Confused about the difference between DTI and LTV? We’ve got you covered. Quickly find clear definitions of common mortgage terms, making the home buying process easier to understand.
1003 Application or URLA
This is the Uniform Residential Loan Application, which the industry standard mortgage application form. When you, a borrower, request to lock a loan on Morty.com, you enter in all necessary information for us to create a 1003 application. We can then use that application to register your loan
First section of an individual’s federal tax return, reporting the income of the individual or income combined with their spouse.
The IRS tax form used to confirm the income of a contract worker.
Change in Circumstance (CIC, COC)
When information about the loan application changes (closing date, contact information, loan amount, job change, etc), Morty will work with the lender to alert them that the information has changed since the original application. A CIC can affect the loan qualification, depending on the information that has changed.
Clear to Close (CTC)
When all underwriting has been completed and all third party work is complete, the loan will be approved by the lender, and the borrower is now “clear to close”. This stage is also referred to as the Final Approval
Closer (Loan Processor)
The closer at Morty works with the lender, the title company, and the borrower to make sure that the loan gets the final approval and everything is ready for the final closing.
Closing Disclosure (CD)
A 5-page form that states the confirmed monthly payments, closing costs, and rate of the loan. This form is produced by the title company. Up until this point, these values have been estimated, so this gives you a chance to review the final loan breakdown. This must be provided to borrowers at least 3 days before their closing date so they have the opportunity to decide if they want to close their deal with this specific loan.
Conditional Approval (CA)
Once a lender’s underwriting team reviews a complete mortgage application along with all available verification documentation provided by the borrower/broker/MLO, they will either reject, suspend or approve the loan. The approval at this point in the process will be Conditional to the remaining requirements outlined by the lender/UW that are necessary in order to issue a final approval and close on the mortgage
These are something you can choose to use when selecting your loan. Lender credits are a tradeoff: the more credits applied to the loan, the lower the closing costs will be, but your interest rate will increase. Points have the opposite effect. Those willing to pay a higher monthly payment, but lower closing costs would want to use credits
Day One Certainty
When registering a loan, we hope to have “day one certainty”, which means that even on the first day of the loan process, we know it will be approved. This is achievable by setting up our system to “pre-verify” applicants before officially submitting them to underwriting.
Earnest Money Deposit (EMD)
Some sellers require the buyer to put down an earnest money deposit to show they are serious about purchasing the home while waiting for the closing date and their loan to be approved. These deposits are usually $1000 – $4000, but it is up to the seller what the exact amount is. Depending on the contract, the buyer can lose their earnest money deposit if they decide to back out of the deal after having signed the purchase contract.
An Escrow account is a bank account managed by the lender after closing which will be used to pay your monthly HOI fees and property taxes. Part of each monthly mortgage payment will be allocated to this escrow account for the entire life of the loan. You can opt-out of escrowed taxes/insurance if you want to pay them yourself (not very common).
Another form of an escrow account
A bank account managed by a title company or attorney to hold earnest money deposits until closing.
This is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later. This is typically given to someone who has lost their job or someone whose home has been damaged due to a natural disaster.
Homeowner’s Insurance (HOI, Hazard Insurance)
HOI is required by lenders for any purchase of a home. It protects the home from interior and exterior damage, loss or damage of assets, etc. Every policy has a liability limit for the coverage. Lemonade, Hippo, etc. are all examples of HOI companies.
A set of documents that are prepared by the lender, to be reviewed, acknowledged, and signed by you, the borrower. It outlines the closing costs, monthly payments, and other fees associated with the chosen loan. These documents must be sent to the borrower within 3 days of applying, to give them time to decide whether or not they want to proceed. The loan estimate is included in the initial disclosures. While initial disclosures are an estimate of the borrower’s costs, closing disclosures are the actual costs.
Intent to Proceed (ITP)
Many borrowers will shop around for different loan options before they choose to settle with one lender and loan. After you have been sent initial disclosures, you must notify the lender if you intend to proceed with this application, meaning that you are choosing to go with that lender and loan.
