Keep It Super Simple - Mortgage Grammar 101

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Keep It Super Simple

Keep It Super Simple K.I.S.S

Sometimes we get caught up in our craft that we tend to forget our clients are not familiar with our short jargon or abbreviated sayings.  

Nobody wants to feel they are being talked downed to making them feel dumb or clueless on the words and sayings we use on an everyday basis.

There is an effective saying in life and that is to keep everything super simple or K.I.S.S.  The home buying process can already be scary and confusing in itself and we don't need to add to already what they are feeling.

Our job is to make the client feel very comfortable and ease the home buying process for them so below are some common terms a client might hear but may not know the meaning to.

  • LTV (Loan To Value) - a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

  • DTI (Debt To Income Ratio) - a comparison or ratio of gross income to housing and non-housing expenses

  • PMI (Private Mortgage Insurance) - insurance purchased by a buyer to protect the lender in the event of default. The cost of mortgage insurance is usually added to the monthly payment.

  • GFE (Good Faith Estimate) - an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

  • FHA (Federal Housing Administration) - established in 1934 to advance home-ownership opportunities for all Americans; assists home-buyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

  • FICO (Fair Isaac Corporation) - FICO is an abbreviation for Fair Isaac Corporation and refers to a person's credit score based on credit history. Lenders and credit card companies use the number to decide if the person is likely to pay his or her bills. A credit score is evaluated using information from the three major credit bureaus and is usually between 300 and 850.

  • HUD1 (Settlement or Closing Statement) - it itemizes all closing costs; must be given to the borrower at or before closing. Items that appear on the statement include real estate commissions, loan fees, points, and escrow amounts.

  • LOX (Letter of Explanation) - A letter of explanation is often times needed by the lender to help clarify and solidify an understanding of the issue in question.

  • HELOC (Home Equity Line of Credit) - a mortgage loan, usually in second mortgage, allowing a borrower to obtain cash against the equity of a home, up to a predetermined amount.

  • ARM (Adjustable Rate Mortgage) - a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate.


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Just-In-Time Loans - Mortgage Needs and Advice on Time. (757) 692-3464



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Maria Morton
Chartwell Kansas City Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

Justin, what an excellent idea! Giving your clients a dictionary so that they can understand the jargon.

May 13, 2009 04:22 PM #1
Matt Grohe
RE/MAX Concepts - Des Moines, IA
Serving the metro since 2003

If I say HELOC people think I've insulted them, or worse.

May 13, 2009 04:29 PM #2
Sandra White
John L Scott Real Estate - Port Townsend, WA
Experienced Residential Resale Broker

That is great...I am going to copy and paste it somewhere.  Thank you.

May 13, 2009 04:30 PM #3
Todd Pierceall
Prestige Properties - Gastonia, NC


You are so right about the jargon and clients feeling stupid.  I find most of them are bewildered after talking to their lender.  I have posted a pretty thorough lists of terms and abbreviations with their definitions on my website which I quite often refer clients to.  You can check it out here.

Mortgage Terms -

Mortgage Abbreviations -

I hope it helps others as well and anyone may copy it.  We are here to share!

May 13, 2009 05:47 PM #4
Joseph D. Federico
Donahue Real Estate Co. - Dedham, MA
Eastern Massachusetts Real Estate

Justin-Thanks! and also Thanks to Todd for the link.

May 20, 2009 11:45 PM #5
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Justin Williams

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