Glossary

We know that getting a loan can be a complicated project. All kinds of new terms don’t make it any easier. We hope this page of definitions, explanations and examples (we’re adding new ones all the time–if you have questions about any you don’t see, let us know) will help.

AMORTIZATION

In the widest definition possible, amortization (pronounced: am-ohr-tih-ZAY-shun) is the scheduled process by which a loan’s principal balance pays down to $0. Read more on amortization in our article.

DEBT-TO-INCOME RATIO (DTI)

The (DTI) is calculated by dividing a borrower’s total monthly liabilities (minimum credit payments, auto loans / leases, child support, mortgage payments…) by the verifiable monthly income. Read more about debt-to-income ratio in our article.

FEDERAL HOUSING ADMINISTRATION

See FHA.

FHA

The Federal Housing Administration “provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.”

FHA is overseen by HUD.

Frost Mortgage is a Full Eagle licensed FHA lender.

HOME EQUITY CONVERSION MORTGAGE (HECM)

The official name of the FHA Reverse Mortgage program. See REVERSE MORTGAGE. Please click here if you have additional reverse mortgage questions. We will be happy to help.

HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF

See HUD.

HUD

The mission of the U.S. Department of Housing and Urban Development is ” to increase homeownership, support community development and increase access to affordable housing free from discrimination.”

JUMBO LOAN

According to InvestorWords.com, a Jumbo loan is a

home mortgage amount that exceeds the limit for qualifying for government-backed low interest rate loans. This limit is temporarily set at $729,750 and may change at the end of year 2008. Government-backed loans are bought or securitized by the federal agencies Fannie Mae (FNMA) and Freddie Mac (FHLMC) and are therefore available at comparatively low interest rates. To qualify for these rates when buying very expensive houses the borrowers have to pay down the over-the-limit amount from own resources.

LOAN-TO-VALUE (LTV)

The (LTV) is calculated differently depending on whether the new transaction is a purchase, refinance, or rehab loan. Basically, it is the amount of the new loan in comparison to the total value of the property. Read more about loan-to-value in our article.

MERS eRegistry

The MERS eRegistry “is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.”

MISMO

MISMO (Mortgage Industry Maintenance Standards Organization) “is the leading technology standards development body for the residential and commercial real estate finance industries [and] is a wholly owned subsidiary of the Mortgage Bankers Association. The MISMO standards are grounded in an open process to develop, promote and maintain voluntary electronic commerce procedures and standards that allow mortgage lenders, investors in real estate and mortgages, servicers, industry vendors, borrowers and other parties to exchange real estate finance-related information and eMortgages more securely, efficiently and economically.”

REVERSE MORTGAGE

As the department of Housing and Urban Development (HUD) explains:

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence.

Please click here if you have additional reverse mortgage questions. We will be happy to help.