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For any first-time homebuyer, the mortgage application process can be confusing and intimidating. Typically, there is a lot of information and documentation to gather, plus dozens of forms to complete before your mortgage request can be approved. It can also often be difficult to understand the meaning of the numerous acronyms used in the process.
There are lots of initials that stand for calculations, deductions, fees, and much more. Knowing what these acronyms stand for is usually crucial for the success of your mortgage experience. We are here to make your mortgage process as simple as we can. Here are some of the common mortgage acronyms and what they mean.
LE stands for loan estimate, and it is a document that provides details about a mortgage that you have applied for. Typically, you are required to mail or deliver it within three business days of the loan application. The LE summarizes all the estimated loan costs and other crucial information and shows the mortgage rates and whether they are fixed or adjustable.
The lender is required to deliver the Closing Disclosure (CD) at least three days before closing. The CD itemizes all the loan costs, and it is designed to make it relatively easy to compare with the LE so that you tell if the lender has changed any terms.
This stands for adjustable rate mortgage, which is a mortgage loan that has a fluctuating interest rate and a monthly payment plan. The fluctuations usually start to occur at least three years after the loan has been approved.
PMI stands for private mortgage insurance and is usually paid by the borrower to protect the lender’s investment whenever the borrower makes a down payment of less than 20% on a home purchase. Although it is the lender who pays the premiums, it is the lender who will benefit in the event of a default.
Debt to Income (DTI) ratio is the percentage of your income that usually goes towards paying your monthly bills. Mortgage lenders typically require a DTI below a specified percentage to qualify for a mortgage.
If you are ready to start the home buying process or have questions, contact the experts at Midland Mortgage Corporation today for more information.