Indiana USDA Home Loan Expert » Mortgage

What Do You Mean ?

Jeremiah Wean — Thu, 02 Sep 2010 21:44:04 +0000

What, What Do You Mean – Define It For Me

The other day my 5 year old son was playing on the computer and told me he wanted to play on the White game. I know all the games that he plays, but there was no game called the White Game. So, we went through all his usual games so he could show me the White Game.

Sure enough it was one of the usual games that he plays. The thing is, the game is actually called Y8. I had never connected the acronym, but Y8 = White. There are so many acronym’s used in the Mortgage business, that have little meaning to most consumers.

A Sticky I don’t Need No Stinking Sticky

When I first started in the mortgage industry I worked at a company that kept track of mortgage payments on ledger cards, 5 x 7 white cards. These cards had all the customers information. Every time a customer would make a payment, we would write on the ledger card: the date of the payment, the amount, amount applied to interest, the amount applied to principal, and the new balance.

Eventually our home office took over the processing of payments, as our main goal was origination of new loans. Some customers would still send the payments to us; however, it was not an official payment until the home office processed the payment. The home office would process the payments, and then every other day send us a sheet of stickers with all the information that we used to hand write, our administrative assistant then had to place the stickers on each customers ledger card.

Internally we called these stickers with the payment and new balance information “sticky’s”. Because the payment wasn’t considered official until we received the “sticky” from home office, we couldn’t give out mortgage payoff’s. One day we had a customer come into the office and request a payoff, our administrative assistant was talking to the customer, I was not sitting far from her so I could hear what she was saying.

The administrative assistant told the customer that she could not give him the payoff on his mortgage because the sticky’s hadn’t come in yet. The customer was clearly getting agitated because he had no idea what a sticky was, or why it would hold up getting the payoff on his loan. I went up and explained what a sticky is and explained we would get his payoff as soon as possible.

There’s an Acronym For That

In order to help avoid confusion here are some common acronym’s and their definition:

