There has been significant media coverage lately in regards to the real estate market in addition to several mortgage issues. No matter what the business, professionals often use inside jargon that are not commonly known by the majority of people. To provide some clarity, here are the most common terms used by mortgage professionals followed by simple explanations.

• ARM: (Adjustable Rate Mortgage) that after the completion of the chosen term, the rate can adjust yearly. Make sure that you are given the full terms of this type of loan so you are aware of the potential increases.
• Automated Underwriting: An online computer system that reviews the entire loan application and informs the mortgage company if the borrower is approved and what documentation may be needed to meet that approval.
• Conforming Mortgage: Loan that does not exceed $417,000.00
• Jumbo Mortgage: Loan that exceeds $417,000.00
• FICO: Your credit score. There are three scores provided by the different credit bureaus and mortgages companies have to use the middle number for qualifying purposes.
• PITI: Principal, Interest, Taxes, and Insurance which make up your monthly payment.
• DTI: (Debt to Income ratio) Compares how much you earn to how much you owe.
• LTV: Loan amount compared to appraised value
• Seller’s Concessions: A contribution to a borrower’s closing costs paid by the seller.
• Escrows: You will pay monthly along with your principal and interest, one-twelfth of the annual charges for real estate taxes and insurances. These funds will be held in an escrow account until the bills come due, at which time the Lender will use the funds to pay them.
• Fannie Mae and Freddie Mac: Federal Agencies that purchase home loans from lenders. Loans must meet the guidelines set forth by these agencies in order for them to purchase these loans.
• HUD-1 or Settlement Statement: Provided to the borrower at closing which details all the payments made or received by any parties connected with the real estate transaction.
• RESPA: The Real Estate Settlement Procedure Act was enacted to protect the consumer by mandating that certain disclosures be provided to the borrower within regulated deadlines so the consumer has a better handle on what the transaction will cost him. It also prohibits kickbacks.
• 1031 Exchange: The ability to defer capital gains when selling and buying like properties (selling 2nd home and buying 2nd home) for further information contact your attorney to determine if you are eligible