true prime mortgage

CLTV/HCLTV

Cltv 

The total amount of all loans on a property compared to its appraised value.

Simple way to explain: “It shows how much of the home’s value is being borrowed when you add up the first mortgage and any second loans, like a home equity line.”

HCLTV

Similar to CLTV, but it includes the full credit limit of a home equity line of credit (HELOC), even if it hasn’t all been used.

Simple way to explain: “It’s like CLTV but counts the maximum a borrower could take out on a line of credit, not just what’s been used.”

PITI/ PITIA

PITI refers to the total monthly payment for a mortgage, which includes Principal, Interest, Taxes, and Insurance. PITIA includes the same components but also factors in any applicable homeowner association fees.

escrows/impounds

Escrows / Impounds: Money that the lender collects each month (along with the mortgage payment) to cover property taxes and insurance when they’re due.

Simple explanation:
“It’s like a savings account your lender manages for you. They set aside part of your payment every month so when your property taxes or insurance bills come, they pay them for you.”

Lender credit/rebate (ysp)

• Lender Credit / Rebate (YSP – Yield Spread Premium): Money the lender gives the borrower to help cover closing costs, usually in exchange for choosing a slightly higher interest rate.
  Simple explanation:
  “It’s like the lender saying, ‘We’ll pay part of your upfront costs if you agree to a higher rate.’ So you pay less today, but a little more over time through your monthly payments.”

Example:
If a borrower can get a 6.5% rate with no help on closing costs, the lender might offer a 6.75% rate with a $2,000 credit toward closing costs.

Lender Credit (YSP): Lower upfront costs, higher rate.

Prepaids

• Prepaids: Upfront costs paid at closing for expenses that will come due after the loan starts, like property taxes, homeowner’s insurance, and prepaid interest.
  Simple explanation:
  “They’re not extra lender fees — they’re just advance payments for things you’d have to pay anyway, like insurance or taxes. The lender collects them upfront to make sure everything’s paid on time.”

Pmi private mortgage insurance

• PMI (Private Mortgage Insurance): Insurance that protects the lender (not the borrower) in case the borrower stops making payments. It’s usually required when the down payment is less than 20%.
  Simple explanation:
  “It’s insurance that helps the lender take on more risk when you put less money down. It lets buyers get a home with less than 20% down, but it adds a small monthly cost.”

MIP

• MIP (Mortgage Insurance Premium): The insurance required on FHA loans that protects the lender if the borrower defaults. It has both an upfront cost and a monthly cost.
  Simple explanation:
  “It’s like PMI, but for FHA loans. You pay a small fee upfront and a monthly amount added to your mortgage payment.”

FHA MIP Duration 

• FHA MIP Duration: How long the borrower has to pay mortgage insurance on an FHA loan — it depends on the down payment and loan term.
  Simple explanation:
  “If you put less than 10% down on an FHA loan, you’ll pay MIP for the entire life of the loan. If you put 10% or more down, you’ll pay MIP for 11 years.”

Example:

• 3.5% down → MIP lasts for the life of the loan.

• 10% down → MIP drops off after 11 years (if payments are on time).

USDA Guarentee Fee

• USDA Guarantee Fee: A fee charged on USDA loans that protects the lender in case the borrower defaults. It’s similar to mortgage insurance on other loans but unique to USDA programs.

• USDA loans, which are for rural or suburban homebuyers.
  Simple explanation:
  “It’s like insurance for USDA loans — it helps keep the program running and allows borrowers to get 100% financing with no down payment.”

Example:

• Upfront Guarantee Fee: 1% of the loan amount (can be added to the loan).

• Annual Fee: 0.35% of the loan amount, divided into monthly payments.

Tip: This fee helps make USDA loans possible with low rates and no down payment, even for buyers who don’t have a lot of savings.

VA funding fee

VA Funding Fee: A one-time fee charged by the Department of Veterans Affairs on VA loans to help cover the program’s cost and keep it running for future service members.
Simple explanation:
“It’s a one-time fee most veterans pay instead of monthly mortgage insurance. It helps the VA keep offering zero-down loans.”

Temporary Buydown

3-2-1 / 2-1 / 1-0

• Temporary Buy Down (3-2-1, 2-1, 1-0): A mortgage option where the lender or seller “buys down” the interest rate for the first few years of the loan, making early payments lower.
  Simple explanation:
  “It’s a way to make your monthly payments smaller at the start. After a set number of years, the rate goes up to the full note rate.”

