Atlanta Regional Housing

Resources for Buyers

Q&A FOR NEW HOMEBUYERSQ: Homebuyers Training/Counseling: What is it? Why is it necessary? Where can it be found?
The process of buying a home is very involved and at times a complicated process.  Homebuyer training can help the first time homebuyer understand the process, learn how to avoid mistakes, and ultimately make sure your first home purchase is a more educated experience. If you receive down payment support or other subsidy to help you afford a home, you may be required to attend both pre-purchase homebuyer training as well has post-purchase counseling.  Even if you aren’t required to participate in homebuyer training, it is highly recommended.  It is also recommended that you participate in training that is recognized and approved by a government agency.  For a list of home buyer education providers visit the links below.Georgia Department of Community Affairs – Home Buyer Counseling & Education Agencies
http://www.dca.state.ga.us/housing/Homeownership/programs/downloads/HBed.pdfU.S. Department of Housing & Urban Development (HUD) Approved Housing Counseling Agencies
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=GA#searchArea
Q: What is involved in the home buying process?
The home buying process has many steps and requires advanced preparation before taking any step.  The U.S. Department of Housing & Urban Development (HUD) has an excellent online resource guide to help you understand the process.  To access the guide, visit the link .  http://www.hud.gov/buying/index.cfm#afford

Q: How much home can I afford?
There is a general rule that a family, in order to remain financially healthy, should spend no more than 30% of their monthly household income on housing.  Housing advocates, including those associated with this website, ask you to consider your transportation cost as well.  The general rule for housing and transportation is spend no more than 50% of your monthly income on housing + transportation.  You may want to use an online mortgage calculator to help.  But beware, many online calculators have yet to place emphasis on the “housing + transportation” expense issue.

Q: What is a mortgage calculator? Where can I find one?
A mortgage calculator is an online tool used to estimate a monthly mortgage payment, determine how much home you can afford, or both. Example:  www.ginniemae.gov/2_prequal/intro_questions.asp?Section=YPTH

Q: Where can I search for a home that’s in my price range and meets my other needs?
The most commonly used search sites are those that offer “multiple listing services.”  That is to say, the search engine results include homes for sale from a wide variety of sellers – no just one company.  Example: www.georgiamls.com

If you think you’re not ready to buy, and you need a search tool for rental property, consider www.georgiahousingsearch.org.

Q: Are there down payment or other programs that would help me?
To learn more about down payments or other assistance programs, visit our Subsidy Programs  page.

 

