News by Subject
Complete list of specialty news sections.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Mortgage Industry News
Subscription-based news for people who work in real estate finance.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from

Mortgage News Reprints
Put entire stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed stories for your web site or for your RSS reader.

News Archives
Archive of news entries.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Graphs
Directory of lenders, branch operators and mortgage service providers.
home advertise email RSS about us
HOT Topics Rates Glossary LO License Search
Consumer Mortgage News
Free mortgage news for current and prospective borrowers from a leading online mortgage industry news publication.

Understanding the Language of Home Lending

Michael Estrin: For PITI's sake: Mortgage acronyms defined

Oct. 9, 2015

By MICHAEL ESTRIN - Tribune News Service

If you've ever shopped for a mortgage, you've probably been overwhelmed by an alphabet soup of acronyms that seem to be designed to confuse the borrower at every turn.

The lingo is complex, but the definitions aren't hard to understand.

Here are the basics.

LE and CD
The Loan Estimate, or LE, is a document that provides details about a mortgage that the borrower has applied for.

The lender is required to mail or deliver it within 3 business days of the loan application.

The LE describes the interest rate on the mortgage, shows whether the rate is fixed or adjustable, summarizes the estimated loan costs, calculates how much money the borrower will need to take to the closing table and contains loan-comparison calculations that encourage borrowers to apply at more than one lender and compare loan offers.

Three days before closing, the lender is required to deliver the Closing Disclosure, or CD. This document itemizes the loan costs.

The CD is designed to make it fairly easy to compare with the LE, so borrowers can see if the lender changed any terms of the mortgage.

A debt-to-income ratio, or DTI, is how a lender determines how much a borrower can afford to pay every month.

By dividing the borrower's monthly liabilities by monthly income before taxes, the lender arrives at a percentage.

To qualify for the mortgage, borrowers usually need to fall below certain thresholds.

Typically, lenders don't want the monthly house payment to exceed 28 percent of income, and don't want all debt payments (house, auto, credit cards, student loan) to exceed 36 percent of income. Thresholds can vary by lender.

An LTV, or loan-to-value, is one of the key ratios that lenders use to assess the risk of a loan. The ratio is the mortgage divided by the purchase price or appraised value of the property.

When a property has multiple mortgages, lenders use a combined loan-to-value ratio, or CLTV.

Borrowers with an LTV or CLTV of less than 80 percent often get lower interest rates because lenders view such loans as less risky.

The Real Estate Settlement Procedures Act, or RESPA, and the Truth in Lending Act, or TILA, are the two main pieces of federal legislation that govern mortgage lending to consumers.

Among other things, RESPA requires lenders to provide borrowers with a Loan Estimate within three days of applying for a loan, as well as the Closing Disclosure three days before closing.

Private mortgage insurance, or PMI, is paid by the borrower to protect the lender's investment when the borrower makes a down payment of less than 20 percent on a home purchase, or when the borrower has less than 20 percent equity in a refinance.

But don't let the name fool you. The borrower pays the premium and the lender gets the benefit in the event of default.

On a loan insured by the Federal Housing Administration, the borrower pays a mortgage insurance premium, or MIP.

An adjustable-rate mortgage, or ARM, is a home loan in which the interest rate can change based on movement in an agreed-upon index, such as the London Interbank Offered Rate, or Libor.

Usually, ARMs start with lower rates than fixed loans. But there's always the risk that the borrower can eventually end up paying more than if he or she had secured a fixed rate.

A home-equity line of credit, or HELOC, allows homeowners to borrow cash against home equity.

Unlike a 2nd mortgage, borrowers can take what they need (up to the limit) and return for additional funds.

The credit limit is often determined by the loan-to-value ratio. Often a HELOC will have a variable rate.

VOR, VOM, VOD, VOE and Form 4506-T
When you apply for a home loan, the lender will want to verify what you said about your personal finances.

While different lenders will require different levels of documentation, the process will typically involve some or all of the following forms: verification of rent, or VOR; verification of mortgage, or VOM; verification of deposit, or VOD; and verification of employment, or VOE.

Each form will allow the lender to contact a party in the position to confirm some aspect of your finances.

Borrowers usually are asked to provide IRS Form 4506-T, which allows the lenders to see transcripts of tax returns.

Best understood as the bottom line on a monthly mortgage loan, PITI represents the sum total of principal, interest, taxes and insurance costs.

It's the monthly house payment.

Lenders divide PITI by the borrower's pretax monthly income to calculate DTI -- the debt-to-income ratio.

About the Writer
Michael Estrin writes for

next story

back to home page

To see more of or to subscribe to the newspaper, go to

Copyright (c) 2015,

Distributed by Tribune News Service.

This story was distributed by TNS - Tribune News Service
Refinance News
News about refinance programs, pricing and production.
H A R P 2.0 News
News stories about the H o m e Affordable Refinance Program including expanded program guidelines.

Copyright © 2016 Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

pricing engine directory

wholesale lender directory

More Mortgage News Resources ( full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

free mortgage news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

refinance news

reverse mortgage news

sales blog

secondary marketing

servicing news

subprime news

wholesale lenders

wireless mortgage news