1003	Uniform Residential Loan Application. Document, contains information about the type of mortgage being applied for and personal financial information of the applicant.
1004	Uniform Residential Appraisal Report. Appraisal Report for a single family home.
1008	Uniform Underwriting and Transmittal Summary. Form used to summarize key information about the loan transaction.
APR	Annual Percentage Rate. Cost of credit as calculated according to the consumer credit protection act (Regulation Z). APR includes the stated interest rate on the loan plus all additional finance charges associated with the loan. (i.e., points, mortgage insurance, broker fee, title closing fee, odd days interest).
ARM	Adjustable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically according to a pre-selected index.
CLTV	Combined Loan To Value. The total percentage of all mortgages on a home compared to the appraised value of the home.
DOT	Deed of Trust. An instrument which secures a note. It conveys an interest in the property to a third party and is recorded with the county. A deed of Trust does not covey title to the property. May also be referred to as Mortgage Deed depending on state real estate laws.
DTI / D/R	Debt To Income / Debt Ratio. The relationship of a borrower’s total monthly payment obligations on long-term debts divided by gross monthly income, expressed in percentages.
ECOA	Equal Credit Opportunity Act. A federal law that requires lenders to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, or marital status.
FACTA	Fair and Accurate Credit Transactions Act. An amendment to FCRA, Fair Credit Reporting Act to protect consumers from identity theft and limit the way consumer information may be shared.
FCRA	Fair Credit Reporting Act. A law, which requires a lender who is rejecting a loan because of adverse credit information to inform the borrower of the source of such information.
FDIC	Federal Deposit Insurance Corporation. The U.S. Government agency created in 1933 which maintains the stability of an public confidence in the nation’s financial system by insuring deposits and promoting safe and sound banking practices.
FEMA	Federal Emergency Management Agency. Federal agency which, among other things, directs the activities of the Federal Insurance Administration and establishes flood insurance rates and terms of coverage, issues policies, processes claims and indicates and maps flood-prone areas.
FHA	Federal Housing Authority. A U.S. Government agency created by the National Housing Act of 1934 with a role to promote and stabilize moderate income housing.
FHLMC / Freddie Mac	Federal Home Loan Mortgage Corporation. A secondary market agency created by Congress which buys and sells both Conventional and Government loans. One of the two Government Sponsored Entities (GSE), presently in receivership.
FICO	Fair Isaac Company. Creator of one of the best known credit scoring models.
FNMA / Fannie Mae	Federal National Mortgage Association. A secondary market agency created by Congress which buys and sells both Conventional and Government loans. One of the two Government Sponsored Entities (GSE), presently in receivership.
FOMC	Federal Open Market Committee. This 12-member committee meets eight times a year to set guidelines for the Federal Reserve regarding the sale and purchase of the government securities in the open market. Its chief importance for consumers is that the FOMC can adjust the federal funds rate and the federal discount rate. Banks set their rates based on the FOMC’s, and therefore the committee’s actions can effectively ratchet consumer interest rates upward or downward. The committee is composed of the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the presidents of the other 11 reserve banks.
FTHB	First Time Home Buyer. A home purchaser that has not had ownership in a home in the previous three years.
GFE	Good Faith Estimate. In compliance with the Real Estate Settlement Procedures Act (RESPA), the GFE discloses to the borrower all of the costs associated with the loan transaction.
HECM	Home Equity Conversion Mortgage. A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.
HELOC	Home Equity Line of Credit. Second mortgage financing that consists of a revolving line of credit that is secured by the appraised market value of the property and is usable for any purpose.
HOA	Home Owners Association. An organization of property owners within a development whose purpose is to maintain and provide community facilities. It has the power to collect dues or assessments. HOA’s are usually found in connection with Condo projects or PUD’s (Planned Unit Developments).
HOI	Home Owner’s Insurance. A multiple peril insurance policy available to owners of private dwellings, which covers the dwelling and its contents, as well as personal liability.
HUD	Department of Housing and Urban Development. A cabinet department of the federal government responsible for federal housing and urban development programs. It governs FHA and GNMA operations.
HUD-1	Settlement Statement. Form used by the settlement or closing agent to itemize all charges associated with the loan transaction.
LPMI	Lender Paid Mortgage Insurance. This is mortgage insurance paid for by the lender instead of the borrower. Typically the cost is paid for through an increased rate.
LTV	Loan to Value. The relationship of the loan amount to the appraised value of property.
MBS	Mortgage Backed Security. Investment instruments that mortgages are bundled into by Fannie Mae, Freddie Mac, and Ginnie Mae for sale on Wall Street. Bond type investment securities representing an undivided interest in a pool of mortgages or trust deeds. Income from underlying mortgages is used to pay off the securities.
MI / PMI / MMI	Mortgage Insurance / Private Mortgage Insurance / Monthly Mortgage Insurance. Special insurance that protects the lender in case of borrower default. It’s typically required when the borrower makes less than 20% down payment.
MIP	Mortgage Insurance Premium. The amount paid by a mortgagor for mortgage insurance either to FHA (FHA loans) or a private mortgage insurance company (conventional loans) which covers a percentage of loss due to default.
MLS	Multiple Listing Service. A system that provides to its members detailed information about properties for sale.
MTG	Mortgage. A legal document which pledges real property as security for a loan.
N/O/O	Non-Owner Occupied. A house not occupied as the principal or primary residence.
PITI	Principal Interest Taxes, and Insurance. The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance on the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
PR	Primary Residence. A house occupied as the principal or primary residence. Sometimes called O/O or Owner Occupied.
Reg Z	Regulation Z. The title of the Federal Reserve Board’s ruling implementing the Consumer Credit Protection Act.
RESPA	Real Estate Settlement Procedures Act. A consumer protection law that requires lenders to give borrowers advance notice of closing costs. A federal statute effective June 20, 1975, requiring disclosure of certain costs in the sale of residential improve property which is to be financed by a federally insured lender.
TIL / TILA	Truth In Lending / Truth In Lending Act. Popular name for the Consumer Credit Protection Act of 1968 which requires lenders to fully disclose credit terms, conditions, the APR, and other charges in writing. Used synonymously with Reg. Z.
USDA / RHS / RD	United States Department of Agriculture / Rural Housing Services / Rural Development. An agency within the Department of Agriculture, which operates principally under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.
UFMIP	Up-Front Mortgage Insurance Premium. This is the mortgage insurance that is added on top of the loan for a FHA loan.
VA	Veteran’s Affairs. An agency of the Federal Government established to assist veterans in obtaining loans to secure housing. The loans guarantee the lender against loss.
VOD	Verification of Deposit. The form that is used to determine the amount of funds the borrower has on deposit and available for use.
VOE	Verification of Employment. Form signed by the borrower’s employer(s) verifying his/her position and salary.
VOM	Verification of Mortgage. Form completed by borrower’s mortgage company verifying the payment history of the mortgage.
YSP / SRP	Yield Spread Premium / Service Release Premium. Yield Spread Premium is what the Lender pays the Mortgage Broker for bringing the loan at that specific rate. The Yield Spread Premium will be shown as a dollar amount and the full amount will be a closing cost credit. Service Release premium is the amount the Mortgage Banker will get for giving you the loan at that rate. The amount of Service Release Premium will not be disclosed to you, and you will not receive a credit towards your closing costs for the amount of the SRP.