100 TERMS EVERY HOME BUYER SHOULD KNOW

Term

Definition
Adjustable Rate Mortgage (ARM) A mortgage loan subject to changes in interest rates during the course of the loan term. When rates change, adjustable-rate mortgage (ARM) monthly payments increase or decrease at intervals determined by the lender. The change in monthly-payment amount, however, is usually subject to a cap. In hybrid ARMs, the interest rate is fixed for a period of time – often, 3, 5, 7, or 10 years – and then coverts to an adjustable rate thereafter.
Amortization The gradual repayment of a debt, such as a mortgage, by installments.
Amortizing Loan A loan for which equal payments are due on a regular periodic basis, usually monthly.  The payments include varying amounts of principal and interest.  These are sometimes called “level payment” loans, as opposed to deferred payment loans due only on resale or loans repaid with unequal periodic payments of principal and interest.
Annual (Gross) Income The total amount of money that a person or company receives over the course of a year, before taxes and other deductions. This income may include, but is not limited to, funds from employment; interest; dividends; alimony; disability payments; or public assistance.
Application  Fee Charge collected by the lender at the time a would-be borrower applies for a mortgage. This fee generally covers the cost of the appraisal on the property and the cost of ordering a mortgage credit report.
Appraisal Estimate of the real or market value of a property, that is, what the owner could reasonable expect to get upon sale. Estimates are usually made by professional real estate appraisers.
Appreciation An increase in the value of property due to changes in market conditions or other causes.
Assessment Area The geographical area served by a lender.  The area is used by the Federal Reserve Board to evaluate the lender’s compliance with the Community Reinvestment Act and  the bank’s record in helping to meet the credit needs of its community
Below Market Interest Rate Program (BMIR) Applies to certain mortgage programs where the interest rate on the mortgage is below that charged for conventional financing, in order to assist low-and moderate-income families rent or purchase dwelling units.
Capital Gain Or Capital Loss: The gain or loss incurred from the sale or disposition of a capital asset (such as a property).
Cash-To-Close A colloquial term used in the single-family lending industry to describe the total amount of cash to be provided by the homebuyer at the real estate and loan closing.  This cash is applied to pay the down payment, appraisal fee, and other loan-related fees, recording costs, and pre-paid real estate taxes and insurance.
Clear Title Title to real estate that is free from competing interests such as old liens or other claims to ownership. Because having clear title is generally a requirement to purchase title insurance, clear title is sometimes interchanged with “insurable title.” Similarly, because possession of clear title is necessary to market or sell a property, the term “marketable title” can also be synonymous with clear title
Collateral Property pledged as security for a debt, for example, mortgaged real estate.
Consumer Credit Counseling Service Consumer Credit Counseling Service (CCCS) is a nonprofit, community service agency whose services are open to all members of the community.  CCCS provides free, confidential budget counseling, community-wide education programs in money management, debt management programs for consumers who are overextended and comprehensive housing counseling
Conventional Financing In the low-income housing industry, a term often used to refer to any loan made with non-subsidy sources.  Among private, single-family lenders, a term to describe a loan that is made with a minimum 20% down payment and conventional underwriting criteria—a maximum 80% loan-to-value ratio and maximum 28/36 underwriting ratios.  See “loan-to-value ratio” and “underwriting ratios.”
Conventional Loan A mortgage loan not insured by FHA or guaranteed by the VA or by USDA-Rural Development
Credit And Debt Profile A credit and debt profile assesses the financial history of an individual, business, jurisdiction or other entity. Lenders often require a credit and debt profile of their borrowers to assess their credit worthiness and establish loan terms and interest rates for a home mortgage.
Debt Ratio In single-family lending, the percentage of borrower’s income that will be spent on all installment debt after a home purchase, refinancing, or home renovation financing.  The conventional ratio is 36% of income.  Some community reinvestment loan products and insured loans allow a higher ratio.
Debt Service Principal and interest payments on a loan usually paid monthly.
Debt To Equity Ratio The debt to equity ratio is a financial ratio used to determine whether a government agency, business, household, or other entity can safely borrow over long periods of time. The ratio is calculated by dividing an entity’s outstanding debt by the amount of equity it holds. A high debt to equity ratio may indicate that an entity is financing its growth with debt. For government agencies, debt to equity ratio is important because it will determine whether it has a strong or weak bond rating.
Deed The document that transfers ownership of a property. The deed must contain an accurate description of the property being conveyed, be signed and witnessed according to the laws of the State where the property is located, and be delivered to the purchaser at closing day.
