Mortgage words, translated.

Mortgages have enough jargon. Here’s what it actually means — in plain English.

A

A mortgage with an interest rate that can change after an initial fixed period. Future adjustments generally follow the loan's specified index, margin, caps, and adjustment schedule.
The process of paying down a loan over time through scheduled payments that generally include principal and interest.
A broader measure of borrowing cost that reflects the interest rate plus certain applicable finance charges. APR can help consumers compare loan costs.
An independent professional opinion of a property's value used in many mortgage transactions.
The value assigned to a property by an appraiser as of the appraisal's effective date.
Items of financial value owned by a borrower, such as checking accounts, savings, investments, retirement accounts, or other eligible funds.
A method available under certain mortgage programs that converts eligible assets into an amount that may be used when evaluating qualifying income.
A type of mortgage program in which eligible assets may be used as a primary basis for qualification instead of traditional employment income.
A qualification method that may convert eligible assets into calculated monthly income according to a program's guidelines.
Technology used by many mortgage lenders to evaluate loan information against applicable underwriting guidelines and generate a recommendation.

B

An alternative-documentation mortgage that may allow eligible self-employed borrowers to establish qualifying income using bank deposits rather than relying solely on traditional tax-return income.
One one-hundredth of one percentage point. For example, 100 basis points equals 1 percentage point.
A person or entity that applies for and receives credit and is responsible for repayment according to the loan terms.
Short-term financing designed to bridge a temporary funding gap, often until another property is sold, refinanced, or stabilized.
A financing arrangement in which funds are used to reduce the borrower's effective mortgage payment or interest rate for a specified period, subject to the structure of the program.

C

The amount of money remaining after applicable income and expenses are considered. In real estate investing, it often refers to rental income remaining after property expenses and debt payments.
A refinance in which the new mortgage exceeds certain existing liens and eligible costs, allowing the borrower to receive a portion of the property's equity in cash, subject to program limits.
A term commonly used when the lender has completed required underwriting review and the loan can proceed toward closing, subject to any remaining closing requirements.
The final stage of a mortgage transaction when applicable documents are executed, funds are disbursed, and ownership or lien interests are finalized.
Expenses associated with completing a mortgage transaction, which may include lender charges, title charges, appraisal costs, recording fees, prepaid items, points, and other settlement expenses.
A disclosure used for many residential mortgage transactions that provides final information about loan terms, projected payments, and closing costs.
An additional borrower who applies for the mortgage and shares responsibility for repayment.
Property pledged to secure a loan. With a mortgage, the financed real estate generally serves as collateral.
A ratio comparing the combined balances of applicable loans secured by a property with the property's value.
A recently sold property with characteristics similar to the subject property that may be considered when estimating market value.
A conventional mortgage that meets applicable requirements for acquisition by Fannie Mae or Freddie Mac, including applicable loan limits.
Financing designed to fund the construction of a property, often through scheduled draws as construction progresses.
A contract condition that generally must be satisfied or waived for a real-estate transaction to proceed under the terms of the agreement.
A mortgage that is not insured or guaranteed by a federal government agency such as the FHA or VA.
A record of a consumer's reported credit history obtained from a credit reporting agency.
A numerical representation derived from information in a consumer's credit report and used as one factor in evaluating credit risk.

D

A ratio comparing a property's qualifying income with its applicable debt obligation. DSCR is commonly used in investment-property lending.
A ratio comparing applicable monthly debt obligations with gross monthly qualifying income.
A legal document used to transfer ownership of real property.
Upfront charges associated with obtaining a particular mortgage interest rate. One point generally equals 1% of the loan amount.
The portion of a property's purchase price paid by the buyer rather than financed through the mortgage.

E

Funds a buyer deposits in connection with a purchase contract to demonstrate intent to complete the transaction, subject to the contract's terms.
The difference between a property's current value and applicable debt secured by the property.
An arrangement in which a third party holds money or documents for a transaction. In mortgage servicing, an escrow account may also collect funds for expenses such as property taxes and homeowners insurance.

F

A mortgage insured by the Federal Housing Administration and originated by an approved lender.
A type of credit score developed using models from FICO. Mortgage lenders may use applicable FICO scores as part of credit evaluation.
A mortgage where the note interest rate remains the same for the loan's scheduled term.
Short-term financing commonly used by real-estate investors to acquire and renovate a property intended for resale or refinance.
Insurance that covers certain losses caused by flooding. It may be required when a financed property is located in a designated flood hazard area.
A mortgage program designed for certain non-U.S. citizen borrowers whose primary residence and financial profile may be outside the United States.

G

Funds provided to a borrower by an eligible donor that may be used toward an eligible mortgage transaction subject to program documentation requirements.
Income before applicable taxes and deductions, calculated according to the requirements of the mortgage program.
The development of a new structure from the ground up rather than the renovation of an existing completed property.

