Mortgage Terms & Definitions Part II
Mortgage Terms & Definitions Part II
As mentioned in last weeks blog, understanding certain mortgage terms can be very important and beneficial when entering in the process of getting a home mortgage. So this week I will expand further into essential requisites that everyone needs to know from day one.
Equity: The amount the homeowner would receive in cash if they sold their home after all liens have been satisfied. Therefore, it’s the value of the home minus unsatisfied liens. Example: Say you have a $100,000 home with a $75,000 first mortgage, a $10,000 second mortgage, and a $1,000 tax lien; you would have $14,000 in equity.
Equity Position: The percentage of equity in a home.
Loan to Value (LTV): The percentage of the loan amount divided by the lesser of the appraised value or sales price. Example: Let’s say that you have a loan amount of $200,000 and a purchase price of $250,000. Therefore, you would have a 20% equity position in the home; or an 80% loan to value ratio. Now let’s say that the appraised value on the home came in at $235,000. Due to the LTV ratio being divided by the lesser of the two, now you only have a 15% equity position or an 85% LTV ratio. If the appraised value came in at $260,000, you still only have 20% equity and an 80% LTV.
Debt to Income Ratio (DTI): There are two types.
- Housing Ratio (also known at front end): This is simply the total housing payment including principle, interest, taxes, and insurance (PITI), and dividing by total gross income per month. Note, insurance is a broad term that includes applicable hazard, flood, mortgage, and HOA dues.
- Total Ratio (also known as back end): This is PITI plus all other obligations divided by total gross income per month. Note, “other obligations” include non-obligations that don’t show up on ones credit report; such as car insurance, health insurance, utilities, phone bills, cable TV, etc.
Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.
Matt Pell, Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Matt@mortgagewarehouse.com
www.facebook.com/themortgagewarehouse
Company NMLS ID – 137154
Individual NMLS ID – 1018529
Better Business Bureau Rating = A+
Posted on June 17, 2013, in Finance and tagged Bonita Springs Loan Officer, Cape Coral Loan Officer, Debt to Income, DTI, Equity, Equity Position, Estero Loan Officer, Finance Me, Florida Loan Officer, Fort Myers, Fort Myers Loan Officer, Housing Ratio, Lender, Loan, Loan to Value, LTV, Matt Pell, Mortgage, Mortgage Warehouse, PITI, Property Guiding, Real Estate Financing, SWFL Real Estate, Total Ratio. Bookmark the permalink. Leave a comment.
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