CNC Mortgage Blog

Those of us who have worked for so many years in the mortgage business sometimes assume that the consumer understands our terms. This is not true. Do not be intimidated to ask for further explanation if the person you are dealing with uses terms you do not understand. They could say that “we can’t be sure of what rate you are going to get because that will depend on your fico score, your ltv and cltv, the dti and the margin over libor, or cofi for the arm and the rate we can get for the pmi”. Easy, simple isn’t it?

Ask questions if you don’t understand!!! This whole process can be scary. When you sit down at the closing table you will be presented with many documents. You probably can’t change many of them because they are standard boilerplate developed by the state. But be sure they indicate to you where they are showing your interest rate, years of the loan, prepayment penalties, future adjustments, and other pertinent information.

By the way,

FICO is Fair Isaac Company, this is one of the credit scoring companies.

LTV means loan to value, that is the amount of the first mortgage on your property divided by the value of your property.

CLTV is cumulative loan to value, the sum of the first and second (or more) loans on your property divided by the value of your property.

DTI means debt to income ratio, it is the sum of your monthly obligations  (mortgage, credit cards, student loans, car payments, insurance, real estate taxes) divided by your gross monthly income. It is expressed as a percentage.

LIBOR is the London interbank offered rate, it is the rate at which banks lend to each other on short term overnight transactions.

COFI is the cost of funds index which is an indicator of how much banks are paying for the funds from checking accounts, savings accounts and certificates of deposit (I was tempted to say CDs) to their customers.

ARM is an adjustable rate mortgage as opposed to a fixed rate mortgage. The interest rate on these mortgages can change after a predetermined period of time.

PMI is private mortgage insurance, a premium you pay in addition to the interest and principal on your loan. It is a premium because it is the payment on an insurance policy that the lending bank takes out to be sure that you do not default on the payment of your loan.

Feel free to call if you are still confused, 952 545 6769