Here’s a little trade secret: financial institutions LOVE acronyms. No, not LOL and FOMO, but more like FICO and LTV. Not to worry. At FFCCU (that’s Firefighters Community Credit Union, BTW), we’ve compiled the ultimate list of mortgage abbreviations and mortgage acronyms that you might come across when applying for and filling out all the paperwork for your home loan. This includes acronyms you might see if you’re a Veteran and applying for a VA loan – or if you’re a first-time homebuyer, looking at special government programs tailored to your needs.
While you may not use these acronyms in text conversations with your BFF, you’ll appreciate having a handy, quick reference guide to help you fully understand this major investment in your life – and your future.
All the Mortgage Terms and Acronyms You Ever Needed to Know – and a Few Bonus Ones
ALTA: American Land Title Association. ALTA is the national trade association representing title insurance agents.
AMC: Appraisal Management Company. Mortgage lenders will typically work with an AMC to schedule an appraisal on the property being financed. AMCs then hire an appraiser, who determines the fair market value of the home and submits the report to the lender.
AMI: Area Median Income. This tool, available on Fannie Mae’s website, lets you or your lender lookup the typical median income for a specific geographic area.
APR: Annual Percentage Rate. The annual amount of interest you’ll pay on your loan PLUS additional costs such as closing costs and lender fees.
ARM: Adjustable Rate Mortgage. Some mortgages have APRs that adjust after a certain number of years – three years, five years, etc. and will adjust annually every year thereafter. These rates can go up or down depending on the Federal Reserve’s published rate at the time.
ATR: Ability to Repay. Many lenders have a calculation that looks at your ability to repay the loan. This may be indicated in certain loan documents as ATR.
Bps: Basis points. A fraction of an interest rate. This term can be used to indicate how much an interest rate increases or decreases.
BWR: Borrower. That’s YOU! Whomever is borrowing the money is considered the BWR.
CBWR: Co-Borrower. Sometimes home loans are a joint purchase. If your spouse, parent or significant other is going in on the loan with you, they will be listed as a CBWR.
CC: Closing Costs. All lenders have processing and filing fees associated with initiating a mortgage. Closing costs cover these fees and typically range between 3 to 6%, depending on the lender. It helps to shop around and compare closing costs!
CD: Closing Disclosure. Just prior to closing on your home, your lender will provide you with a CD document that details all the final costs associated with the loan, as well as details on your projected monthly payment.
COE: Certificate of Eligibility. Also known as VA Form 26-1880, this is issued to show you are eligible for a loan through the Department of Veterans Affairs.
Condo Association/Co-op/Condominium Cooperative: Your first home purchase may be a condo or townhome. If it is, it will likely include monthly fees, paid to a condo association, to cover shared areas (like a pool or fitness center) and future capital expenses (like new roofing). These monthly fees will need to be disclosed to your lender.
CRV: Certificate of Reasonable Value. If you are hoping to use a VA Loan, the Department of Veterans Affairs will need to issue this document. It is based on the appraisal of the property you are planning to purchase.
CTC: Clear-To-Close. When you see these letters (or this phrase), you’re in the home stretch! All of your documentation is ready to close on your loan.
DO: Desktop Originator. This computer program, offered by Fannie Mae, helps lenders gather information related to your loan. It works in conjunction with Desktop Underwriter (DU).
DTI: Debt-to-Income. When considering whether to offer you a loan, financial institutions will look at your debt-to-income ratio – how much you’re looking to borrow, what this means in terms of a mortgage payment and how other debts you might have (credit cards, car payments, etc.) will factor in.
DU: Desktop Underwriter. This computer program, offered by Fannie Mae, is an automated system that helps lenders determine a person’s loan eligibility. It works in conjunction with Desktop Originator.
ECOA: Equal Credit Opportunity Act. A Federal law enacted in 1974 that states that lenders cannot discriminate against an applicant based on race, gender, religion or nationality.
EFT: Electronic Fund Transfer. You may choose to make your down payment electronically via a fund transfer.
EMA: Earnest Money Agreement. Earnest money is a deposit you put down on a property when making your initial offer as a sign of your serious interest to purchase. The agreement sets the terms for refunding the deposit, should the deal fall through.
FAIR: Fair Access to Insurance Requirement. This program can help you find homeowners’ insurance coverage if you’re having difficulty due to high-risk factors or other issues.
FANNIE MAE: Sometimes referred to as FNMA, or the Federal National Mortgage Association. Fannie Mae is a U.S. Government program, sponsored by Congress in 1938, to support low- and moderate-income mortgage borrowers and renters. Fannie Mae doesn’t originate mortgage loans or lend money to borrowers. Instead Fannie Mae purchases mortgages from lenders to encourage more lending.
FCRA: Fair Credit Reporting Act. The Federal Trade Commission regulates who can receive your credit information, assuring only eligible parties have access to your consumer credit report.
FHA Loans: Federal Housing Administration Loans. FHA is a government agency that oversees the U.S. housing market. FHA Loans are given through most financial institutions but are guaranteed by the Federal Government. These loan programs are designed to open more lending opportunities to more people.
FHFA: Federal Housing Finance Agency. This government agency regulates Fannie Mae, Freddie Mac and several other Federal-sponsored loan programs.
FICO: Fair Isaac Corporation. You’ve likely heard of a FICO score – a “credit score” that you’re assigned based on your credit history. FICO is the company that created and determines your score – and your potential credit worthiness – based on a variety of data and history.
FMV: Fair Market Value. Every home has a value associated with it based on similar home sales in the same market.