Examples:

• 3-2-1 Buy Down: Year 1 = 3% below note rate, Year 2 = 2% below, Year 3 = 1% below, then full rate after that.

• 2-1 Buy Down: Year 1 = 2% below, Year 2 = 1% below, then full rate.

• 1-0 Buy Down: Year 1 = 1% below, then full rate.

Tip: Often the seller or builder pays the cost of the buy down to help buyers qualify or make payments more affordable early on.

VOE/VOD / VOR

common verification documents in lending. Here’s a clear way to explain them for flashcards:

• VOE (Verification of Employment): A document that confirms a borrower’s current employment and income.
  Simple explanation:
  “It’s proof that the borrower works where they say they do and earns what they report.”

• VOD (Verification of Deposit): A document from a bank showing the borrower’s account balances and history.
  Simple explanation:
  “It shows the lender how much money the borrower has in the bank and their account activity.”

• VOR (Verification of Rent): A document confirming the borrower’s rent payment history.
  Simple explanation:
  “It proves the borrower pays rent on time, which helps the lender see if they can handle a mortgage payment.”

Tip: Lenders use these to verify income, assets, and housing history before approving a loan.

IPC (Interested Party Contributions / Seller Credits)

• IPC (Interested Party Contributions) / Seller Credits: Money a seller, builder, or another party contributes toward the buyer’s closing costs or prepaid expenses.

  Simple explanation:
  “It’s when the seller helps the buyer by covering some of their upfront costs — like closing fees or taxes — to make the deal easier.”

Permanent Buydown

Permanent Buydown: When the borrower pays discount points upfront to lower the interest rate for the entire life of the loan.

Simple explanation:
“You pay money upfront to get a lower rate forever — not just for a few years like a temporary buydown.”

AUS (Automated Underwriting System)

AUS (Automated Underwriting System): A computer system used by lenders to evaluate a borrower’s loan application and determine if it meets loan program guidelines.

Simple explanation:
“It’s the software that reviews a borrower’s information — income, credit, assets — and gives the lender an initial approval or feedback.”

Credit Supplement / Rapid Rescore

• Credit Supplement: A document or process used to update or verify information on a borrower’s credit report, like paying off a loan or correcting an error.

  Simple explanation:
  “It helps lenders show updated or corrected credit info quickly so the borrower’s loan can move forward.”

• Rapid Rescore: A service that quickly updates a borrower’s credit score after verified changes are made.

Gift Funds

Gift Funds: Money given to the borrower by a family member, friend, or eligible donor to help with the down payment or closing costs.

Simple explanation:
“It’s money you don’t have to pay back that helps you afford your home.”

reserves

• Reserves: Funds a borrower has left after closing to cover future mortgage payments or other expenses.

  Simple explanation:
  “It’s extra money in the bank that shows the lender you can handle your payments even if something unexpected happens.”

Non-Occupant Co-Borrower

Non-Occupant Co-Borrower: Someone who helps qualify for the loan by adding their income or credit, but does not live in the home.

Simple explanation:
“It’s a co-borrower who helps you get approved or get a better loan, but they won’t actually live in the house.”

Turn Times

Turn Times: The amount of time it takes for a lender, underwriter, or processor to complete a specific step in the loan process.

Simple explanation:
“It’s basically how long each part of the loan takes — like how quickly your application gets approved or your documents get reviewed.”

Title Insurance (Lender's / Owner's)

• Title Insurance: Insurance that protects against problems with the property’s ownership history, like liens, claims, or disputes.

  Simple explanation:
  “It makes sure the buyer and lender actually own the home free of unexpected legal problems.”

Types:

• Lender’s Title Insurance: Protects the lender if a title issue arises.

• Owner’s Title Insurance: Protects the buyer/owner if a title issue arises.

Example:

• If a previous owner had unpaid taxes that the buyer didn’t know about, title insurance could cover the loss or legal costs.

Recording / Transfer Taxes

• Recording / Transfer Taxes: Fees paid to the local government to officially record the property sale and transfer ownership.

  Simple explanation:
  “It’s the cost of making the home sale official in the county records.”

Examples:

• Recording fee: Pays for the deed and mortgage to be entered into public records.

• Transfer tax: A tax charged when ownership of the property changes hands.

Tip: These fees vary by state and county, and sometimes the buyer, seller, or both share the cost.

Flood Determination/Flood Insurance

• Flood Determination: The process a lender uses to see if a property is in a flood zone and requires flood insurance.

  Simple explanation:
  “It checks if the home is at risk of flooding so the lender knows whether flood insurance is required.”

