Plain-English definitions of the terms you will meet in a mortgage transaction. Search, jump to a letter, or start with the basics.

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Annual Percentage Rate (APR)Loan Estimate Closing Disclosure (CD)Debt-to-Income Ratio (DTI)Loan-to-Value Ratio Discount Points Rate Lock Escrow or Impound Account Private Mortgage Insurance (PMI)Pre-Approval Conforming Loan Closing Costs Cash to Close Reserves

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A 36 terms

Ability-to-Repay (ATR): A federal rule, in effect since 2014, that requires lenders to make a reasonable, documented determination that you can repay the loan, using verified income, assets and debts. It applies to nearly every home loan, including non-QM loans.
Abstract of Title: A written history of all the transactions related to the title for a specific tract of land. An abstract of title covers the period from the original source of title (often the original land grant from the United States government to an individual) to the present time and summarizes all subsequent documents that have been recorded against that tract.
Acceleration Clause: The clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the mortgagee defaults under the terms of the contract.
Acceptance: A buyer’s or seller’s agreement to enter into a contract and be bound by the terms of the offer.
Account Termination Fee: A fee that may be charged if you pay in full and terminate your home equity line of credit during the first 5 years. Paying down to a zero balance does not count as termination. See also: prepayment penalty.
Acquisition Cost: Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs.
Acre: a land measurement commonly used in U.S. property negotiations. One acre equals 43,560 square feet.
Additional Principal Payment: A payment made by a borrower of more than the scheduled principal amount due in order to reduce the outstanding balance on the loan, to save on interest over the life of the loan and/or pay off the loan early.
Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.
Adjusted Book Basis: The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale.
Adjustment Date: The date the interest rate changes on an ARM (adjustable rate mortgage).
Adjustment Interval: For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.
Adverse Action Notice: The written notice a lender must send within 30 days of a completed application if the loan is denied, explaining the specific reasons, as required by the Equal Credit Opportunity Act and the Fair Credit Reporting Act. If a credit score was a factor, the notice includes the score and the bureau that supplied it.
Affordability Analysis: A preliminary analysis of a borrower’s ability to afford the purchase of a home that takes into consideration factors such as income, liabilities and available funds, as well as the type of home loan, the likely taxes and insurance for the home and the estimated closing costs.
Alternative Documentation (Alt-Doc): Income verification other than W-2s and tax returns, used on non-QM loans: bank statements, 1099 forms, a CPA-prepared profit-and-loss statement, or assets that can be converted to income. The documentation is still verified; "no-doc" loans no longer exist for owner-occupied homes.
Amortization: The gradual reduction in the principal amount owed on a debt. During the earlier years of the loan, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.
Amortization Table or Schedule: A timetable or schedule that gives you a breakdown of your monthly payments into principal and interest. You can use this schedule to figure out the amount of principal you’ll be repaying during your mortgage term.
Amortization Term: The amount of time required to amortize (pay off) the loan, expressed in months. For example, for a 15-year fixed-rate mortgage, the amortization term is 180 months.
Annual Adjustment Cap: A limit on how much the variable interest rate on a loan can increase or decrease each year.
Annual Percentage Rate (APR): The annual cost of a loan to a borrower. Like an interest rate, the APR is expressed as a percentage. Unlike an interest rate, however, it includes other charges or fees (such as mortgage insurance, most closing costs, discounts points and loan origination fees) to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing the costs of similar credit transactions.
Annuity: A series of income payments of receipts over a period of years.
Application: A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more.
Application Fee: Nonrefundable fees paid when you apply for your loan. These fees may include charges for items such as, for example, a credit profile or a property appraisal.
Appraisal Contingency: A contingency in a sales contract that the property must appraise at a value that is equal to or greater than your offering price.
Appraisal Gap: The difference when a home appraises for less than the agreed purchase price. Because the lender bases the loan on the lower of price or value, the buyer must make up the gap in cash, renegotiate the price, or cancel under an appraisal contingency.
Appraisal or Appraised Value: An informed estimate of the value of a property. When made in connection with an application for a loan secured by a home, a professional appraiser usually performs the appraisal.
Appraisal Waiver: Permission from Fannie Mae or Freddie Mac, delivered through the automated underwriting system, to close a loan without a new appraisal by relying on their property data. It saves time and the appraisal fee. Availability depends on the loan type, the loan-to-value ratio and the data available on the property.
Appreciation: An increase in the value of property over time. Important factors in a home’s appreciation are its location, condition and the selling price of similar homes in the area. Appreciation increases the amount of equity, which may also increase the amount you can borrow for a home equity line of credit.
Assessed Value: The value of a property, established by a public tax assessor. The assessed value is used to determine property taxes.
Assessment: Determining a property’s value for the purpose of taxation.
Asset: Valuable items, encumbered or not, owned by a person, corporation, or entity.
Assignment: The method of transferring a right or contract, such as the terms of a loan, from one person to another.
Assumable Mortgage: A mortgage that provides for a buyer to “assume” all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan.
Assumption: Buying property and assuming the responsibility of the exiting mortgage.
Attorney Fees: fees possibly due during closing.
Automated Underwriting System (AUS): Software that evaluates a loan file against program guidelines and returns a recommendation. Fannie Mae's is Desktop Underwriter (DU) and Freddie Mac's is Loan Product Advisor (LPA). The findings determine the documentation required and whether an appraisal waiver is offered. A human underwriter still reviews the file.