Deed Of Trust Similar to a mortgage or security deed, a document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower’s land to a neutral third party, a trustee, to secure the payment of a debt by the borrower. A deed of trust is an arrangement among three parties: the borrower, the lender, and an impartial trustee. In exchange for a loan of money from the lender, the borrower places legal title to real property in the hands of the trustee who holds it for the benefit of the lender, named in the deed as the beneficiary. The borrower retains equitable title to, and possession of, the property.
Deferred Payment Loan Funds provided to a borrower under terms that calls for repayment to be delayed for a certain length of time, until certain circumstances change, or a certain threshold is met. In housing programs, deferred payment loans are often used as a recapture mechanism. In home ownership programs the loans often become due when the assisted family sells the home. Under rental programs the loans often become due if the affordability requirements are breached. In most housing programs these loans have an interest rate of zero percent; in some communities interest does accrue.
Deferred Payment Second Mortgage Loan A non-amortizing loan, usually at 0% interest, on which no repayments are due until sale or some other point in the future.  They are usually made by a public or nonprofit agency to a lower income homebuyer or a developer of low-income housing.  Sometimes called a “deferred payment loan,” a “DPL,” or a “soft second mortgage.”
Document Recording Fee The fee a government charges for reporting a real estate purchase or sale in the public record. Document recording fees are one source of funding for housing trust funds.
Down Payment Assistance Grants or low interest loans given to lower income homebuyer’s help to fund down payment and/or closing costs—usually in the range of $2,000 to $5,000.  Less commonly, the term is used to refer to any second mortgage financing in any amount.
Downpayment. The amount of cash a buyer is required to put up in order to purchase a piece of property; it is generally equal to the purchase price less the amount of mortgage loans used to finance the purchase.
Easement The right of a person, government agency, or public utility company to use for a specific purpose public or private land owned by another.
Encumbrance A legal right or interest in land that affects a good or clear title, and diminishes the land’s value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.
Equal Credit Opportunity Act is a United States law (codified at 15 U.S.C. § 1691 et seq.), enacted in 1974, that makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant’s income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The law applies to any person who, in the ordinary course of business, regularly participates in a credit decision, including banks, retailers, bankcard companies, finance companies, and credit unions.
Equity The market value of real property, less the amount of existing debt or liens.
Escrow Account As used in the housing context, an escrow account is a separate account into which the lender puts a portion of each monthly mortgage payment. An escrow account provides the funds needed for such recurring expenses as property taxes, homeowners insurance, mortgage insurance, etc. Requiring families to make monthly payments into an escrow account to cover these expenses is generally viewed as a desirable practice that helps families manage their housing costs by spreading the payments for these expenses throughout the year.
Fair Housing Act A federal law that prohibits discrimination on the basis of race, color, national origin, religion, sex, familial status, or disability. It applies to both home buying and renting.
Fair Lending The prohibition of lenders from practicing unlawful discrimination against anyone on the basis of race, color, religion, national origin, age, sex, marital status, family status, handicap, receipt of public assistance and good faith exercise of rights under the Consumer Protection Act. Fair lending is governed by four major federal regulators: the Equal Credit Opportunity (ECOA or Regulation B), Fair Housing Act, Home Mortgage Disclosure Act (HMDA or Regulation C), and Community Reinvestment Act (CRA or Regulation BB)
Fair Market Value The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation. The amount an appraiser decides a house is worth. The appraiser compares the house with houses like it that have sold recently in the same area. The physical condition of the house also affects its fair market value.
Fannie Mae  Federal National Mortgage Association Federal National Mortgage Association (FNMA). Both Fannie Mae and Freddie Mac were chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to home buyers. Fannie Mae and Freddie Mac buy mortgages from lenders, packaging the mortgages into securities and selling them to investors. As Fannie Mae and Freddie Mac will only buy loans that meet their guidelines, they play an important role in setting what criteria are used to evaluate a mortgage application.
Federal Home Loan Bank System is a cooperative bank that offers low-cost financing, community development grants, and other banking services to help member financial institutions make affordable home mortgages and provide economic development credit to neighborhoods and communities.
Federal Home Loan Mortgage Corporation A commonly used name or the Federal Home Loan Mortgage Corporation, a publicly chartered corporation that buys residential mortgage loans from loan originators, typically local banks and thrift institutions.
Fee Simple Ownership Outright ownership of real estate, as opposed to leasing, lease-purchase arrangements, and buying a home on land leased from a land trust.
Finance although the terms ‘credit’ and ‘finance’ are often used interchangeably they denote related but distinct concepts. Finance refers to the manner in which an activity is funded. Credit is the form of finance when borrowed capital is used to fund an activity.
