Mortgage Terminology

APR

Annual Percentage Rate (APR) is the rate of interest you pay over the life of your loan plus any additional lender fees (discount points, origination fees, mortgage insurance, underwriting, processing fees, etc.). The APR is typically higher than your interest rate because the APR includes all lender fees.

DTI

Debt to income ratio is your monthly debt payments divided by your monthly income. Lenders use this number to determine qualification amounts.

ESCROW

Your escrow account is an account that is paid into each month with a portion of your monthly payment. 1/12 of homeowners’ premium and 1/12 of property taxes are a portion of your monthly mortgage payment when you have an escrow account. The lender will use this account to pay your annual property tax bill and homeowners insurance premium. An escrow account is required with government loans and conventional loans with less than 20% down payment.

Equity

Equity is the portion of the value of your home less the amount you owe on a mortgage loan. For example, if your home value is $200000 and you owe $150000 on a mortgage loan, your equity portion is $50000.

LTV

Loan to Value Ratio. The loan amount(s) on a home divided by the value or sales price. For example, $200,000 loan amount divided by $250,000 value equals 80% loan to value.

TERM

Number of years reflected on your mortgage note to re-pay the loan in full. Terms can be from 10-30 years.

Prorated Prepaids

Based on the day of closing, prorated portions of the property tax bill and HOA bill may be collected from you and paid to the seller or credited to you from the seller.

Title/Deed

Deed reflects the property owner, property address, and property description. This document is recorded at the clerk’s office. A title search is performed to determine if the property has any outstanding liens prior to purchase. All liens must be paid in full by the seller at or before closing in order for the title/deed to change hands. Terms to Know