B 22 terms

Balance Sheet: A dated financial statement (in table form) that shows your assets, liabilities and net worth.
Balloon Loan: A loan that provides you with lower-than-usual monthly payments for a set period of time followed by a payment larger than usual at the end of your loan repayment period. While a balloon loan may lower your monthly payments it can also mean you make higher interest payments over the life of the loan.
Balloon Mortgage: Behaves like a fixed-rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single “balloon” payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.
Balloon Payment: The final lump sum that is paid at the end of the balloon mortgage.
Bank Statement Loan: A non-QM loan for self-employed borrowers that calculates income from 12 or 24 months of personal or business bank deposits instead of tax returns. An expense factor is applied to business deposits. Typical requirements are two years of self-employment, 10% to 20% down and a reserve cushion.
Bankruptcy: A court process that discharges or reorganizes debts. Chapter 7 wipes out most unsecured debts; Chapter 13 sets up a repayment plan. You can get a mortgage after bankruptcy once the program's waiting period has passed and credit has been re-established: generally two years after a Chapter 7 discharge for FHA and VA loans and four years for conventional loans, with shorter waits after a Chapter 13. Some non-QM programs allow less.
Base Rate: An interest rate that is used as a benchmark, or index, for pricing variable-rate loans such as adjustable-rate mortgages, auto loans and credit cards.
Basis Point: An amount equal to 1/100th of a percentage point. For example, a fee calculated as 50 basis points of $200,000 would be 0.50% or $1,000.
Bill of Sale: A written document that transfers a title to personal property.
Biweekly Mortgage: Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.
Blanket Mortgage: A mortgage secured by the pledging of more than one property or collateral.
Bond: An interest-bearing certificate of debt with a maturity date. A real estate bond is a written obligation that is usually secured by a mortgage or a deed of trust.
Book Value: Acquisition costs less any accrued depreciation.
Borrower: the individual or individuals extended a loan and mortgage for the purchase of a house and/or property. Borrower is responsible for making all payments and fees associated with the loan over the life of the loan.
Break Even Point: The point at which total income equals total expenses. Also used in connection with decisions related to purchasing discount points on a mortgage. Calculating the break even point will identify how many months it will take to recoup the costs associated with paying for the discount point amount under consideration.
Bridge Loan: A type of mortgage financing between the termination of one loan and the start of another loan. For example, a bridge loan might be taken out by a borrower and secured by that borrower’s present home so that the closing on a new house can take place before the present home is sold.
Broker: A third party who arranges funding or negotiates a contract between parties, but does not lend the money.
Broker Compensation: How a mortgage broker is paid on a loan: either by the borrower as a fee listed on the Loan Estimate, or by the lender through the rate, but never both on the same loan. Federal rules prohibit paying a broker more for placing you in a higher-rate or riskier loan. The amount is disclosed before you commit.
Broker Fees: Fees charged by a real estate broker or a mortgage broker for providing assistance in a real estate transaction.
Budget Mortgage: A mortgage that includes a portion for taxes and insurance as well as principal and interest.
Buydown: Paying money up front to reduce the interest rate. A permanent buydown (discount points) lowers the rate for the life of the loan. A temporary buydown, such as a 2-1 buydown, lowers the payment for the first one to three years and is usually paid by the seller or builder; you must qualify at the full note rate.
Buyer's Agent: real estate agent that works on behalf of the homebuyer.

