Mortgage & Real Estate Glossary

143 terms

Adjustable Rate Mortgage

A mortgage with a fixed rate for an initial period, after which the rate adjusts periodically based on an index and margin, within caps stated in the note. Read the full guide

Alimony

Support paid to a former spouse. Recipients may choose whether to have it considered as qualifying income; payers usually see it counted as debt. Read the full guide

Amortization

The schedule that shows how each payment splits between interest and principal until the loan reaches a zero balance. Read the full guide

Appraisal

An independent opinion of a property's market value, ordered by the lender and based largely on comparable sales. Read the full guide

Appraisal Contingency

A contract provision allowing the buyer to renegotiate or cancel if the appraised value comes in below the purchase price.

Appraisal Waiver

An offer from the automated underwriting system to accept an estimated property value without a full appraisal on qualifying low risk loans. Read the full guide

APR

The annual cost of a loan expressed as a rate that includes the interest rate plus certain lender fees, designed to help compare offers.

Assessed Value

The value a county assigns to a property for tax purposes, which may differ significantly from market value. Read the full guide

Asset Depletion

A method that converts eligible assets into a monthly income figure so borrowers with substantial savings but low monthly income can qualify. Availability and formulas vary by program. Read the full guide

Assets

Funds and accounts a lender reviews to confirm you can cover the down payment, closing costs and any required reserves.

Bank Statement Loan

A loan that qualifies self employed income using deposits on personal or business bank statements instead of tax returns. Read the full guide

Blanket Loan

A single loan secured by multiple properties, often used by investors consolidating several rentals.

Bonus Income

Incentive pay averaged across the period it has been received. A first year bonus with no history usually cannot be used. Read the full guide

Break Even Point

The number of months it takes for monthly savings from a refinance to cover the costs of doing it. Read the full guide

Bridge Loan

Short term financing secured by your current home that provides access to equity before it sells, repaid from the sale proceeds. Read the full guide

BRRRR

An investing strategy: buy, rehab, rent, refinance, repeat, using a cash out or delayed financing refinance to recycle capital into the next property.

Builder

The licensed contractor constructing the home. Construction lenders review builder experience, licensing and the construction contract. Read the full guide

Business Balance Sheet

A snapshot of a business's assets, liabilities and equity, used to judge whether the business can withstand funds being withdrawn. Read the full guide

Buydown

Paying money upfront to lower the interest rate, either temporarily for the first years of the loan or permanently for the full term. Read the full guide

Buyer's Agent

The licensed real estate agent representing the buyer's interests in a transaction.

Cap Rate

Net operating income divided by purchase price, used to compare rental properties without regard to financing. Read the full guide

Cash on Cash Return

Annual pre tax cash flow divided by the cash actually invested, which reflects the effect of financing. Read the full guide

Cash Out Refinance

Replacing your existing mortgage with a larger one and receiving the difference in cash at closing, minus closing costs. Read the full guide

Cash to Close

The total funds you must bring to closing: down payment plus closing costs and prepaids, minus credits and your earnest money deposit. Read the full guide

Certificate of Occupancy

The local government document confirming a newly built or renovated home meets code and is legal to occupy.

Child Support

Court ordered support for a child. It can be qualifying income with documentation and remaining term, and it is a monthly liability for the payer. Read the full guide

Clear to Close

Underwriting has signed off on the file and the lender is ready to prepare closing documents. Read the full guide

Closing

The meeting or process where documents are signed, funds are disbursed and ownership transfers.

Closing Costs

The lender, title, government and prepaid costs due at closing, separate from your down payment. Read the full guide

Closing Disclosure

The final statement of loan terms and costs, which must be received at least three business days before closing. Read the full guide

Combined Loan to Value (CLTV)

All loans secured by a property, added together, divided by the property's value. Read the full guide

Commission Income

Earnings tied to sales production, generally averaged over a documented history and reduced or excluded if the trend is declining. Read the full guide

Comparable Sale

A recently sold, similar property used to estimate value for an appraisal or pricing decision.

Conditional Approval

An underwriting decision to approve the loan once a specific list of documentation items, called conditions, is provided and accepted. Read the full guide

Condominium

A property where you own a unit and share ownership of common areas. Lenders review the association's budget, insurance and owner occupancy before approving financing. Read the full guide

Conforming Loan

A conventional loan that meets Fannie Mae and Freddie Mac requirements, including annual loan limits set by the Federal Housing Finance Agency.

