By Scott Drescher (NMLS #168878), Highlands Residential Mortgage, LLC and Member, CCAR’s REALTOR®/Lender Committee

The mortgage industry is rife with abbreviations and acronyms. Some are obvious, but others are a little more esoteric. The REALTOR®/Lender Committee thought you might benefit from a short list of the most common or noteworthy. When the abbreviation is an acronym, we provide pronunciation in parentheses; when it is not an acronym, it will have no parenthetical following the abbreviation.

App:  Application – the form that an applicant uses to apply for a mortgage.

APR: Annual Percentage Rate – the total cost of the credit, expressed as a yearly rate. This is not the interest rate because the interest rate doesn’t include any other costs of obtaining the credit, which may include, for example PMI (see below) or MIP (see below).

ARM (arm): Adjustable Rate Mortgage – a mortgage that has a feature that allows the interest rate to rise or fall. It is not a “rising rate mortgage” as some people mistakenly believe. The rate is determined by adding a margin to an index.

CLTV: Combined-Loan-to-Value – a ratio of all of the mortgages on a property to the value of the property, which by definition is the lower of the sale price or actual appraised value.

CD:  Closing Disclosure – the form required by the government that must show the final figures for all of the terms of the purchase and mortgage.

CTC:  Clear to Close – three words everyone likes to hear that indicate full approval, the file has overcome all obstacles and the lender is ready to prepare closing documents.

DTI: Debt to Income (Ratio) – the ratio of a borrower’s monthly housing payment (PITI below and association dues) and minimum payment on all debt and child support/alimony to his gross income.

DU:  Desktop Underwriter – the automated underwriting engine provided to lenders by Fannie Mae for underwriting Fannie Mae-eligible mortgages. DU is also used for underwriting FHA mortgages.

FHA: Federal Housing Administration – the department of the federal Department of Housing and Urban Development that oversees the U.S. housing market. FHA insures the entire mortgage made for loans sold to Ginnie Mae (see GNMA below) by its approved lenders.

FHLMC (fred-ee mack):  Federal Home Loan Mortgage Corporation – Freddie Mac is the other of the two conventional enterprises created by Congress to increase access to mortgages.

FNMA (fan-ee may): Federal National Mortgage Association – Fannie Mae is one of two conventional enterprises created by Congress to increase access to mortgages.

FTHB: First Time Home Buyer – a home purchaser that has not had an ownership interest in a residence within the prior three years.

GFE: Good Faith Estimate – used to be the document that a lender was required to send an applicant within 3 business days of an application that showed the closing costs, prepaid items and rate lock terms. It has been replaced by the LE (see below).  One should never suggest a buyer get a GFE anymore.

GNMA (jin-ee may): Government National Mortgage Association – Ginnie Mae is the agency that actually guarantees the federally guaranteed mortgages insured or guaranteed to lenders:  VA, FHA and USDA (see below).

GSE:  Government Sponsored Enterprise – created by Congress to increase access to mortgages.

HELOC (hee-lok): Home Equity Line of Credit – a loan against a primary residence that generally is used to take cash out, although it could replace existing home debt. It is designed to borrow and pay back from time to time, like a credit card.

LIBOR (ly-bor): London Interbank Offered Rate – the most commonly used index for ARMs.

LE:  Loan Estimate – the replacement for both the GFE and Truth-in-Lending forms, requiring lenders disclose within three days of receiving a formal loan application the closing costs, prepaids, the interest rate and other information.

LP:  Loan Prospector – the automated underwriting engine developed by Freddie Mac for underwriting Freddie Mac eligible mortgages.  LP is also used for underwriting FHA mortgages.

MBS: Mortgage Backed Securities. These are the investment instruments that are bundled by Fannie Mae, Freddie Mac, and Ginnie Mae for sale on Wall Street.

LO: Loan Officer – the individual who takes the actual application for a mortgage. An LO may be a licensed mortgage banker or broker, or he can work for a depository institution, be registered but not be required to be licensed.

LPMI: Lender Paid Mortgage Insurance – private mortgage insurance paid by the lender instead of the borrower. This is accomplished by the lender increasing the mortgage interest rate.

LTV: Loan-to-Value – the ratio expressed as a percentage of the mortgage to the value, which is the lower of the purchase price or the appraised value (when purchasing) or simply the appraised value (when refinancing).

MIP: Mortgage Insurance Premium – fully insures against loss for a lender, similar to PMI (see below) but is required for FHA mortgages. With FHA mortgages there is an upfront MIP payment, that is usually financed, as well as a monthly payment.

N/O/O: Non-Owner Occupied – signifies that the mortgagor uses the mortgage for an investment property.

O/O: Owner Occupied – signifies that the mortgagor uses the mortgage for a primary residence.

PITI (pit-ee): Principal Interest Taxes and Insurance – the combined total of all of the housing expenses listed, paid on a monthly basis, including mortgage insurance.  When not clearly stated otherwise, PITI includes any homeowners association fees.

PMI: Private Mortgage Insurance – partially insures against loss for a lender, charged on conforming mortgages that are over 80% LTV (see above).

RESPA (res-pah): Real Estate Settlement Practices Act – the federal law that regulates the sale and purchase of residential real estate.

TIP (tip): Total Interest Percentage – the amount of all the interest if paid in full over the term of the mortgage without prepayment at any time divided by the original loan amount.

TLTV: Total Loan-to-Value – another name for CLTV (see above).

TRID (trid):  TILA/RESPA Integrated Disclosures – the rules that govern the disclosure of the LE and CD.

USDA RHS: United States Department of Agriculture/Rural Housing Services – a program for guaranteeing rural mortgages, guaranteed by the federal government.

VA: Veterans Administration – guarantees the top portion of the mortgage made for loans sold to Ginnie Mae (GNMA) by its approved lenders. However, VA mortgages are only available to members of the military, honorably discharged veterans of military service and the unremarried spouse of a member of the military who passed away as a result of service in the military.

VOD: Verification of Deposit – a form that sent to a bank/credit union/savings bank/investment company to verify the amount of funds in accounts and to provide an average balance over a specified, usually 60-day, period.

VOE: Verification of Employment – a form that is sent to an employer to verify income in all its forms (gross earnings, bonuses, commissions, etc.), hours worked, continuance expected and more. Many times a VOE will be done followed up verbally by the lender just prior to closing.

VOM: Verification of Mortgage – a form that is sent to a lender to verify the amount and timeliness of the payment of an existing mortgage. This is normally used when a mortgage is not being reported properly and for privately held mortgages that don’t report to the bureaus.

VOR: Verification of Rent—a form that is sent to an applicant’s landlord to verify the amount and timeliness of the payment of rent.

For these and other questions about lending, contact the REALTOR®/Lender Committee at