Sorting Out the Acronyms....................................................................................................................................................................................................

With all the complicated terminology, acronyms and industry lingo used in the mortgage industry, even the expert linguist can sometimes find themselves baffled. Collected below are a few of the more common terms used in lending today. If you feel like your and your lender are speaking different languages, reading the definitions listed below can help you get you on the same page.

Any non-government loan program is a conventional loan, most of which are provided by banks, savings and loans, mortgage bankers and mortgage brokers (basically, the private sector).

An agency of the Department of Housing and Urban Development. The FHA guarantees certain loan programs for all Americans; insure loans that are made by approved lenders to qualified borrowers; and allows low income and/or low down payment loan borrowers the opportunity to purchase a home that they might not have been eligible for under conventional loan programs.

Within 72 hours of signing a residential loan application, the federal government requires that a good faith estimate is sent to the borrower, outlining the costs and charges a borrower is likely to incur in connection with the loan closing. however, the GFE is not a guarantee that the applicant will be approved for the loan or that the final amount will be the same figure; the amount (interest rate, terms, conditions) may change pending final loan approval and down payment terms.

The amount that the FHA charges up front when they insure a loan under one of their programs. The FHA pays the money into a fund where the money is held until it is headed in the event of a default by the buyer.

If a mortgage load exceeds 80% of the sales price of a home, lenders require insurance coverage that will protect them in the event that a buyer defaults on their loan. The cost of the PMI is typically charged to the borrower when the loan to value ration is greater than 80%.

An up front cash payment required by the lender as part of the charge for a loan, expressed as a percent of the loan charge equal to 3% of the loan balance.

A general term that means that a borrower has completed a loan application and provided their debt, income, and savings information which an underwriter has reviewed and approved.

A preliminary step in the loan application process, a prequalification is a lender's written opinion of the ability of a borrower to qualify for a particular loan amount. The amount prequalified by the lender is determined based on inquiries into the borrower's debt, income and savings, and may or may not require a credit check.

Ratios are used in the lending industry to determine the probability of a borrower being able to repay a loan - usually this ratio compares the borrower's fixed monthly expenses to his gross monthly income. Certain lenders have different ratio requirements; for example, the FHA requires that a monthly mortgage payment is no more than 29% of monthly gross income before taxes, and that the total mortgage payment and non-housing debts is less than 41% of income.

In lending these two figures are represented as 29/41: 29 is the Front-End Ratio (gross monthly income before taxes divided by monthly mortgage payment (principle, interest, taxes and homeowners insurance); 41 is the Back-End Ratio (gross monthly income before taxes divided by monthly mortgage payment plus non-housing debts, such as car loans and credit card debt).

A federal law that requires lenders to fully disclose, in writing, the fees, terms and conditions associated with the loan, including the annual percentage rate (APR) and other charges.

The department of the federal government that handles all programs associated with veterans of the U.S. military; in the mortgage industry, the agency guarantees loans that are made to veterans (similar to mortgage insurance), thereby encouraging lenders to make mortgages to veterans.