Construction to Permanent Loan

Financing that funds a home build in draws and then converts to a long term mortgage at completion without a second closing. Read the full guide

Contingency

A condition in the purchase contract that must be satisfied, such as financing, appraisal or inspection, or the buyer may cancel under the contract terms.

Continuance of Income

The expectation that an income source will keep coming for the period a loan program requires, often about three years for sources with an end date. Read the full guide

Conventional Loan

A mortgage not insured or guaranteed by a government agency, typically following Fannie Mae or Freddie Mac guidelines. Read the full guide

Credit Score

A number lenders use to summarize credit risk. Mortgage lenders typically use specific FICO versions and often the middle of three bureau scores. Read the full guide

Credit Utilization

The percentage of your available revolving credit that is in use. It is one of the fastest moving parts of a credit score. Read the full guide

Days on Market

How long a listing has been actively for sale, often used as a negotiating signal.

Debt to Income Ratio

Your monthly debt payments divided by your gross monthly income, expressed as a percentage. Lenders use it to judge whether a new mortgage payment fits your budget. Read the full guide

Deed

The recorded document that transfers ownership of real property from one party to another.

Delayed Financing

A refinance shortly after a cash purchase that returns the purchase funds to the investor, using the purchase price rather than a long ownership history.

Discount Points

An upfront fee paid to permanently lower the interest rate. One point equals 1% of the loan amount. Read the full guide

Down Payment

The portion of the purchase price you pay from your own funds or eligible gift funds rather than borrowing. Read the full guide

Draw Period

The phase of a home equity line when you can borrow, repay and borrow again, often with interest only payments. Read the full guide

Draw Schedule

The stage by stage plan for releasing construction funds as work is completed and inspected, built from the project's line item budget. Read the full guide

DSCR

Debt Service Coverage Ratio: the rental income a property produces divided by its total monthly housing payment. A DSCR loan qualifies the property rather than the borrower's personal income. Read the full guide

Due Diligence

The buyer's investigation period to inspect, review documents and confirm the property fits their plans.

Duplex

A property with two separate dwelling units. Buyers who live in one unit may be able to use financing intended for a primary residence. Read the full guide

Earnest Money

A deposit made with an accepted offer to show the buyer is serious. It is typically credited toward cash to close.

Equity

The difference between what your home is worth and what you still owe on loans secured by it. Read the full guide

Escrow

Two related meanings: a neutral third party holding funds and documents during a transaction, and the account your servicer uses to collect and pay property taxes and homeowners insurance with your mortgage payment. Read the full guide

FHA Loan

A mortgage insured by the Federal Housing Administration, often used for lower down payments or more flexible credit profiles. FHA charges both upfront and annual mortgage insurance. Read the full guide

Financing Contingency

A contract provision that protects the buyer's deposit if the loan cannot be obtained under the stated terms by the deadline.

Fixed Rate Mortgage

A mortgage whose interest rate and principal and interest payment stay the same for the entire loan term. Read the full guide

Flood Zone

A FEMA designation describing flood risk for a property. Loans on homes in high risk zones generally require flood insurance. Read the full guide

Fourplex

A property with four dwelling units. Four units is the upper limit for standard residential financing; five or more is commercial.

Gift Funds

Money given by an eligible donor, usually a relative, toward down payment or closing costs. Lenders require a gift letter and a documented paper trail. Read the full guide

Gross Income

Earnings before taxes and payroll deductions. This is the figure used for wage earners in mortgage qualification. Read the full guide

HELOC

A Home Equity Line of Credit is a revolving credit line secured by your home. You draw what you need during a draw period and repay it, similar to a credit card secured by the property. Read the full guide

HOA

A homeowners association that maintains shared areas and enforces rules, funded by dues that lenders include in your qualifying payment.

Home Equity Loan

A fixed rate second mortgage that provides a lump sum repaid over a set term. Read the full guide

Home Inspection

A buyer ordered review of the home's condition. It is not the same as an appraisal and is usually optional for the lender but valuable for the buyer. Read the full guide

Home Sale Contingency

A contract provision making the purchase dependent on the buyer selling their current home by a stated date. Read the full guide

Homeowners Insurance

A policy covering damage to the home and certain liability. Lenders require coverage and typically collect the premium through escrow. Read the full guide

Inspection Contingency

A contract provision giving the buyer a period to inspect the home and request repairs, renegotiate, or withdraw.

