Mortgage Number Glossary Terms
QM & Non-QM Loans
Qualified mortgage (QM) loans and non-qualified mortgage (Non-QM) loans must meet the ability-to-repay rule, among other rules formed in 2014 (Dodd-Frank). Whereas QM and non-QM underwriting standards use two different approaches to qualify your loan, Mortgage Number utilizes both. This convergence of ideas provides you with the best of both worlds when it comes to qualifying for a mortgage.
Non-QM lenders have more flexibility in underwriting guidelines compared to QM underwriting guidelines. Non-QM loans are best for documenting income for self-employed borrowers, investors, foreign nationals and others that QM guidelines do not recognize. Think of non-QM loans as a hybrid that can extend your qualifying reach.
Loan-to-Value Ratio (LTV)
Loan-to-value is the ratio of how much you're borrowing compared to your home's worth. It's a simple formula, but it's the basis for most mortgage lending. Once you know your LTV, you can figure out which mortgages you're likely to qualify for.
Private Mortgage Insurance (PMI)
Private Mortgage Insurance is when you put less than 20% down on your home.
If you have a loan greater than 80% LTV, that is from 79.9% – 100% (or putting down less than 20%), the PMI Premium turns on but defaults to zero. This is because the trend has been that lenders will ‘bake’ the premium into your interest rate. You can turn it on by clicking the red and green buttons and adjust the % or $ amount. It will default to a number to start. You can turn it off by clicking ‘Off’.
Interest Only vs. Amortization
Interest Only or I/O does not have a term because it will never be paid off, it’s Interest Only. Amortized has a set number of years until the balance is zero. PITI is Principle Interest Taxes and Insurance, ITI is Interest, Taxes and Insurance. Why do people select I/O? It has a lower monthly payment.
Lower down payments, higher DTI (Debt to income) ratios and lower credit scores. The risk is diluted through PMI or MIP (Mortgage Insurance Premium). Basically, it’s insurance against mortgage defaults/foreclosure. 100% financing? It’s coming, again and it’s starting with VA loans.
Why does this happen? Two-thirds of the US economy is based on consumer spending. Homeownership is the threshold to all spending. Homeownership expands our economy by creating more tax revenue. It’s an engine that powers our capabilities.
Once this becomes more mainstream (100% financing), we will add a button to our home page with this option…