Frequently Asked Questions and Helpful Guides to understanding the Mortgage Industry.
Glossary
GMI - Gross Monthly Income; borrower's income before taxes.
HUD - The Department of Housing and Urban Development; The branch of the government, designed to help with housing needs, that oversees the Federal Housing Administration (FHA).
LTV - Loan to Value; The percentage of mortgage versus the value of the property.
PITI - Principle & Interest, Taxes and Insurance of monthly mortgage payment.
PMI - Private Mortgage Insurance; insurance that is paid by borrower, but is for the protection of the lender in case of borrower default.
Pre-payment Penalty - a penalty imposed bythe lender for paying mortgage in full before its maturit, usually during the first 1-5 years of the mortgage. Although not standard in conventional mortgages, it is quite common in "non-conforming" mortgages.
Pre-payment Privilage - this allows the borrower the right to pay any or all of the principle in advance of the maturity without penalty.
Secondary Mortgage Market - a system whereby lenders and investors buy existing mortgage and mortgage-backed securities and in doing so provide greater availibity of funds for additional mortgage lending.
- FNMA - "Fannie Mae" Federal National Mortgage Association; a tax paying corporation created by Congress to support the secondary market. It purchases and sells residential mortgages. It is responsible for setting most of the standards for "conventional" mortgages.
- FHLMC- "Freddie Mac", Federal Home Loan Mortgage Corporation; a private corporation authorized by Congress. It sells participation certificates secured by pools of conventional of conventional mortgage loans that if purchased through the secondary market. The principle and interest for these securities are guaranteed by the federal government.
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