10 Mortgage Acronyms Every Real Estate Agent Should Know

The real estate industry is full of complex terms. The layered process of managing properties, handling finances, and taking out a mortgage loan means there is a multitude of multi-word concepts to absorb, before anyone can fully understand what it takes to buy or sell a house. As the real estate agent in the equation, it is your duty to be the acronym-expert, filling in your client about the process and the meaning of these mortgage acronyms.

1. MLS – Multiple Listing Service

Every real estate agent should be familiar with the MLS, or multiple listing service. This is the internal industry database of all properties currently on the market. Seller’s agents can list homes in a more comprehensive location than the public real estate sites. Buyer’s agents can check the MLS for a perfect home when public listings haven’t yielded a satisfactory result.

2. SFH – Single Family Home

While looking in the MLS, you may see properties listed as SFH. This means a single-family home – not an apartment, condo, and potentially not a townhouse either. SFHs are bought house-and-land by the buyer who will enjoy the luxury of private home walls.

3. FSBO – For Sale By Owner

Real estate agents always watch out for properties marked FSBO – for sale by owner. This means that the homeowner is trying to sell their own land with little to no consultation. FSBO cases are notoriously challenging. However, it really depends on the owner and their personal experience in real estate selling, whether an FSBO house is worth recommending to a buyer.

4. REO – Real Estate Owned

REO is the opposite of an FSBO, but also less common. Additionally, REO stands for Real-Estate Owned. This occurs when a home has been repossessed by the lender or did not sell in a foreclosed auction. In these cases, the home is owned by a financial entity that doesn’t really want the house. The house will then be auctioned again or sold at a lower cost.

5. EMC – Earnest Money Contract

EMC stands of Earnest Monty Contract. In other words, the EMC defines the escrow. Escrow and earnest money are the amount put down by the buyer to prove their bid is serious. Finally, this is often a small percentage of the home’s value and will be put toward property taxes when the sale is complete.

6. DTI – Debt to Income

A buyer’s DTI or Debt-to-Income ratio determines how much of a loan they can take out. DTI indicates whether the buyer can afford – from their monthly salary – to take on a new set of loan payments. A high DTI assumes that the buyer is already bogged down with existing loan payments effectively diminishing their income for the sake of a mortgage.

7. LTV – Loan to Value

LTV is another essential ratio, indicating how valuable the bank thinks the house is. Loan represents the amount of the mortgage. Value, however, is the bank-appraised value of the house. So this is a comparison of the actual value of the house to the amount a buyer will pay to purchase it.

8. FHA – Federal Housing Administration

FHA loans are those offered by the Federal Housing Administration. Furthermore, FHA loans are configured to help first-time homeowners, and those with an especially small down payment, as a government incentive for more of the population to become homeowners. If your buyers are short on funds but have stable income, they may be able to purchase more easily with an FHA loan.

9. PITI – Principle, Interest, Taxes, Insurance

The PITI is how monthly loan costs are calculated. It stands for Principle, Interest, (property) Taxes, and Insurance. Principle is the amount of equity each monthly payment achieves. Additionally, interest is the amount paid to the bank for providing the loan. T for property taxes wraps the property tax of the home into the monthly mortgage payment. If the mortgage was taken with less than 20% down payment, then Insurance represents the private mortgage insurance (PMI) payments in addition to the mortgage costs.

10. GCI – Gross Commissionable Income

Last but not least, every real state agent should know the GCI or Gross Commissionable Income. This is the amount that the agent or broker receives from the seller when the sale of a home is complete. It is found by multiplying the property sales price by the known commission rate. The broker then pays the real estate agent out of the GCI, if they are a broker and agent working together.

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