First Mortgage Loan For a home purchase or a real estate project, usually the largest loan and one that gives the lender the most security.  In case of foreclosure and sale, the first mortgage lender gets the money before any other lender is paid off.  Also called a “first deed of trust” loan in some areas of the country.
First-Time Home Buyer A first-time homebuyer is an individual or family that has not owned or had ownership interest in any residence during the last three years preceding closing. An exception to this requirement exists only if the home to be purchased is located in a targeted area.
Fixed-Rate Mortgage Loan A mortgage loan for which the interest rate does not change over time.
Foreclosure The process by which a mortgaged property may be sold when a mortgage is in default.
Gross Monthly Income (GMI) Household income as calculated before taxes or deduction are subtracted. This income may include, but is not limited to, funds from employment; interest; dividends; alimony; disability payments; or public assistance.
Home Buyer Training Workshops conducted for groups of prospective homebuyers.  Participants receive training on the pros and cons of buying a home, credit issues, the home search, mortgage financing, special financing (if available), the loan closing, home maintenance, and other responsibilities of homeownership.
Home Mortgage Disclosure Act (HMDA) The Home Mortgage Disclosure Act requires larger lending institutions making home mortgage loans to publicly disclose the location and disposition of home purchase, refinance and improvement loans. Institutions subject to HMDA must also disclose the gender, race, and income of loan applicants.
Home Program HOME Investment Partnership Program A program administrated by the US Department of Housing and Urban Development which is designed exclusively to create affordable housing for low-income households.  HOME provides formula grants to States and localities that communities use-often in partnership with local nonprofit groups-to fund a wide range of activities that build, buy, and/or rehabilitate affordable housing for rent or homeownership or provide direct rental assistance to low-income people
Homestead Exemption The home of each resident of Georgia that is actually occupied and used as the primary residence by the owner may be granted an exemption from state, county and school taxes except for school taxes levied by municipalities and except to pay interest on and to retire bonded indebtedness.  The standard exemption is $2,000 off of the from the 40% assessed value of the homestead, but the value of the exemption can vary based on several factors including age, military service and some counties have increased the amounts of their homestead exemptions by local legislation above the amounts offered by the State.
Housing Payment Ratio In single-family lending, the percentage of a borrower’s income that will be spent on the housing payment after a home purchase, refinancing, or home renovation refinancing.  This includes payments of loan principal, interest, real estate taxes, and insurance (called PITI).
Income Eligibility Limit The highest income level at which a household qualifies for participation in a subsidy program. In most housing programs, income limits are expressed as a percentage of the area median income, as determined by HUD.
Insurable Title A clear title is a signal that a property can be purchased without worrying about old liens or owners coming back to assert claims to the property. This status is also referred to as an ‘insurable title,” since the property owner can get title insurance to protect against losses if there was an error in checking the title history; and as a “marketable title,” since having a clear title facilitates marketing and selling a property.
Interest percentage charged over the life of a loan for the use of the money to purchase property. Both the principal and interest usually are paid in monthly installments throughout the life of the loan.
Interest Rate The annual percentage of the principal amount payable for the use of borrowed money.
Layered Financing Financing for an affordable housing project that includes several subsidy sources (for example, HOME, CDBG, and Tax Credits).
Lien A document recorded in public records that represents a debt owed whose payment is secured by the property as collateral.  Examples of liens include: a recorded mortgage deed, a lien for unpaid taxes, and a mechanic’s lien representing construction work on a property that was not paid for.
Loan Loans are often referred to as debt financing and must be repaid according to a fixed payment schedule, generally with interest.
Loan Guarantees A pledge by a third party that, in case of default by the borrower, promises to repay all or a portion of the borrowed amount. State and local governments and non-profit intermediaries are often sources of loan guarantees, with the Federal Housing Administration (FHA) being one of the most well known.
Loan-To-Value Ratio loan amount and the appraised value of a property that money is being borrowed for.  For instance, if a proposed loan equals 85% of appraised value, the loan-to-value ratio is 85%.  For community reinvestment programs, lenders will sometimes lend up to 95% or 97% of value, typically only if mortgage insurance is provided.  The maximum ratio for conventional loans is 80%.
Low- And Moderate-Income Low- to moderate-income working families are defined as those households earning at least the full-time minimum wage (nationally $10,712) up to 120 percent of the local area median income
Median Family Income (MFI) also referred to as Median Household Income, is commonly used to provide data about geographic areas and divides households into two equal segments with the first half of households earning less than the median household income and the other half earning more. The median income is considered by many statisticians to be a better indicator than the average household income as it is not dramatically affected by unusually high or low values