Interest Rate

The annual rate charged on the loan balance, used to calculate the interest portion of each payment. It is not the same as APR. Read the full guide

Investment Property

A property purchased to generate rental income or appreciation rather than to occupy. It generally requires a larger down payment and carries different pricing. Read the full guide

Jumbo Loan

A loan larger than the conforming loan limit for the county. Guidelines, reserve requirements and pricing are set by individual investors. Read the full guide

K1

The tax form reporting an owner's share of income from a partnership or S corporation, used with business returns to calculate qualifying income. Read the full guide

Large Deposit

A deposit into your account that is significant relative to your income and is not regular payroll, which underwriting will ask you to source and document. Read the full guide

Lender Credit

Money the lender applies toward your closing costs in exchange for accepting a higher interest rate. Read the full guide

Lender's Title Insurance

The required policy protecting the lender's lien position for the loan amount. It does not protect the homeowner's equity. Read the full guide

Letter of Explanation

A short signed statement documenting the reason behind an item in your file, such as a deposit, a credit inquiry, a late payment or an employment gap. Read the full guide

Lien

A legal claim against a property securing a debt. Liens generally must be paid or released before clear title can transfer. Read the full guide

Listing Agent

The agent representing the seller and marketing the property.

Loan Estimate

A standardized three page disclosure showing your estimated rate, payment, closing costs and cash to close, required within three business days of a complete application. Read the full guide

Loan to Value

The loan amount divided by the property value. A $200,000 loan on a $250,000 home is an 80% LTV. Read the full guide

Market Value

The price a willing buyer and seller would agree to under normal conditions, estimated through comparable sales.

Master Insurance Policy

The association's insurance covering the building and common areas. Lenders review its coverage limits and deductibles when financing a condo. Read the full guide

Mortgage Broker

A licensed professional who works with multiple wholesale lenders to place your loan, rather than lending from a single institution's own products. Read the full guide

Mortgage Lender

The party that underwrites and funds the loan. A broker submits files to lenders; a retail bank both originates and funds its own products. Read the full guide

Mortgage Note

The document that states the loan amount, rate, payment and your promise to repay. The mortgage or deed of trust secures that promise with the property.

Mortgage Recast

Applying a lump sum to principal and re amortizing the existing loan, which lowers the payment while keeping the same rate and term. Read the full guide

Mortgage Servicer

The company that collects your payments, manages escrow and handles your account. Servicing can be sold without changing your loan terms. Read the full guide

Multifamily Property

A residential property with more than one dwelling unit. Two to four units use residential guidelines; larger properties use commercial financing. Read the full guide

Multiple Listing Service

The database agents use to list properties and share sale data, which also feeds the comparable sales appraisers review.

Net Income

For an employee, pay after deductions. For a business, profit after expenses, which is the starting point for self employed qualification. Read the full guide

New Construction

A home being built or recently completed, financed either with a construction loan or an end loan once the home is finished. Read the full guide

Non QM

Loans outside the Qualified Mortgage definition, often used for bank statement, 1099, asset based and DSCR qualification. Guidelines vary widely by investor. Read the full guide

Non Warrantable Condo

A condominium project that fails one or more agency requirements and therefore needs portfolio or specialty financing, usually with a larger down payment. Read the full guide

Origination Fee

A lender charge for processing the loan, disclosed on the Loan Estimate and Closing Disclosure. Read the full guide

Overtime Income

Pay above your standard hours, typically averaged over a documented history rather than annualized from a recent stretch. Read the full guide

Owner's Title Insurance

An optional one time policy protecting your ownership and equity against title defects, unknown liens and recording errors for as long as you own the home. Read the full guide

Pension Income

A recurring retirement benefit from a former employer or plan, documented by an award letter, 1099-R and deposits. Read the full guide

PITI

Principal, Interest, Taxes and Insurance: the four parts of a typical escrowed mortgage payment, plus HOA dues or mortgage insurance when they apply. Read the full guide

Portfolio Loan

A loan a lender keeps on its own books rather than selling to an agency, allowing flexibility on property type, entity ownership or borrower profile. Read the full guide

Possession

When the buyer gains physical use of the property, which is negotiated in the contract and may differ from the closing date.

Pre Approval

A lender's written statement of how much you can likely borrow after reviewing your credit, income and assets. It is based on documentation, not just a conversation. Read the full guide

Pre Qualification

An early estimate of what you may be able to borrow, usually based on information you state rather than documents the lender has verified. Read the full guide

Primary Residence

The home you live in most of the year. It typically receives the most favorable financing terms and occupancy requirements apply.

