the interest rate with the comparative number. Often people are told to try to get a lender's APR but that is dependent on the type of loan, loan amount the rate and the closing costs. A lender can produce one but it may be incorrect if the borrower hasn't been fully prequalified for the loan type and loan amount.
DTI-this means debt to income ratio. There is Housing DTI and Total DTI. Most loans use the two ratios-housing typically being not more than about 33% of total gross monthly income and total DTI is the ratio for total consumer debt plus the housing cost. What is commonly referred to as the bottom ratio typically is acceptable up to about 43% thought FHA loans will go higher with good credit and or assets. If you are figuring your own DTI you need to be sure to add in an estimate for taxes and insurance. In Indiana real estate taxes that have no exemptions can make the DTI too high so caution should be used when consdiering vacant properties.
VOR, VOE, VOD-these abbreviations represent verifications-of rent, employment and deposit. The lender verifies all these items during the processing of your loan. But I have heard mortgage loan originators tell clients-all we are waiting on is the VOE before you are fully approved. If you don't know what that stands for you are being told nothing.
PITI-this is an acronym for Principal and interest, taxes and insurance. In other words your total payment with everything in it.
HUD- The department of Housing and Urban Development. You may not hear this in the context of your loan but you will hear it in the context of housing. HUD is the agency responsible for implementing many of the requirements of the Dodd/Frank Financial Reform Act. They also oversee VA and FHA mortgage lending.
HUD-1-this is the settlement statement that you will receive upon closing your loan. This form was established by HUD-which is why it has HUD in the title. The CFPB (this is a quiz-quick what does that stand for???) Which now is overseeing lending rather than HUD will implement a new settlement form which compliments the new combined GFE and TIL next year.
defininghopes.com
There are other acronyms of course-we seem as a society to be heading in that direction, but hopefully I have given you enough information that you will be able to translate what you are hearing during your mortgage transaction.
blog.themarketinganaylyst.com
No comments:
Post a Comment