Mortgage Glossary

ARM Loan

aka Adjustable-Rate Mortgage

A mortgage whose rate adjusts on a set schedule after an initial fixed period, unlike a standard fixed-rate loan that never changes.

Conforming Loan Limit

aka Conforming Limit

The maximum loan size Fannie Mae and Freddie Mac will purchase from a lender — above it, you need a jumbo loan with stricter underwriting instead.

Conventional Loan

aka Conforming Loan

A mortgage not insured by a government agency, typically underwritten to Fannie Mae or Freddie Mac guidelines and the most common loan type in the U.S.

FHA Loan

aka Federal Housing Administration Loan

A government-insured mortgage with flexible credit standards and a low minimum down payment, popular with first-time and past-credit-event buyers.

HELOC

aka Home Equity Line of Credit

A revolving credit line secured by your home equity — borrow as needed, repay, and borrow again, paying interest only on what you actually use.

Jumbo Loan

aka Non-Conforming Loan

A mortgage larger than the conforming loan limit, underwritten with stricter credit, reserve, and documentation standards than a conforming loan.

Non-QM Loan

aka Non-Qualified Mortgage

A mortgage using alternative documentation instead of standard tax returns — built for self-employed and rental property borrowers.

USDA Loan

aka Rural Development Loan

A zero-down mortgage for eligible rural and suburban homebuyers, guaranteed by the USDA's Rural Development program for moderate-income households.

VA Loan

aka Veterans Affairs Loan

A zero-down mortgage guaranteed by the VA for eligible veterans, active-duty service members, and surviving spouses, with no monthly mortgage insurance.

APR

aka Annual Percentage Rate

The all-in yearly cost of a mortgage as a single percentage, combining interest with most upfront lender fees and points so you can compare offers fairly.

Closing Costs

aka Settlement Costs

The fees paid at settlement on top of your down payment — lender charges, third-party services, and prepaid taxes and insurance combined.

Discount Points

aka Points

Optional upfront fees you can pay at closing to lower your interest rate. One point equals 1% of the loan amount, and the choice is always yours.

Interest Rate

aka Note Rate

The percentage a lender charges you for borrowing the principal balance of your mortgage, used to calculate your monthly principal-and-interest payment.

Origination Fee

aka Lender Fee

What a lender charges to process, underwrite, and close your loan, typically quoted as a percentage of the loan amount and shown on your Loan Estimate.

PITI

aka Principal, Interest, Taxes, Insurance

The four components — Principal, Interest, Taxes, Insurance — that typically make up a full monthly mortgage payment, not just the loan itself.

Property Tax

aka Real Estate Tax

The annual tax your city or county charges based on your property's assessed value — an ongoing cost that continues long after closing.

Compensating Factors

Financial strengths — reserves, a large down payment, stable employment — that let an underwriter approve a borderline loan file.

Credit Score

aka FICO Score

A 3-digit number summarizing your credit history — one of the most important factors lenders use to price and approve your mortgage.

DSCR

aka Debt Service Coverage Ratio

A rental property's monthly rent divided by its full housing payment — the core qualifying metric for investment property loans.

DTI Ratio

aka Debt-to-Income

The percentage of your gross monthly income that goes to debt payments, including your mortgage, car loans, student loans, and credit cards.

Front-End Ratio

aka Housing Ratio

The share of your gross monthly income that goes only to your full housing payment — principal, interest, taxes, insurance, and HOA dues.

LTV Ratio

aka Loan-to-Value

Your loan amount divided by the home's appraised value, expressed as a percentage — one of the core risk measures lenders use in underwriting.

Qualifying Income

aka Effective Income

The portion of your income a lender actually counts when calculating DTI — it can differ from what shows up in your bank account.

Appraisal

An independent, professional opinion of a home's market value, ordered by the lender to confirm it's worth what you're borrowing.

Closing Disclosure

aka CD

The final 5-page disclosure showing your exact mortgage terms and costs, delivered at least 3 business days before your scheduled closing.

Contingency

A condition in a purchase contract that lets a buyer back out, and reclaim their earnest money, if the condition isn't met.

Down Payment

The cash you pay at closing toward the purchase price, rather than financing it — it shapes your loan amount, rate, and whether you pay PMI.

Earnest Money

aka Good Faith Deposit

A deposit made when your purchase offer is accepted, showing the seller you're serious — and usually applied to your down payment later.

Escrow Account

aka Impound Account

An account your lender uses to collect a share of your property taxes and homeowners insurance each month, then pay the bills on your behalf.

Loan Estimate

aka LE

The standardized 3-page disclosure every lender must give you within 3 business days of your application, built for side-by-side comparison.

Pre-Approval

aka Mortgage Pre-Approval

A lender's written confirmation of how much they're willing to lend you, based on a full, document-verified review of your finances and credit.

Pre-Qualification

aka Pre-Qual

A quick, informal estimate of how much you might qualify for, based on self-reported income and debts with no documents verified yet.

Rate Lock

aka Lock-In

A lender's written guarantee that your interest rate and points won't change for a set period while your loan moves through underwriting to closing.

Underwriting

The lender's formal process of verifying your finances, the property's value, and the loan terms before issuing final approval to close.

Homeowners Insurance

aka Hazard Insurance

Insurance covering damage to your home and belongings from fire, wind, theft, and other hazards — required by every mortgage lender.

MIP

aka FHA Mortgage Insurance Premium

Mortgage insurance required on every FHA loan, with an upfront premium financed into the loan and an ongoing monthly charge added to your payment.

PMI

aka Private Mortgage Insurance

Insurance that protects the lender, not you, when you put less than 20% down on a conventional loan — and it can be canceled once you build equity.

Title Insurance

One-time insurance protecting against past defects in a property's title — forged deeds, unpaid liens — paid as a single premium at closing.

Cash-Out Refinance

aka Cash-Out Refi

Replacing your mortgage with a larger one and walking away with the difference in cash — often cheaper than a HELOC for large, one-time needs.

Rate-and-Term Refinance

aka No Cash-Out Refinance

Replacing your mortgage to get better terms — a different rate, a different length, or both — without taking any cash out at closing.

Flood Insurance

aka NFIP Insurance

A separate policy covering flood damage — not included in standard homeowners insurance, and required by lenders in high-risk flood zones.

GFCI Outlet

aka Ground-Fault Circuit Interrupter

A safety outlet that shuts off power in a fraction of a second when it detects a ground fault, required in kitchens and bathrooms.

HOA Fees

aka Homeowners Association Dues

Recurring dues paid to a homeowners association for shared amenities, maintenance, and building reserves — they count toward your DTI.

Home Inspection

A professional, visual examination of a home's condition, arranged by the buyer before purchase — different from a lender's appraisal.

Home Warranty

aka Home Service Contract

An annual service contract covering repair or replacement of home systems and appliances that wear out — separate from homeowners insurance.

Homestead Exemption

aka Homestead Protection

A state-level protection that can lower your property tax bill and, in some states, shield home equity from creditors and lawsuits.

Insurance Deductible

aka Homeowners Deductible

The amount you pay out of pocket on a claim before your homeowners insurance starts covering the rest — it shapes your premium too.

R-Value

aka Insulation R-Value

A measure of how well insulation resists heat flow — the higher the number, the better it keeps your home's temperature stable.

SEER Rating

aka Seasonal Energy Efficiency Ratio

A rating that measures how efficiently an air conditioner or heat pump cools your home over a typical season — higher means lower bills.