The following definitions are taken from the Massachusetts Homeownership Collaborative Curriculum or guidelines from the state-sponsored mortgage products offered on this website. To learn more about the terms below as well as many more be sure to sign up for a First-time Homebuyer Course. These courses will educate you about the mortgage and homebuying process and are a requirement for the state-sponsored products on this website.
Amortization: This term refers to the gradual paying down of a loan. For example, traditional mortgage terms require that each payment include, in addition to interest, part of the loan principal. That way, you continually lessen the amount you owe and extinguish the debt within a set period of time.
Annual Percentage Rate (APR): The APR provides the true cost of a loan expressed as one number that enables you to compare all types of loans. The APR calculates the annual cost of the loan, taking into consideration points (loan origination fees), the interest rate, and other costs associated with getting the loan, including appraisal and credit report fees.
Credit Report: This is a report containing detailed information on your credit history. The report includes identifying information and details about your credit accounts, loans, bankruptcies, late payments, and recent credit inquiries. Prospective lenders will obtain these reports, with your permission, to evaluate your creditworthiness. Every year you should order a free copy of your credit report and review it for accuracy.
Debt-to-Income-Ratio (DTI): This ratio represents your monthly fixed expenses divided by your gross monthly income (income before taxes and deductions). The Lender uses this ratio to help determine how much it will lend you. If the percentage is greater than 36, the ratio could negatively impact your credit score because the lender considers you to have too much debt.
Income Limits: Each state-sponsored mortgage product offered on this website require that a qualifying homebuyer meet certain income guidelines. To view MHP's income limit requirements please click here. To view MassHousing's income limit requirements please click here.
First time Homebuyer: This means you haven't owned a home in three years prior to applying for a mortgage; some exceptions may apply. For further clarification please contact MHP or MassHousing directly.
Loan-to-Value-Ratio (LTV): The ratio compares the value of the loan with the fair market value of the home. The lender uses it to determine if its potential losses (in the event that you do not pay) may be reoccupied by selling the house.
Private Mortgage Insurance (PMI): PMI is required by lenders when a loan is originated and closed without a 20 percent down payment. This insurance protects the lender from default losses in the event a loan becomes delinquent. If you are approved for a mortgage that requires PMI, you still have to apply for PMI and you may not qualify. You can be approved for a mortgage and not qualify for PMI.