I thoroughly believe I have succeeded in answering all your questions. However, some of the answers only led to more questions. To sum it all up, I feel I am more confused than ever, but about more important issues, and on a higher plain.

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The Basics of A FHA Loan

Jeremiah Wean — Thu, 19 Aug 2010 22:53:27 +0000

The Federal Housing Administration or FHA has provided a way for low to middle-income earners to obtain a mortgage loan, when they might otherwise not be able to qualify for a regular mortgage loan. The basics of an FHA loan guarantees that they will insure the lender against any default of payment. This gives the lender the assurance that they will be recouped the full amount of the loan should anything happen and the new homeowner not be able to pay back the loan.

The first step in securing an FHA loan is to use a mortgage broker who deals with FHA loans. Not all do, but there are a number of brokers who are well versed in approaching lenders for this type of loan. They know the requirements and can often help to push a loan through for a new homebuyer fairly quickly providing all the conditions are met.

While an FHA loan is not for everyone, there are quite a few benefits that make it an ideal choice for many people who would like to own their own home but do not have the cash reserves, or a good enough financial score to qualify for a regular home loan. Perhaps one of the biggest obstacles to many people who would like to own their own home is that they simply do not have enough cash reserves for a down payment. A regular mortgage loan often requires a very minimal down payment, sometimes more depending on the person’s FICO score. You can usually apply for an FHA loan with as little as a three percent down payment. Coupled with this, is stipulation that the loan amount that is approved is relative to the cost of buying a home in your area. Thus the loan amount that is approved is usually not that high, just enough to buy a home similar to those where the person already resides. Consequently, the 3% down payment is usually quite a reasonable amount.

There are no actual income limits when applying for a loan, although you do need to have a regular source of income; it just does not need to be a lot. You also need to prove that you have a good debt to income ratio, in other words that you are not spending more than you are earning. While your credit score may be taken into account, it is not a major consideration when applying for an FHA loan. In fact, you can qualify for a loan as soon as two years after declaring bankruptcy.

There are also other programs associated with FHA loans that can help subsidize home repairs and improvements, as well as an easing of regulations such as pre-payment penalties. While an FHA loan may not be ideal, or even necessary, for everybody it does provide many people with the opportunity to own their own homes and thus better their own financial situation. If you are interested in applying for one and you have a regular source of income, your first step should be to find a suitable mortgage broker who can help you secure the loan and advise you on what requirements are needed.

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How To Use A FHA Loan To Refinance

Jeremiah Wean — Tue, 17 Aug 2010 15:03:06 +0000

If you are struggling with your monthly mortgage payments, to the point that you are worried that you may not be able to keep up with them any longer, it can be very worrying, particularly with today’s economic condition. This can be additionally problematic and add stressors, if your current financial condition does not allow you to refinance your mortgage with the current refinance options available. However, there are some options open to you that you may want to consider especially if your current credit rating is not as high as it could be; namely FHA refinancing.

