Mortgage Processing Terms
While processing your mortgage, we may from time to time use industry-internal language. We will generally explain what we mean when we use this terms; this is intended to be a reference if your memory is imperfect.
Appraisal - This is an independent third party verification that the home is in basically financeable condition and isn't worth less than what you are paying for it. Typically this is the only thing paid for upfront shortly after a homebuyer goes into escrow. What that will look like is either a link from the lender's appraisal management company sent to your email, or one of our team members calling you for your credit card number. If you have a preference between those two, or if you (or your Realtor) feel there will be appraisal issues, it is vitally important that you let us know upfront, as early in the process as possible, so we can get in front of the potential issue, rather than be responsive to it.
Bank Statements - Federally regulated depository institutions such as banks, retirement account managers, and credit unions, are required to provide periodic statements to the consumer. For retirement accounts this will typically be a quarterly statement, for checking and savings accounts this will typically be a monthly statement. Sometimes, if you've disabled paper statements, it is necessary to log onto your banking institution's website to find PDFs of these statements, but they do exist even if you do not get them in the mail. Lenders require copies of these bank statements for all accounts that contain funds that will be considered by the underwriter as part of your application, or used for your home purchase or refinance. Some depository institutions, such as ones that work with cryptocurrency, often do not follow many of these federal regulations and laws. Whatever one's personal philisophical opinion on cryptocurrency is, federal laws and regulations about money laundering can make it problematic to introduce these funds into a federally regulated real estate transaction involving a mortgage.
Closing Disclosure (CD) - This is a final summary of the terms and conditions of your mortgage loan that is released prior to closing. Certain items, such as seller credits for closing costs, are only as accurate as the numbers that escrow has shared with us. For these items that are not a term or condition of your mortgage, the purchase contract is considered more authoritative than the CD. Meaning that if your purchase contract specifies that the seller is paying for a home warranty and covering half of the Oakland transfer taxes, that will happen regardless of it being reflected on the initial CD. It is important that the CD be signed as soon as possible, as this signing starts a mandatory waiting period before you can sign your loan documents before a notary public and ultiamtely become the owner of your house.
Cash to Close (CTC) - This is the sum total of all closing costs and your down payment, less any seller credits, that you will be expected to deposit into escrow at or near closing. It is important that you disclose upfront which assets (and in which bank account) will be used for cash to close, if it is not obvious or apparent. Attempting to introduce previously undisclosed funds into the transaction, either by moving the funds into a known bank account from an unknown bank account, or by moving funds to escrow from an unknown source, will delay your closing.
Clear to Close (CTC) - Yes, this acronym is shared with the above. Context will let you know which one is being referred to. Clear to close indicates that the final signoff by the underwriter has occurred, and you've been given the official OK to close on this home purchase or refinance. Yay!
Earnest Money Deposit (EMD) - Your Realtor might have called this your upfront deposit, your initial deposit, or your deposit towards the down payment. This is often 3% of the sales price in California, and often due within a few days of signing the purchase contract. Ask your Realtor for where, and how, to send these funds.
Gift Letter - If a family member is donating down payment funds towards your home purchase, the donor will be required to sign a letter detailing this (along with provide additional supporting documentation), and attesting to the nature of this donation as a "gift," and not as a "loan." Funds gifted from family can generally be used to help you buy a home, funds borrowed from family generally cannot. All funds used to buy your home will need to be sourced and papertrailed.
Homeowner's Insurance (HOI) - When you are buying a home, you will need to obtain homeowner's insurance. While you are free to use whomever you like, Kevin Hernandez is the Chief Operating Officer of Partner's Direct Insurance Services, a local insurance brokerage here in California, and he is our go-to. He can be found here. If you elect to use a different insurance agent, our only requirement is that you have a direct phone number to that person that is not a 1-800 number, and doesn't require any extension number be entered to reach that person. There is a rock-solid correlation between the use of insurance agents behind 1-800 numbers and inside call centers, and your home purchase not being able to close on time.
Letter of Explanation (LOE, LOX) - You are a human person. Underwriters are only human persons on a technicality. Sometimes they ask you to explain things that would be self-explanatory to a normal human. We all have to explain ourselves when we get mortgages, including industry insiders. Sometimes we will re-state what you tell us and send it over to you for your digital signature at the bottom, other times we will have you write it up in your own words, sign it, and upload it.
Loan Estimate (LE) - This is an initial rough draft of the terms and conditions of your mortgage based on the information available as of when the LE is dated. It is a reflection of the latest and greatest of what is in the computer software, and if something changes the compliance software will automatically generate a new LE reflecting those changes. This adds a relatively new level of transparency, since anything entered into the computer reflecting a change in the terms or conditions of your mortgage are instantly sent to you without human intervention. Frequently, especially on refinances where the appraised value is unknown and unknowable upfront, the initial "rough draft" LE differs significantly from the final LE or initial CD. On purchase mortgages as well, for example, a revised LE would go out if you requested that your interest rate be lowered, or if you request a lender credit towards your closing costs.
Transaction History - This is in reference to one or more of your bank accounts. While logged into your bank, view the last 60 days of account activity, and press Ctrl+P (Command+P on Mac) and print to PDF. Please note that a screenshot is not a transaction history.