We're talking to mortgage companies about financing a new home. What do all those letters stand for?
It's true that there are many abbreviated terms in a real estate dictionary. Here are a few you're likely to encounter:
DU: Desktop Underwriter is the automated underwriting engine developed by Fannie Mae for underwriting Fannie Mae and FHA eligible mortgages.
HUD: Housing and Urban Development is the cabinet department that oversees the U.S. housing market.
LO: Loan Officer is the person that takes the actual application for a mortgage. An LO can be a licensed mortgage broker or can work for a lender.
LTV: Loan-to-Value is the percentage of the mortgage compared to the purchase price or the appraised value.
PMI (or just MI): Private Mortgage Insurance is added to mortgages that are more than 80 percent of the loan value.
LPMI: Lender-Paid Mortgage Insurance, an arrangement in which the mortgage lender covers the cost of your mortgage insurance in exchange for a higher interest rate.
DTI: Debt-to-Income is the ratio of the borrower's gross monthly income to their consumer and/or housing debt.
HUD1: The statement that you receive that details all the costs and expenses involved in the closing of a mortgage.
GFE: Good Faith Estimate. The lender's estimate of what the closing costs of the applicant's mortgage will be.
TIL: Truth in Lending. A document you may receive within three business days of applying for a mortgage. It shows what the payments and the cost of the mortgage will be.
API: Annual Percentage Interest is the interest rate the borrower pays for the mortgage.
APR: Annual Percentage Rate. Calculates the cost of the mortgage by adding the fees and total interest to be paid over the life of the loan, divided by the loan principal, divided by the total days in the loan term, multiplied by 365, then multiplied again by 100.