The Federal Housing Administration (FHA) has a very popular refinance option that is suited to most home owners, whether you have an FHA mortgage loan or not. Refinancing your mortgage with an FHA loan has many benefits, including the main benefit of needing a very minimal down payment in order to qualify. Other benefits to apply for an FHA refinance loan include the fact that there are no pre-payment penalties and the qualification standards including your credit score are much more relaxed than they are with other refinancing options. They are readily available, easy to process and have good terms. It is a great way to refinance your current mortgage into more reasonable and easily reachable monthly payments.

If you are interested in applying for an FHA loan, it is recommended that you use a mortgage broker who deals with FHA refinancing. Brokers who are willing to take on this type of refinance loan with the added benefit being that they also know which lenders are willing to refinance you through and FHA loan.

There are several different types of FHA refinance loans available. The FHA Rate/Term refinance option is available to people who currently have a conventional mortgage that is not and FHA mortgage. Best of all a Rate and Term refinance is available up to 96.5% of your homes value. It simply allows you to refinance your loan into an FHA mortgage loan. The Streamline Refinance option allows you to switch to a fixed rate FHA mortgage or to lower your rates on your current FHA mortgage. This is the simplest type of refinance option, requiring very little paperwork. Finally, the Cash out FHA Refinance loan is of main benefit to homeowners whose equity has built up on their loan since their last mortgage. With this type of refinancing you can actually get up to, 85% of your home’s value to use in whichever way you chooses, including using the cash itself.

Options for an FHA refinance loan are available to any homeowner needing to refinance in order to lower your monthly mortgage payments. It is best to try to find a mortgage broker who can help you decide which type of FHA refinance loan best suits, before you proceed with taking one out. They will be able to advise you on what is best for your situation, based on your current financial status, and then help you to find a lender who will give you the refinance loan.

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Keeping Good Credit

Jeremiah Wean — Mon, 16 Aug 2010 15:49:05 +0000

In life, we maintain those things that we take great pride in-our bodies, our health, our hair, our home, our lawn-you get the picture! Credit maintenance might not come to mind here, but I can assure you, that adding this to your “to-do list” will benefit you in the long run. I realize this seems like no easy task, and that is why I wanted to send you this video tip, to show you how simple it is to maintain your credit. Tune in to learn how this discipline will help you achieve long-term financial health.

www.youtube.com/watch?v=iW4nERUuVxM

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5 Benefits to Using FHA

Jeremiah Wean — Mon, 16 Aug 2010 13:37:59 +0000

5 Benefits to Using A FHA Loan

The Federal Housing Administration (FHA) has several programs in place in order to promote and encourage homeownership. These are especially useful for people who may otherwise have difficulty in obtaining a home own, especially lower to middle income earners. The FHA guarantees lenders that they will pay the loan back to the lender should the person taking out the loan somehow default on their payments.

If a person qualifies for this type of loan, it is usually recommended that they seek out a mortgage broker who can help negotiate the loan for them. Though you should use a mortgage broker, not all will work with FHA loans, so the very first step in securing one is to find a broker who is willing to help secure one. Once they have found a suitable mortgage broker, they will not need to worry about approaching lenders themselves but can leave it in the brokers hands.

There are 5 benefits of an FHA loan to purchase your new home, which would not be available were they to pursue taking out a loan under other circumstances.

Minimal Down-Payment

One of the main benefits is that FHA loans will allow a potential homeowner to buy a home with a very minimal down payment, oftentimes as low as three percent. This is to help people while they have secure fairly well paying employment, do not have sufficient cash reserves to offer a very big down payment.

No Income Limits

In other words, providing you have a regular source of income the actual amount of money you earn monthly is not as important as it is when taking out a regular mortgage loan. This benefit is balanced out by the fact that FHA loan amounts are limited and are usually relative to the average cost of housing in the area where you currently reside.

Lenient Credit Standards

If you do not have a perfect credit record, you do not need to worry that it disqualifies you from taking out an FHA loan. In fact, while a prospective homeowner’s credit rating plays a big part in being able to receive a regular mortgage loan, FICO scores can be much lower when applying for an FHA loan.

