What you ought to know (#4)...

What do all the different acronyms mean that you use in lending?

Just like in real estate sales, there are many different acronyms that are used on the lending side of the business. The most common that you will hear are: PMI, LTV, CLTV, DTI, PITI, FICO, APR, ARM, HELOC, and SISA. Below is a brief description of each term:

PMI ? Private Mortgage Insurance, or sometimes just MI (Mortgage Insurance). This is typically required on all loans with less than a 20% down payment. It is an insurance policy, paid by the borrower, with benefits to the lender, in the event the borrower defaults on the loan.

LTV ? Loan To Value. The percentage of the loan compared to the value of the property.

CLTV ? Combined Loan To Value. Same as above, but the combination of all loans that might be on the property (Firsts, seconds, HELOC, etc.).

DTI ? Debt to Income Ratio (debts divided by gross income)

PITI ? Principle, Interest, Taxes, and Insurance

FICO ? Fair, Isaac and Company ? the company that invented the most widely used credit scoring system.

APR ? Annual Percentage Rate ? this is the cost of money borrowed expressed in an annual rate. When borrowers get a rate quote, that does not take in to consideration, the cost of getting that rate, the APR expresses the actual cost, and is a tool for borrowers to compare exact loan types with one another3;but they need to make sure they are comparing "apples to apples".

ARM ? Adjustable Rate Mortgage

HELOC ? Home Equity Line Of Credit

SISA ? Stated Income Stated Assets ? a type of loan product where full documentation is not required. These products do charge a higher rate, as there is more risk exposure to the lender.

Bottom-line, if you have questions, you should talk with Arrowhead Home Loans.