Median Income This is a statistical number set at the level where half of all households have income above it and half below it. The U.S. Department of Housing and Urban Development Regional Economist calculates and publishes this median income data annually in the Federal Register.
Mortgage A legal document used to ensure payment of a debt by transferring an interest in real property to the lender.  Mortgages are commonly associated with residential home loans.  In that case, the buyer may give the lender a mortgage with the purchased home as collateral to secure the repayment of funds loaned to purchase the home. (See also Security Deed–in Georgia, security deeds are used more commonly than mortgages)
Mortgage Banker A lender who originates loans for sale to other investors. The mortgage banker generally continues to service the loans.
Mortgage Insurance Insurance provided by a private institution or public agency that insures a lender in whole or in part from losses due to a default on a loan.  Lenders typically require mortgage insurance only for loans that are not considered conventional (see “conventional financing”).  Borrowers pay the premiums.  The Federal Housing Administration (FHA-part of HUD) provides many kinds of mortgage insurance, as does the Veterans Administration (VA) and many private insurers, who provide what is called “private mortgage insurance (PMI).
Mortgage Interest Deduction The mortgage interest deduction is a tax break for homeowners. Homeowners with deductions that are large enough to warrant itemizing can deduct the amount of interest on their mortgage when they file their taxes. The mortgage interest deduction is the largest subsidy for housing in the United States.
Mortgage Loan A loan secured by a mortgage deed, meaning the property owner has agreed to give the property to the lender if monthly payments are not made, so the property can be sold to pay off the loan.  First deed of trust loan means the same thing.
Mortgagee The lender in a mortgage loan transaction
Mortgagor The borrower in a mortgage loan transaction
Non-Amortizing Loan A non-amortizing loan, usually at 0% interest, on which no repayments are due until sale or some other point in the future.  They are usually made by a public or nonprofit agency to a lower income homebuyer or a developer of low-income housing.  Sometimes called a “deferred payment loan,” a “DPL,” or a “soft second mortgage.”
Non-Recourse Loan A type of mortgage loan in which the lender’s remedies in the event of the borrower’s default are limited to foreclosing the mortgage; the borrower is not personally liable.
Note A document signed by a borrower agreeing to pay the lender a specific amount of money over a given period of time according to specified terms and conditions.   Also referred to as a Promissory Note..
Origination Once a lone has been underwritten, the act of processing the loan through closing, providing the loan funds and setting the loan up for servicing.
Origination Fee: The fee charged by a lender to prepare loan documents, make credit checks, inspect and underwrite a property; usually computed as a percentage of the face value of the loan.
Overpayment The extent to which gross housing costs, including utility costs, exceed 30 percent of gross household income, based on data published by the Census Bureau. Severe overpayment exists if gross housing costs exceed 50 percent of gross income.
Parcel The basic unit of land entitlement. A designated area of land established by plat, subdivision, or otherwise legally defined and permitted to be used, or built upon.
PMI – Private Mortgage Insurance Insurance provided by a private institution or public agency that insures a lender in whole or in part from losses due to a default on a loan.  Lenders typically require mortgage insurance only for loans that are not considered conventional (see “conventional financing”).  Borrowers pay the premiums.  The Federal Housing Administration (FHA-part of HUD) provides many kinds of mortgage insurance, as does the Veterans Administration (VA) and many private insurers, who provide what is called “private mortgage insurance (PMI).”
Prequalification The process of assisting a homebuyer in determining if they qualify for conventional and/or subsidy loans.  This typically involves a credit check, verifying income and asset information, and evaluating debt, income, and credit information in relation to lender underwriting standards.  The process typically determines if a borrower has good enough credit to borrow, and approximately how much can be borrowed at certain interest rates and loan terms.
Principal The currently unpaid balance of a loan, not including interest.
Principal, Interest, Taxes, And Insurance (PITI) Principal, Interest, Taxes, and Insurance; the monthly payment on a mortgage typically includes an amount toward each.
Promissory Note A document signed by a borrower agreeing to pay the lender a specific amount of money over a given period of time according to specified terms and conditions.   Also referred to as a Promissory Note..
Property Tax A government levy based on the market value (as assessed by the county assessor’s office) of property, such as real estate.
Purchase Agreement a written proposal by a buyer to purchase real estate that becomes binding upon acceptance by the seller.
Real Estate Transfer Tax State and/or local taxes that are assessed on real property when ownership of the property is transferred between parties. Real estate transfer tax revenue is sometimes used to fund state or local housing trust funds.
REO – Real Estate Owned. Property that is owned by a lender, usually acquired through a foreclosure, or through a deed in lieu of foreclosure.