No Prepayment Penalty

This means that if you are able to pay off your loan early there are no financial penalties applied. This means that should your financial situation improve dramatically to the point that you can pay off your loan sooner than you had originally planned, you can do so without having to pay extra fees for doing so.

Property Standards

Before a property is allowed to be bought using an FHA loan, it must meet minimum condition standards. This protects the new homeowner from buying into a home that will need a lot of maintenance. Along the same line, there are also programs that will provide additional funding for any home improvements that need to be made.

While an FHA loan may not be for everybody, the benefits do make it a very promising proposition for many potential new homeowners who may not be able to get a mortgage loan otherwise.

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So You Don’t Have Credit

Jeremiah Wean — Fri, 13 Aug 2010 15:46:31 +0000

Having credit is like having a golden ticket to financial freedom. But if you have not established credit yet, it’s OK-I can show you where you need to start. Check out the video I have included for you and you’ll learn how easy it is to establish credit and secure your financial future. Take action and implement the quick tips in this lesson and in less than six months, you’ll be on your way to having your very own golden ticket!

www.youtube.com/watch?v=D2n5W1QMwms

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10 Credit Myths

Jeremiah Wean — Thu, 12 Aug 2010 15:43:51 +0000

The economy sure has thrown us all for a loop this year, but did you know how many consumers have been taken on a wild ride by those who claim to be financial gurus and credit repair specialists? Far too many have gotten caught in this tangled web, and as your trusted advisor, I am committed to making sure that you are armed with the information you need to protect your finances and your family from such predators. This is why I want to share with you, the top 10 credit myths- so that you can avoid the credit advice that can potentially damage your credit.

www.youtube.com/watch?v=FkpeyB1tKdA

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Getting The Right Mix With Your Credit

Jeremiah Wean — Wed, 11 Aug 2010 15:40:37 +0000

I have a great tip that I want to share with you today, one that is sure to give you the knowledge you need in order to develop a high quality credit profile, with excellent credit scores! I often find there is a misconception when it comes to the mix of credit that is needed in order to generate excellent credit scores and because this mix makes up a percentage of your actual credit score, I thought you would find this video tip to be highly valuable. Tune in to learn which credit accounts are the ones to have and how you can use them as a tool for financial freedom.

www.youtube.com/watch?v=zViI4dbTEPI

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Items to Consider When Disputing Credit Information

Jeremiah Wean — Tue, 10 Aug 2010 15:40:06 +0000

Have you scanned thru your credit report only to find a credit card with a whopping balance that doesn’t belong to you? What about a second mortgage listed, when you only have one loan on your home? Disputing items on your credit report is an absolute must, especially when you find information on your report that does not belong to you or is reported incorrectly. Did you know that if you do not follow the proper measures when disputing, then your efforts can actually have the opposite effect on your credit and your score could actually go down? I want to make sure that the effort and energy that you are putting into the dispute process, produces the results that you deserve and that’s why I wanted to share this extremely valuable tip with you-Disputing Do’s and Don’ts. If you invest six minutes and tune into this quick video tip, not only will you save yourself hours of frustration and unnecessary work but you’ll learn the ten tips that will help you avoid the credit disputing mistakes that many consumers make.

www.youtube.com/watch?v=CKF3hkIDovQ

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Basic Tips for Disputing Credit Bureau Items

Jeremiah Wean — Sun, 08 Aug 2010 20:17:15 +0000

Dispute, negotiate or wait-these are the action steps you can take when it comes to cleaning up your credit. This can seem like a hefty task and since I realize that credit repair is not your full-time job, I thought I’d help simplify things for you and share a valuable tip. In this video clip, you will learn exactly where to start, whether you decide to open a dispute, negotiate or wait. Watch to learn some basic tips on the commitment involved in opening a dispute, some important resources that will educate you on the ins and outs of credit negotiation, and why waiting will cost you in the long-run.

www.youtube.com/watch?v=3-xXROw21VA

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