A lender is a financial institution that offers and underwrites loans. There are many different types of lenders and many lenders offer several types of loans. Here at Morty, we work with several different lenders through their wholesale third-party origination channels.
Lender/Borrower Paid Compensation (BPC, LPC)
Depending on the amount of the loan, the broker fee (paid to the mortgage broker, i.e. Morty), can either be paid by the borrower or the lender.
An agreement that allows someone the legal right to obtain an asset if certain conditions aren’t met. In the mortgage world, a lien is a legal agreement between the borrower and the lender that if mortgage payments aren’t made on their loan, the lender can seize the property.
Loan Estimate (LE)
This is typically one of the documents included in the initial disclosures. It estimates what the borrower’s monthly payments and closing costs will be, based on the information they provided in their application.
Locking a Loan
Pricing for loans is changing on a daily (sometimes multiple times per day) basis, so when someone requests to lock their loan, it must be done quickly, before pricing changes. Each lender allows you to lock a loan through their portal. This usually goes hand in hand with generating initial disclosures, which are generated when registering a loan.
When applying points and credits to a loan, some borrowers will request to be at “par rate”, which means as close to 0 points, 0 credits applied as possible.
These are something the borrower can choose to use when selecting their loan. Lender points are a tradeoff: the more points applied to the loan, the higher the closing costs will be, but your interest rate will decrease. Credits have the opposite effect. A borrower who is willing to pay higher closing costs, but lower monthly payments, would want to use points.
Before purchasing a home, most sellers will ask the buyer to get a pre-approval letter from a lender that shows if they will be able to pay for the home. Buyers can get pre-approved by submitting Proof of Income, Assets, Credit Report, Employment Verification, and Identification.
Profit and Loss Statement (P&L)
This is a breakdown of cash flow for a business, usually created once a year. We may require a year-to-date P&L if the borrower owns their own business (self-employed).
These are paid to the county by the owner of a home, and are calculated based on the value of the home. The property taxes are a big chunk of the closing costs/fees associated with the loan estimate when a loan is initially applied for.
Morty doesn’t normally take refinance opportunities, but it is on the horizon. Refinancing is replacing a current loan with a different one. A homeowner can choose to refinance their homes when interest rates change, which would allow them to lower their monthly payments and overall total money spent on the loan.
Registering a Loan
When we lock a loan for a borrower, we usually register the loan while doing so. Registering the loan generates the initial disclosures. The process to register a loan requires uploading the borrower’s 1003 application to the desktop originator, then to the lender portal. After inputting all relevant information, we can register the loan.
Replacement cost estimate (RCE)
This is required by many lenders to show the maximum price a property can be replaced for due to damages. This is something the HOI company will issue to the borrower when they are finalizing their HOI policy.
Borrowers must select a local title company, which will prepare multiple documents needed for closing. This includes title insurance, a title commitment, a closing protection letter, verification of property taxes, wiring instructions, and preliminary closing disclosures.
These are conditions that are requested by an Underwriting team after they have issued their initial conditional approval. Typically, these are requested as a result of flagging or finding additional items upon newly provided documentation that need to be addressed prior to issuing a final approval. This can also happen if there is a change in circumstance or a material change to the borrower’s financial situation or loan application.
When a property is transferred from one owner to another, transfer taxes must be paid to the local government. These are included in the closing costs, usually paid by the buyer.
When a loan is submitted to be approved by a lender, it goes through the underwriting process. The lender is verifying all of the information on their application and eventually approving or rejecting it based on their eligibility.
Acceptable forms of documentation that validates key information provided by an applicant and used in mortgage eligibility determination. Examples of this include W2’s and pay stubs to verify current employment as well as income levels that are used in the overall assessment of someone’s eligibility.
The IRS tax form used to confirm the income of a salaried or hourly worker.