• Flood Insurance: Insurance that protects the property from damage caused by flooding.

  Simple explanation:
  “It covers the home and belongings if a flood damages them. Lenders require it for homes in high-risk flood areas.”

Easement / Encroachment

• Easement: A legal right that allows someone else to use part of your property for a specific purpose, like a driveway or utility line.

  Simple explanation:
  “It means someone else has permission to use part of your land for something, even though you still own it.”

• Encroachment: When a structure or improvement (like a fence or building) crosses onto someone else’s propertywithout permission.

  Simple explanation:
  “It’s when part of a neighbor’s building or fence is on your property — which can cause legal issues if not resolved.”

Minimum Down (FHA)

• Minimum Down (FHA): The smallest down payment allowed on an FHA loan, based on the borrower’s credit score.

  Simple explanation:
  “It’s the least amount of money you have to pay upfront to get an FHA loan.”

Example:

• Credit score 580 or higher: Minimum down payment = 3.5% of the purchase price

• Credit score 500–579: Minimum down payment = 10% of the purchase price

Manual Underwrite

• Manual Underwrite: A loan review process where a human underwriter evaluates the borrower’s application instead of relying on an automated system (AUS).

  Simple explanation:
  “It’s when a person carefully reviews your income, credit, and assets to decide if you qualify, instead of a computer doing it automatically.”

Example:

• A borrower has unique income sources (like self-employment) that the automated system can’t evaluate accurately. An underwriter reviews the documents manually to make a decision.

203(k) (Light touch mention)

• 203(k) Loan: An FHA loan that allows borrowers to finance both the purchase and renovation of a home in a single mortgage.

  Simple explanation:
  “It lets you buy a fixer-upper and roll the cost of repairs into your loan instead of paying cash.”

Tip: There are two types:

• Standard 203(k): For major renovations

• Limited (or “Light Touch”) 203(k): For minor repairs and improvements

3% Down FTHB (HomeReady/Home Possible)

3% Down FTHB (HomeReady / Home Possible): Loan programs from Fannie Mae (HomeReady) and Freddie Mac (Home Possible) that let first-time homebuyers put down as little as 3%.

Simple explanation:
“These programs make it easier for first-time buyers to get a mortgage with a very small down payment and flexible credit requirements.”

Second Home / Investment LLPA & IPC Caps

• Second Home / Investment LLPA (Loan-Level Price Adjustments): Extra fees or rate adjustments lenders charge for loans on second homes or investment properties because they’re considered higher risk.

  Simple explanation:
  “If the property isn’t your primary home, the lender may charge a slightly higher rate or fee to account for the extra risk.”

• IPC Caps (Interested Party Contributions Caps): The maximum amount a seller or other interested party can contribute toward closing costs for second homes or investment properties.

  Simple explanation:
  “There’s a limit on how much the seller can help with your closing costs when it’s not your primary home.”

Entitlement / Bonus Entitlement

• Entitlement: The amount the VA guarantees to a lender for a veteran’s loan, which helps the borrower qualify for a VA loan without a down payment.

  Simple explanation:
  “It’s the VA’s promise to back part of your loan so lenders feel safe giving you 100% financing.”

• Bonus Entitlement: Additional entitlement for veterans buying a home more expensive than the county loan limit or using remaining entitlement from a previous VA loan.

  Simple explanation:
  “If you’ve used some VA loan benefit before or are buying a higher-priced home, bonus entitlement gives you extra guaranteed backing to qualify.”

Residual Income

• Residual Income: The amount of monthly income left over after all major expenses (mortgage, taxes, debts, living costs) are paid.

  Simple explanation:
  “It’s the money you have left each month to cover everyday living costs — the VA uses it to make sure veterans can comfortably afford their mortgage.”

Example:

• After paying your mortgage, taxes, insurance, car payments, and other debts, you have $1,200 left each month. That $1,200 is your residual income.

• VA guidelines set minimum residual income requirements based on family size and location.

IRRRL (VA Streamline Refi)

• IRRRL (Interest Rate Reduction Refinance Loan) / VA Streamline Refinance: A VA loan that lets veterans refinance an existing VA loan to a lower interest rate or switch from an adjustable to a fixed rate, usually with minimal documentation.

  Simple explanation:
  “It’s a quick and easy VA refinance — no appraisal or credit check in most cases — to lower your rate or monthly payment.”

Example:

• A veteran has a VA loan at 6.5% interest. Using an IRRRL, they refinance to 5.5%, reducing their monthly payment.