C 56 terms

Call Option: A provision in a loan that gives the lender the right to accelerate the debt and require full payment of the loan immediately at the end of a specified period or for specified reason.
Cap: A limit on how much a variable interest rate can increase. Many adjustable-rate mortgages have both annual (or semiannual) rate caps and lifetime caps. They limit the amount your payments can increase in an adjustment period and over the life of the loan.
Capital Gain: profit earned on an asset, such as a home or property.
Capital Gain Tax: a tax levied against the profit made on the sale of a home and/or property.
Carryback Loan: A loan in which a seller agrees to finance a buyer in order to complete a property sale.
Cash Available for Closing: Borrower funds that are available to cover down payment and closing costs. If lending guidelines require the borrower to have cash reserves at the time the loan closes or that the down payment come from specified sources, the borrower’s cash available for closing does not include cash reserves or money from those specified sources.
Cash to Close: The amount a homebuyer needs in cash at the closing of the loan. This typically, this includes down payment and closing costs.
Cash-Out Refinance: A refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement or any other purpose.
Ceiling Rate: The maximum interest rate that can accrue on a variable rate loan or adjustable-rate mortgage (ARM).
Certificate of Eligibility: A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.
Certificate of Reasonable Value (CRV): The older name for the VA document that set the maximum value for a VA loan. VA now issues a Notice of Value (NOV) after reviewing the appraisal; you may still see the older term in some paperwork.
Certificate of Title: A statement provided by an abstract company, title company or attorney stating who holds title to real estate based on the public record.
Chain of title: The history of all of the documents affecting title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Clear Title: A title that is free of liens or any legal question as to the ownership of the property.
Clear to Close: The underwriter's confirmation that every condition has been satisfied and the lender is ready to prepare final loan documents. The Closing Disclosure is issued at or before this point and must be received at least three business days before signing.
Close: Signing the final loan documents. On a refinance of your primary residence you then have a three-business-day right of rescission before the loan funds; on a purchase the loan funds and the deed records soon after signing.
Closing: Final arrangements to transfer title of property as well as allocate charges and credits.
Closing Agent: the person responsible for mediating the closing, documenting the process and assuring all associated paperwork is completed. May be an attorney or official from a title or mortgage company.
Closing Costs: The fees charged to obtain the loan and transfer the property, such as origination and underwriting fees, appraisal, credit report, title insurance, escrow and recording fees. They typically run 2% to 5% of the loan amount and are listed on your Loan Estimate and Closing Disclosure. Prepaid items such as property taxes, homeowners insurance and the initial escrow deposit are shown separately.
Closing Date: The date you will sign your new loan documents.
Closing Disclosure (CD): A closing document provides key information such as interest rate, monthly payments, and costs to close the loan. Consumers are required to receive this form no later than 3 business days before they close on the loan.
Closing Statement: An accounting of funds given to both buyer and seller before real estate is sold.
Cloud: An outstanding claim or encumbrance, that, if valid, would affect or impair the owner’s property title.
Co-Borrower: An additional person who assumes equal responsibility for repayment of a loan and is fully obligated under the terms of the loan. This person also has equal rights to the proceeds of the loan.
Co-Signer: A second person who signs your loan and assumes equal responsibility for payment of the loan but receives no benefit from the loan proceeds.
Coinsurance: A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.
Collateral: An asset, such as a car or a home, used for securing the repayment of a loan. The borrower risks losing the asset if the loan is not repaid.
Collection: The efforts used to bring a delinquent loan current and, if necessary, to file legal papers and notices to proceed with foreclosure.
Combination Loan: A first mortgage paired with a second mortgage or HELOC closed at the same time, often called a piggyback loan. The common structure is 80/10/10: an 80% first mortgage, a 10% second and a 10% down payment, which avoids private mortgage insurance or keeps the first mortgage within the conforming limit.
Combined Liens: The outstanding balance of all mortgages held on a property. Used to determine the total available equity when considering the appraised value of the property less total combined or outstanding liens.
Combined Loan-to-Value Ratio (CLTV): The ratio between the unpaid principal amount of your first mortgage, plus your credit limit if you have a home equity line of credit, and the appraised value of your home. Expressed as a percentage.
Commitment: A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.
