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8/8/2019 Citibank Mortgage Basics Overview
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Mortgage Basics Overview
Brought to you by
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Mortgage Terminology Mortgage- a legal document indicating that a
specific amount of money will be loaned at aspecific interest rate
Equity-The difference between the presentvalue of the property and the mortgage amounton that property
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Mortgage Terminology LTV (Loan to Value)- The ratio of the amount of
the loan to the lower of the appraised value orsales price of real property (expressed as a
percentage) CLTV(Combined Loan to Value)- The ratio of the
amount of the loan and any subordinatefinancing (like home equity loans) to theappraised value or sale price of real property
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Calculating
LTV and
CLTV
The appraised price of the home is $200,000and the mortgage amount is $160,000
LTV= $160,000 divided by $200,000 = .80 or
80% Now assume there is a Home Equity loan with a
$10,000 balance as well
CLTV= ($160,000+10,000) divided by
$200,000 = .85 or 85%
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More Mortgage Terminology Conforming- A mortgage loan which meets all
requirements (size, type, and age) to be eligiblefor purchase or securitization by outside
agencies (ex. Fannie Mae) Non-Conforming- A mortgage loan in which the
loan amount, the loan-to-value ratio, the term, orsome other aspect of the loan exceedspermissible limits as specified in agencyregulations
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MortgageL
oan Types and Sizes
Property Type Maximum Loan Size
1-Family $333,700
2-Family $427,150
3-Family $516,300
4-Family $641,650
Conforming Loan Size Limits
Check Daily Rate Sheet for updates, excludes Alaska and Hawaii
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MortgageL
oan Types and SizesNon-Conforming Loan Size Limits
Loan Type Maximum Loan Size
Jumbo $333,701-$700,000
Super Jumbo $700,001-$1,000,000+
Check Daily Rate Sheet for updates
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More Mortgage Terminology Conventional- Mortgage financing which is
not insured or guaranteed by a governmentagency
Non-Conventional- Mortgage financingwhich is insured or guaranteed by agovernment agency
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More Mortgage Terminology Lock period- The number of days during which
a lender guarantees a borrower a specificinterest rate and terms on a mortgage
F
loat- A loan application in which the lender hasnot committed to lend at a particular interest rate
Rate Cap- On an adjustable rate mortgage, thelimit on interest rate increases and/or decreasesduring each interest rate adjustment (adjustment
period cap) or over the term (life cap) of themortgage
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More Mortgage Terminology Point- An amount equal to one percent of the
principal amount of a mortgage. Loan discountpoints are a one-time charge assessed at closing
by the lender in return for a lower note rate
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MortgageR
atiosHousing or front end debt ratio
Monthly housing costs, including mortgagepayments, property taxes, insurance and monthlymaintenance fees (if applicable) as a percentage of
monthly gross incomeTotal or back end ratio
Monthly housing costs plus monthly payments onconsumer credit and other long term debt as apercentage of monthly gross income
Front End Back End
Standard Financing Options 28% 36%
Affordable Mortgage Options 33% 38%
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More Mortgage Terminology Mortgage Insurance- Insurance which protects
mortgage lenders against loss in the event ofdefault by the borrower. This allows lenders to
make loans with lower down payments. Thefederal government offers MI through HUD/FHA;private entities offer MI for conventional loans
Premium Pricing- a higher interest rate chargedto the borrower in exchange for receiving a dollar
amount credit that reduces their closing costs
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More Mortgage Terminology Escrow account- 1) the deposit by a borrower
with the lender to pay taxes and insurancepremiums when they become due or 2) the
deposit of funds or documents with an attorneyor escrow agent to be disbursed upon theclosing of a sale of real estate (also calledimpounds)
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Refinancing
Rate and term refinance- The refinance of anexisting mortgage balance solely to lower theinterest rate or change the terms of the loan
Cash Out refinance- The refinance of anexisting mortgage at a higher dollar amountresulting in cash back to the borrower. Alsorefers to the refinance of 1st and 2nd mortgageswhen the 2nd mortgage was not originated anddrawn on simultaneous with the purchase of theproperty