RESPA Real Estate Settlement Procedures Act RESPA requires that lenders give all borrowers of federally related loans an estimate of settlement costs and a HUD-prepared booklet with information about real estate transactions, settlement services, cost comparisons, and relevent sonsumer protection laws
Second Mortgage:  A mortgage that has rights secondary to the first mortgage, i.e., the proceeds from a foreclosure sale must pay the first mortgage before any funds can go to repay the second mortgage.
Secondary Financing A term used to describe any financing used in conjunction with first mortgage loans from conventional financing institutions—for example, a down payment grant, a deferred payment loan, or an amortizing second mortgage loan.
Security Deed In a financed purchase of real estate, a document signed by borrower at the time of closing in order to protect the lender in case borrower fails to make payment on the note.  The document transfers legal title to the lender for period of the note.  A secuity deed is similar to a mortgage but it enables the lender to foreclose on the underlying property without going to court making the foreclosure processes quicker. Security deeds, rather than mortgages, are used in Georgia.
Settlement Closing- The occasion where the sale of real estate and/or the making of a loan is finalized.  Sometimes called “settlement.”
Silent Second Mortgage An important technique for making homeownership affordable while recycling public dollars, a silent second mortgage is a secondary home loan issued by a home-buying program to supplement a family’s primary mortgage that does not need to be repaid until the home is resold (or in some cases, refinanced). Because no payments are due on the loan until the home is resold or refinanced, it has the same effect as a grant on housing affordability for a purchaser. But because the loan is repaid upon resale, the funds can be recycled to help the next homebuyer. When used as part of a shared equity strategy, silent second mortgages are known as shared appreciation loans.  Also referred to as a “soft second”
Soft Second Mortgage Program A non-amortizing loan, usually at 0% interest, on which no repayments are due until sale or some other point in the future.  They are usually made by a public or nonprofit agency to a lower income homebuyer or a developer of low-income housing.  Sometimes called a “deferred payment loan,” a “DPL,” or a “soft second mortgage.”
Subordinated Loan In single-family mortgage lending, a second or third mortgage loan with a lien that is subordinate to a first or second mortgage loan.  In the event of default and foreclosure, subordinated loans are repaid only after other debts with a higher claim have been satisfied.  (See “mortgage loan” and “lien.”)
Subprime Subprime mortgages are made to borrowers with poor credit histories who do not qualify for prime interest rates. To compensate for the increased credit risk, subprime lenders charge a higher rate of interest.
Subsidize To assist by payment of a sum of money or by the granting of terms or favors that reduce the need for monetary expenditures. Housing subsidies may take the forms of mortgage interest deductions or tax credits from federal and/or state income taxes, sale or lease at less than market value of land to be used for the construction of housing, payments to supplement a minimum affordable rent, and the like.
Subsidized Housing A generic term covering all federal, state or local government programs that reduce the cost of housing for low- and moderate-income residents. Housing can be subsidized in numerous ways—giving tenants a rent voucher, helping homebuyers with downpayment assistance, reducing the interest on a mortgage, providing deferred loans to help developers acquire and develop property, giving tax credits to encourage investment in low- and moderate-income housing, authorizing tax-exempt bond authority to finance the housing, providing ongoing assistance to reduce the operating costs of housing and others.
Title The legal basis of the ownership of property, also a document serving as evidence of ownership of property, such as the certificate of title
Title Insurance Insurance through a title company to protect the owner or lender from loss if title to the insured property proves imperfect.
Title Search The process of examining official county records to determine whether an owner’s rights in real property are good.
A title search is conducted to discover whether there are any defects in the ownership of a particular tract of land. An Abstract of Title, prepared by the examiner subsequent to such an investigation, is a condensed history of the title to the land.
Underwriting The process of evaluating a loan application to determine if it meets credit standards and any other special requirements (as with special loan products for low-income borrowers).  The underwriting process determines whether or not a loan will be approved, and on what terms and conditions.
Underwriting Ratios Criteria used by lenders to determine how large a loan a prospective borrower can afford.  The housing payment ratio (for “front” ratio) is the maximum percentage of monthly household income that can be paid for principal, interest, taxes and insurance (PITI).  The installment debt ratio (or “back” ratio) is the maximum percentage of income that can be paid for total installment debt (including PITI, car loans, etc.).  Ratios for conventional loans are 28% for PITI, and 36% for all installment debt, often expressed as 28/36.  Many special loan products allow ratios of 33/38 or even higher increasing the amount of the monthly payment and, thus, the amount that can be borrowed.
Variable-Rate Mortgage Loan A mortgage loan for which the interest rate may change over time in relationship to some index such as the market price of long-term U.S. Treasury obligations.