Just like the military, the mortgage industry uses plenty of acronyms. It might sound like a foreign language if you’re a first-time homebuyer who is unfamiliar with the lingo. Use this list of the top 11 mortgage acronyms and abbreviations as a guide to help you in your military mortgage research and meetings with a trusted mortgage lender.

• APR: Annual Percentage Rate
• ARM: Adjustable-Rate Mortgage
• DTI: Debt-to-Income
• FRM: Fixed-Rate Mortgage
• LE: Loan Estimate
• LT: Loan Term
• LOX: Letter of Explanation
• LTV: Loan-to-Value
• P&I: Principal and Interest
• PITI: Principal, Interest, Taxes, and Insurance
• PMI: Private Mortgage Insurance

Read on to learn the definitions of these mortgage acronyms, which have been organized into three categories: Types of Mortgages, Mortgage Acronyms About Your Rate, and Mortgage Acronyms About Your Application.

Types of Mortgages

• Adjustable-Rate Mortgage (ARM): The interest rate and monthly payments of an ARM can change periodically. ARM interest rates typically start lower than fixed rates and stay at that introductory rate for 3-10 years before they become adjustable.
• Fixed-Rate Mortgage (FRM): A fixed-rate mortgage has an interest rate that does not change during the term of your loan. This mortgage is popular with buyers who want stability in their monthly payments.

Mortgage Acronyms About Your Rate

• Annual Percentage Rate (APR): The APR tells you the annual cost of borrowing money based on your loan amount, interest rate, and certain other fees. APR is different from the interest rate because it allows you to compare the true costs from several lenders directly to help you find the best deal.
• LE (Loan Estimate): This is a federally required document you should receive from a lender within three days of submitting your completed loan application. A loan estimate provides the details of your loan, and the estimates of the costs you will pay at closing.
• LT (Loan Term): The term indicates how long you’ll be making payments on the loan. Two popular term choices are 15-year and 30-year.
• P&I (Principal and Interest): P&I is the portion of your monthly mortgage payment that goes toward paying off the money you borrowed to buy your home (the principal loan amount financed), and the amount of interest due each payment period. For most homeowners, P&I will make up the majority of your monthly mortgage payment.
• PITI (Principal, Interest, Taxes, and Insurance): Your total mortgage payment each month will usually include principal, interest, taxes, and insurance if you escrow your taxes and insurance. You can use one of our payment calculator tools to gain a more complete picture of estimated monthly costs.
• PMI (Private Mortgage Insurance): PMI is an insurance that protects lenders from losses if you are unable to pay your mortgage. It is required for homebuyers using a conventional loan who make a down payment of less than 20% of the home’s purchase price (appraised home value). If you cannot put 20% down, you can still avoid paying PMI by using our Home Equity Advantage Loan^SM (a second mortgage option). Lenders may not require a down payment or PMI for a VA Home Loan — however, VA Home Loans have funding fees. In some cases, borrowers may be exempt from paying a VA Funding Fee if they are Disabled Veterans. Your lender can help you determine any applicable fees and costs associated with your mortgage.

Mortgage Acronyms About Your Application

• DTI (Debt-to-Income): This ratio is the percentage of your income that goes toward paying your monthly debt, which is calculated by dividing your monthly debt obligations by your monthly gross income. Lenders typically require your DTI to be below a specified level for you to qualify for a mortgage. Higher DTIs could mean you’ll pay more interest, or you may not qualify for a loan.
• LOX (Letter of Explanation): These are short letters you may be asked to provide to a lender answering questions that may arise during underwriting. It covers common questions such as why your income has changed, your rental history, or any late payments on your credit report.
• LTV (Loan-to-Value): This ratio is calculated by dividing the loan amount by the home’s purchase price if you are buying a home, or the current home value if you’re refinancing.

We’re Here to Help

Whether you’re just thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!