FREDDIE MAC: Also referred to as FHLMC, or the Federal Home Loan Mortgage Corporation. Congress created Freddie Mac in 1970 to support the U.S. housing finance system and to help ensure a reliable and affordable supply of mortgage funds across the country. Like Fannie Mae, Freddie Mac buys loans from approved lenders to help those lenders free up money to provide more loans.
FRM: Fixed Rate Mortgage. These types of mortgages have a set annual percentage rate (APR) for the life of the loan – 10 years, 15 years, 30 years, etc.
FTHB: First Time Homebuyer. If you’ve never purchased a piece of property – home, condo or land — you’re a FTHB. Some financial institutions offer special classes or programs to help first-time homebuyers learn more about the process and expectations of owning a home.
GMI: Gross Monthly Income. The total income you earn, from all sources.
GINNIE MAE: Also referred to as GNMA, or the Government National Mortgage Association. This government organization guarantees mortgages.
HARP: Home Affordable Refinance Program. HARP is a now defunct program that ended in 2018. HARP helped people will little equity in their home take advantage of low interest rates that were offered at the time.
HECM: Home Equity Conversion Mortgage. Also known as a reverse mortgage, this is when you make an agreement with a bank to purchase back your property. An HECM is the only reverse mortgage insured by the U.S. Federal Government.
HELOC: Home Equity Line of Credit. Once you own a home and have accumulated equity in it (paid some of the mortgage down or the property has increased in market value), you can apply for a HELOC loan. This loan acts like a “second mortgage” and allows you to borrow against your equity, using your home as collateral.
HOA: Homeowners Association. Some homes can be part of a collective known as an HOA. The HOA will make rules for the collection of homes (like a subdivision) and enforce those rules. Homeowners in an HOA are required to pay annual dues.
HOEPA: Home Ownership and Equity Protection Act. This government legislation indicates that high-cost loans must contain certain disclosures.
HUD: U.S. Department of Housing and Urban Development. This department of the Federal government oversees all regulatory issues related to home lending programs and services.
IP: Investment Property. If a home isn’t your primary residence, financial institutions may consider it an investment property when evaluating your loan options.
IRS: Internal Revenue Service. As part of the loan review process, your bank may request copies of your IRS tax form from the last several years.
LO: Loan Originator. The person or bank that is helping you arrange for your loan or issuing you your loan.
LOX: Letter of Explanation. When applying for a mortgage, you can provide your potential lender with a brief letter that explains any parts of your financial history that might hinder your ability to get a loan.
LP: Loan Prospector. An automated underwriting service.
LT: Loan Term. This is the length of your loan. 15 or 30 years are common LTs for a mortgage.
LTV: Loan-to-Value. LTV is the amount you owe on your home (or the amount you’re financing) in relation to the total market value of the home.
MBS: Mortgage Backed Security. A mortgage or group of mortgages sold to an investment company.
MCR: Merged Credit Report. Financial institutions can choose to pull a single credit report from one of the three major credit reporting agencies or a merged report that includes all of them consolidated.
MIP: Mortgage Insurance Premium. MIP is like PMI – or private mortgage insurance – in that it protects borrowers in the event you fail to pay back your loan. MIP is used only for Federal Housing Association (FHA) Loans.
NAR: National Association of Realtors. The organization that represents realtors and monitors ethics and practices.
P&I: Principal and Interest. Principal is the amount of your loan. Interest is the amount you pay to finance your loan over a period of time. Together, these are considered P&I.
PITI: Principal, Interest, Taxes & Insurance. This common term combines ALL of the monthly expenses that will make up your total mortgage payment to the bank. The amount you pay each month towards property taxes and insurance will then go into a separate escrow account the bank holds and manages, making these payments on your behalf.
PIW: Property Inspection Waiver. When buying a home, you can choose to have the property inspected, helping to assure there are no unforeseen major repairs or expenses. Some places may require this, however waivers are available if you are unwilling or unable to get an inspection.
PMI: Private Mortgage Insurance. If your down payment on your home is less than 20%, most borrowers will require you to also pay PMI. This fee will be calculated into your monthly payment and protects borrowers against any loss.
REIT: Real Estate Investment Trust. This is a company that owns real estate that they use as an investment.
REO: Real Estate Owned. The property is owned by a real estate agent.
TIL: Truth in Lending. Within three days of applying for a home loan, you should receive a document that outlines many of the terms related to your loan, including finance charges, annual percentage rate (APR), financing amount and number of payments.
T&I: Taxes and Insurance. In addition to the loan amount you’ll repay, property taxes and homeowner’s insurance can also be paid monthly to your bank and put in an escrow account – a type of savings account to pay these bills when they are due.
UPB: Unpaid Principal Balance. The amount you owe on your loan.
VA Loan: Veterans Administration Loan. This mortgage loan program sponsored by the U.S. Department of Veterans Affairs helps make homeownership accessible and affordable to eligible veterans of the U.S. Armed Forces.
VOD: Verification of Deposit. When you make your down payment, your lender should provide verification of receipt.
VOE: Verification of Employment. When applying for a loan, you may be required to submit a letter from your employer confirming employment.
VOM: Verification of Mortgage. If you’re refinancing your current mortgage, you may be asked to complete this form, which will verify the terms of current mortgage.
VOR: Verification of Rent. When applying for a loan, you may be required to submit proof that you have been paying your rent on time and as promised.
Looking for more knowledge and guidance? FFCCU is here to help, and our experts can talk you through all your options. Let’s get started.