Talking Mortgage

Talking Mortgage graphic February 15, 2018

Lending officers have their own language. We try not to use unfamiliar jargon when working with customers, but “talking mortgage” is second nature to us. Let me clarify some lingo my customers have called me out on.

1003

Your loan application. Pronounced ten-o-three. This is a uniform document all lenders use as their mortgage application.

LTV

Loan-to-value. This is a ratio of what you owe on your home versus what it is worth. In a home purchase transaction, this is also your loan balance versus your purchase price. The industry uses the lower ratio — appraised or purchase price — as the value of the home. Therefore, your purchase LTV may be higher than your actual LTV if your appraisal comes in higher than your purchase price.

CLTV

Combined loan-to-value. This is like your LTV, but includes the overall loan amount versus the overall value when combining a first and second mortgage.

DTI

Debt-to-income ratio. Also known as back-end ratio. A percentage of a consumer’s monthly gross income that goes toward paying debts.

Front-end ratio

Mortgage-to-income ratio. Indicates which portion of an individual’s income is used to make mortgage payments. It is computed by dividing your projected monthly mortgage payment by your monthly gross income. Front-end and back-end ratios are used by lenders to determine how much you can afford to borrow.

PMI

Private mortgage insurance. Commonly referred to as MI or mortgage insurance.  This is required on loans for which the buyer makes less than a 20 percent down payment or has less than 20 percent equity on a refinance. This insurance policy protects the lender in case the borrower ends up in foreclosure.

CD

Closing disclosure. A required disclosure given to all borrowers on mortgage loans three days prior to closing. This is a five-page document that details loan terms, payments, fees and other costs.

LE

Loan estimate. This document mirrors the closing disclosure, but is issued at the beginning of the loan application. Since the two documents look alike, it is easy to compare fees, costs and changes from start to finish.

Hazard Insurance

Homeowners insurance.

 

When it is time to buy or refinance a home, talk to a local lender first. The more you know about the mortgage process, available loan options and your individual qualifications, the more satisfying your homebuying experience is.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of Kenneth Wohl and meant for generic illustration purposes only.  For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934.
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How new tax law affects mortgage deductions

W-4 tax sheet with money and house on it February 5, 2018

You’ve likely heard about the new tax plan and the changes coming to our tax code. I am not a certified public accountant (CPA) and cannot speak to how this may directly affect you individually, but I can share how the changes may affect your mortgage tax deduction.

One benefit of home ownership is being able to deduct your property taxes and mortgage interest on your income taxes.

For example, let us say you buy a home for $275,000 and the taxable value of the home is 1.25 percent of the sales price. On a mortgage at 80 percent loan-to-value accruing interest at 4 percent, you can expect to pay around $8,700 in interest and $3,400 in taxes, a total of $12,100, the first year. This amount will decrease each year as you pay down your principal.

Under the current tax code, the standard deduction is $6,350 for single filers and $12,700 for married filing jointly. If you had no other deductions, it would benefit you to itemize if you were single but not if you were married filing jointly.

The proposed tax plan will increase the standard deduction for single filers to $12,500 and married filing jointly to $24,000.

Using our example, the $12,100 mortgage deduction falls below the standard deduction for both single and married filing jointly.

Owning a home is an American dream for many people, and there are benefits to home ownership other than a tax break. Before you decide to purchase, be sure to look at the full picture of ownership.

With many current deductions and potential phase-outs of those deductions if the new tax proposal passes, it’s important to do your homework. Talk with your CPA and ask them to show you a future tax plan based on the proposed law.

When you decide to buy or refinance, first talk to a local lender. The more knowledge you have about the mortgage process, available loan options and your individual qualifications, the more satisfying your home buying experience will be.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of Kenneth Wohl and meant for generic illustration purposes only.  For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934.
Sources: taxpolicycenter.org and irs.gov
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