During a recent virtual meeting, I started hearing some new terms and acronyms that were unfamiliar to me. Granted, it was an IT-related meeting, and I know they have a language of their own, as do we with our numerous languages and regional dialects on my home planet. While I continue to learn your tricky English language and have plans to do that same with at least 1,000 more of your approximately 6,500 Earth-based languages (as part of my Mort-improvement program, of course), I still pride myself on my technical knowledge and capabilities. Nevertheless, I felt a little like a young pupa lost in the Daltarri plants and Bannak trees on my home planet of Amicitia.
We can all admit that we get a little lost in lingo at times. We can’t be the experts of everything, after all. I discussed this very subject in a previous post featuring the Fonz—be cool and check it out.
There is comfort, however, in knowing that we CAN and ARE experts in our own field, which in this case is credit union mortgage lending and servicing. How can we maintain and grow that expertise? The most obvious and effective way is through experience, but no matter if you’re a seasoned veteran or the new Quarran in the sea, professional development is key. I know I can sound like a fractured splarna disk at times, but continuing your learning is the space lane to success. (See my previous posts for more on the importance of professional development and training: Training, Mortgages & Crayons and Are You Up for the Challenge.)
Keeping mortgage training at the front of my cerebrum, I regularly check out the myCUmortgage Training calendar, which is available in our Smart Rooms. On the May calendar, my eyestalks were immediately drawn to a course scheduled later this month: Understanding Home Loan Lingo. Just as IT has its own language, so do mortgage lending and servicing!
Here’s the description of the course: “Whether you’re new to mortgage lending or need a refresher, there’s more to home loans than the mortgage itself. You’ll often hear terms tossed around and be expected to know them. Knowing and understanding key acronyms and terms are the building blocks that are widely beneficial to overall confidence and success in mortgage lending.”
I couldn’t have said it better myself. While I’m hoping you can attend with me on Tuesday, May 18, from 1-2 PM ET, I thought it would be beneficial to post a quick refresher here. I’ve pulled some regularly used terms and acronyms that you can share with your teams and, more importantly, your members. While we deal with mortgages every day, keep in mind that your members only do it a few times, at most, in their lives. So, let’s get started!
Adjustable-Rate Mortgage (ARM): 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. They are also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).
Amortization Schedule: A table that shows how much of each regularly scheduled mortgage payment is applied to the interest and principal balance of the loan, for the scheduled life of the loan.
Annual Percentage Rate (APR): A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, must follow the same rules to ensure the accuracy of the annual percentage rate, it provides members with a good basis for comparing the cost of loans. APR is a higher rate than the simple interest of the mortgage.
Closing Costs: Fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan, such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes.
Contingency: A clause in a purchase contract outlining conditions that must be fulfilled before the contract is executed. Both buyer and seller may include contingencies in a contract, but both parties must accept the contingency.
Debt-to-Income Ratio: A comparison or ratio of gross income to housing and non-housing expenses.
Escrow Account: An account established with your mortgage servicer to collect as part of your monthly payment. The account is used to hold money for the payment of your property insurance premiums, real estate property taxes and mortgage insurance (as applicable).
Fixed-Rate Mortgage: A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Loan to Value (LTV) Percentage: The ratio of your mortgage loan amount versus the appraised value of your property.
PITI: The four elements of your monthly mortgage payment—Principal, Interest, Taxes and Insurance.
Private Mortgage Insurance (PMI): Privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
Pre-Approval: A lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and the review of an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guarantee a loan until the property has passed inspections and underwriting guidelines.
An additional resource I discovered is from the U.S. Department of Housing and Urban Development—37 pages of terms! There’s a lot of great information contained in there for you, your teams and your members. There will be a test, after all…
…Okay, there’s no test but I encourage you to read up on your mortgage lingo, join the Training session on May 14 and get a copy of the guide for ongoing use. The accomplishment of doing so won’t be passing the test; rather, the real accomplishment from this is getting more members into homes and being there for them for the life of the loan.