Debt-to-Income or DTI ratio is one of the measurements lender uses to gauge the affordability of a loan to the borrower. It is to compare the monthly housing expenses (mortgage, tax, HOA dues, insurance, etc.) to the monthly gross income (pre-tax) of the borrower. A healthy and manageable DTI ratio should be in the range of 40-45%.
Loan-To-Value or LTV ratio is one of the measurements lender uses to gauge the risk of a loan. It is to compare the loan balance on a property to its estimated market value.
Title insurance is issued for a one-time fee, called a premium, usually due at the time of escrow closing. Policy coverage lasts as long as the insured or their heirs hold title to the property.
Title Company provides title search service to the parties involved in a real estate transaction. It also issues title insurance policies that protect buyer and lender against losses related to the property’s title and ownership. Title insurance also minimize the risk of acquiring property whole legal history is unknown to the buyer.
Escrow Company is an independent third party entity. Its main function in a real estate transaction is to safe guard funds and real property title involved. Whether it is the buyer, seller, or lender, all parties must strictly follow escrow instructions. Upon successful closing, escrow will disburse money to the appropriate parties and transfer title or ownership of the real property from the seller to the buyer.
Fixed vs Adjustable (ARM) mortgage – Because of the lower initial rate on ARM, the savings could be significant. Also due to the rate cap, ARM isn’t as scary as many think in a rising interest rate environment.