Principal

The amount you borrowed and still owe, not counting interest. Extra principal payments reduce the balance directly. Read the full guide

Private Mortgage Insurance

Insurance that protects the lender when a conventional loan is made with less than 20% down. The borrower pays for it, monthly or through pricing adjustments. Read the full guide

Profit and Loss Statement

A summary of business revenue and expenses over a period, often requested year to date to show a self employed borrower's current trend. Read the full guide

Property Taxes

Taxes assessed by the county on real property, based on an assessed value and local levies, and usually collected through your escrow account. Read the full guide

Purchase Agreement

The signed contract stating price, terms, contingencies and dates for a home sale. Read the full guide

Qualifying Income

The monthly income figure an underwriter can actually use after documentation, calculation and continuance rules are applied. It is often different from what you earn. Read the full guide

Rapid Rescore

A lender initiated process that updates corrected or paid balances with the credit bureaus faster than the normal reporting cycle. It requires documentation and cannot change accurate history. Read the full guide

Rate Lock

A lender's commitment to hold a specific interest rate for a set number of days, subject to the terms of the lock and the loan closing on time. Read the full guide

Reconsideration of Value

A formal, evidence based request asking the appraiser to review specific comparable sales or factual errors in the appraisal report. Read the full guide

Refinance

Replacing an existing mortgage with a new loan, either to change the rate and term or to access equity. Read the full guide

Rent Schedule

An appraiser's estimate of market rent for a property, used when qualifying with rental income.

Replacement Cost

The estimated cost to rebuild a home with similar materials, which insurers use to set dwelling coverage. It can differ substantially from market value. Read the full guide

Reserves

Verified funds left after closing, usually measured in months of the housing payment. Requirements are higher for investment properties and some jumbo loans. Read the full guide

Reverse Mortgage

A loan for qualifying older homeowners that converts equity into funds without a required monthly principal and interest payment, while taxes, insurance and upkeep remain the borrower's responsibility.

S Corporation

A pass through corporation whose income flows to owners via W2 wages and K1 distributions, both of which underwriting reviews. Read the full guide

Seasonal Income

Earnings from work that repeats on an annual cycle, averaged over twelve months when a multi year pattern of return is documented. Read the full guide

Second Home

A property you occupy part of the year that is not a rental business. Lenders review distance, property type and occupancy intent. Read the full guide

Self Employed Income

Income from a business you own or contract work. Conventional guidelines typically use net income after expenses, averaged over a documented period. Read the full guide

Seller Credit

Money the seller agrees to contribute toward the buyer's closing costs or a rate buydown, limited by loan program rules. Read the full guide

Single Family Home

A standalone residential property with one dwelling unit.

Social Security Income

Retirement, disability or survivor benefits paid by the Social Security Administration, documented with an award letter and often eligible to be grossed up when non taxable. Read the full guide

Sole Proprietor

An unincorporated business owned by one person, reported on Schedule C of the personal tax return. Read the full guide

Special Assessment

A one time or temporary charge levied by an association to fund a specific project or shortfall, separate from regular dues. Read the full guide

Stable Income

Income with a documented history and a consistent or explainable pattern, which underwriting can rely on going forward. Read the full guide

Survey

A drawing of property boundaries and improvements, sometimes required to confirm encroachments or lot lines.

Title

Legal ownership of real property, documented through the public record.

Title Insurance

A policy protecting against losses from defects in title, such as unknown liens or recording errors. Lenders require a lender's policy; an owner's policy protects you.

Title Search

A review of public records to confirm ownership and identify liens, easements or judgments that must be resolved before closing.

Triplex

A property with three separate dwelling units, financed under two to four unit guidelines.

Underwriting

The lender's review of credit, income, assets and the property to confirm the loan meets program guidelines. Read the full guide

USDA Loan

A government backed loan for eligible moderate income buyers in designated rural areas, often with no down payment requirement.

VA Loan

A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans and certain surviving spouses, often with no down payment and no monthly mortgage insurance. Read the full guide

Variable Income

Pay that changes period to period, such as overtime, bonus, commission, tips or variable hours. It is usually averaged over a history period. Read the full guide

Variable Rate

An interest rate that moves with an index, plus a fixed margin set by the lender. Read the full guide

Verification of Deposit

A form sent to your financial institution to confirm account ownership, balances and average balance history.

Verification of Employment

A lender's confirmation of your employment, typically written early in the process and verbally again shortly before closing. Read the full guide

Warrantable Condo

A condominium project that meets agency requirements for owner occupancy, investor concentration, budget and reserves, litigation and insurance, making it eligible for conventional financing. Read the full guide

Written Verification of Employment

A form completed by an employer listing hire date, position and a breakdown of base, overtime, bonus and commission pay. Read the full guide