H

The difference between a home's value and debt secured by the property.
A revolving line of credit secured by available equity in a property.
An organization responsible for managing certain rules, common areas, services, and assessments within a community or condominium development.
Insurance that provides coverage for certain losses involving a home and may include liability protection.

I

The cost charged for borrowing money, generally expressed through an interest rate.
A loan structure that permits scheduled payments consisting primarily or entirely of interest for a specified period before principal repayment is required.
The percentage charged on the outstanding principal balance for borrowing money.
Real estate generally owned for purposes such as rental income, appreciation, or investment rather than use as the borrower's primary residence.
Income reported on an applicable IRS Form 1099, commonly associated with independent contractors and certain other non-W-2 income sources.

J

A mortgage that exceeds applicable conforming loan limits or otherwise falls within a lender's jumbo program.

L

A financial institution or company that provides mortgage financing.
A credit from the lender that may offset certain closing costs, generally in connection with the selected interest-rate pricing.
A legal claim or security interest against property that may secure repayment of a debt.
A disclosure provided for many residential mortgage applications that summarizes estimated loan terms, payments, and closing costs.
A ratio comparing a loan amount with the total cost of a real-estate project. It is commonly used in construction and investment lending.
A ratio comparing the mortgage amount with the property's applicable value.

M

A loan secured by real property or, technically in some jurisdictions, the security instrument that creates the lien securing repayment.
Insurance that protects the applicable lender or investor against certain losses if a borrower defaults. Requirements depend on the mortgage program.
A licensed or registered individual who performs mortgage loan origination activities as defined by applicable law.
The legal document containing the borrower's promise to repay the loan according to its stated terms.

N

A mortgage that does not meet the federal definition of a Qualified Mortgage but may use alternative underwriting approaches permitted under applicable law and lender guidelines.

O

How a borrower intends to use a financed property, such as a primary residence, second home, or investment property.
A fee charged in connection with originating a mortgage loan.

P

Principal, interest, property taxes, and homeowners insurance — four common components considered when discussing a housing payment.
Principal, interest, taxes, insurance, and applicable association dues.
A mortgage pricing term generally representing 1% of the loan amount per point. Points may include discount points or other charges depending on context.
A mortgage generally held in a lender's or investor's own portfolio rather than sold through a standard agency execution.
A lender's preliminary assessment based on reviewed borrower information that may include credit, income, assets, and debts. It is not a final loan approval or commitment to lend.
Certain costs paid at or before closing for future expenses, such as interest, property taxes, or homeowners insurance.
A preliminary estimate or assessment of potential financing based largely on information provided by the consumer. It is not a loan approval or commitment to lend.
A charge that may apply under certain loan agreements if some or all of the loan is repaid before specified dates. Many residential mortgage programs restrict or prohibit these penalties.
The home a borrower intends to occupy as their principal residence.
The amount of money borrowed, excluding interest and other charges, or the remaining unpaid portion of that amount.
Mortgage insurance commonly associated with certain conventional loans when the borrower has less than a specified amount of equity.
Taxes assessed on real estate by applicable local taxing authorities.
A contract between a buyer and seller establishing the terms of a real-estate purchase.

R

A refinance primarily designed to modify the interest rate, loan term, or both without providing significant cash proceeds to the borrower beyond applicable limits.
An agreement that locks specified mortgage pricing for a stated period, subject to its terms and conditions.
A recalculation of scheduled mortgage payments after an eligible principal reduction while generally keeping the existing interest rate and remaining loan term.
Replacing an existing mortgage with a new mortgage, typically to change financing terms, access equity, or accomplish another financial objective.
Eligible funds remaining after closing that may be required by certain mortgage programs and are often measured in months of applicable housing payments.

S

A property occupied by the borrower for part of the year but not considered the borrower's primary residence, subject to program requirements.
A contribution from the seller toward certain eligible buyer costs, subject to the purchase agreement and mortgage-program limitations.
The administration of a mortgage after closing, including activities such as collecting payments, managing applicable escrow accounts, and providing account statements.

T

The legal rights of ownership associated with real property.
Insurance designed to protect against certain covered defects or claims affecting title to real property.
A fixed-rate mortgage structured with scheduled payments over a 30-year term, with the note interest rate remaining fixed for the scheduled life of the loan.

U

The process of evaluating a mortgage application, borrower, property, and supporting information against applicable loan requirements.
An item or requirement that must be satisfied as part of the underwriting process before a loan can receive applicable final approval.

V

A mortgage program backed by the U.S. Department of Veterans Affairs for eligible borrowers and originated by approved lenders.
A process or document used to verify a borrower's employment information.

W

A condominium unit in a project that meets applicable eligibility requirements for a particular conventional or agency mortgage execution.