Comparable Sales (Comps): Recent sales of similar homes nearby, used by appraisers and agents to estimate what a property is worth.
Compound Interest: Interest paid on the principal balance and on the accrued and unpaid interest.
Conditional Approval: An underwriter's approval subject to a list of conditions, such as updated bank statements, an explanation letter or a repaired appraisal item. Once every condition is cleared the file moves to clear to close.
Conforming Loan: A conventional loan that meets Fannie Mae and Freddie Mac guidelines, including the loan-size limit the Federal Housing Finance Agency sets each year. High-cost counties, including Los Angeles County, have a higher limit than the national baseline. Loans within the limit usually carry lower rates than jumbo loans.
Construction Loan: A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.
Contingency: A specified condition in a sales contract that must be satisfied before the home sale can occur. When buying a home, the 2 most common contingencies are that the house must pass inspection and that the borrower must be approved for a loan.
Conventional Loan: A home loan that is not insured or guaranteed by the federal government. A conventional loan can be for conforming or non-conforming loan amounts.
Conventional Mortgage: A mortgage that is not insured or guaranteed by a federal agency. Most conventional loans follow Fannie Mae or Freddie Mac guidelines and can be made with as little as 3% down, with private mortgage insurance required when the down payment is under 20%.
Conversion: The right of a borrower to convert an adjustable or balloon loan into a fixed loan.
Convertibility Clause: A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate loan at specified times during the life of the loan.
Convertible ARM: An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate loan under specified conditions.
Convey: To transfer or deliver title to property from one to another by deed or contract. When an item becomes a part of the transfer of title, it is conveyed with the property.
Cost of Funds Index (COFI, discontinued): The 11th District Cost of Funds Index, once a common index for adjustable-rate mortgages in California. It was discontinued in January 2022 and loans tied to it were moved to a replacement index. Most new ARMs today use the 30-day average SOFR or a Treasury index.
Covenant: A promise in a mortgage or deed that requires or prevents certain uses of the property that, if violated, may result in loss or foreclosure of the property.
Credit Bureau: A company that collects and reports consumer credit information. The three national bureaus are Equifax, Experian and TransUnion. You can get free copies of your reports from all three at AnnualCreditReport.com, currently as often as once a week.
Credit Limit: The maximum amount you can borrow under a line of credit.
Credit Monitoring Service: A service that offers the benefit of early detection of unauthorized activity in order to limit the amount of financial damage that a person may suffer at the hands of an identity thief.
Credit Report: A record of your credit accounts, balances, payment history, inquiries and public records, compiled by Equifax, Experian and TransUnion. Mortgage lenders pull a merged report from all three. You can review your own reports free at AnnualCreditReport.com.
Credit Risk: The likelihood that a borrower will pay their obligations as agreed. Borrowers who pay as agreed pose less credit risk to lenders.
Credit Score: A number that rates the quality of an individual’s credit. The number helps predict the relative likelihood that a person will repay a credit obligation, such as a mortgage loan. In general, the higher your credit score, the more likely you are to be approved for and to pay a lower interest rate on a loan.
Creditor: A person or business from whom you borrow or to whom you owe money.
Creditworthiness: The likely ability of a borrower to repay debt.
Cumulative Interest: Total interest accrued.
Curtailment: A payment that reduces the principal balance of a loan.

D 18 terms

Date of Possession: actual date upon which the buyer will move into a home or property; it is usually the closing date, but may be another agreed upon date as well.
Debt Consolidation: A single loan to pay off multiple debts, usually over a longer term. This is a popular use for a home equity line of credit.
Debt Service Coverage Ratio (DSCR): The rent on an investment property divided by its full housing payment (principal, interest, taxes, insurance and HOA dues). A DSCR loan qualifies the property on that ratio rather than on the borrower's personal income. A ratio of 1.0 means rent exactly covers the payment; most programs want 1.0 or higher and price loans below 1.0 as higher risk.
Debt-to-Income Ratio (DTI): The ratio of aggregate monthly debt to aggregate monthly income.
Deed: A document that legally transfers ownership of real estate from a seller to a buyer and delivered to the buyer at closing. Before making a loan, a lender will usually require a title search or a title report to make sure the borrower legally owns the real estate that is being used to secure the loan.
Deed of Reconveyance: when a borrower has paid in full on a mortgage, the lender then awards the borrower a deed of reconveyance. This document becomes also a part of public record. Also known as reconveyance deed and recon.
Deed of Trust: Synonymous to a mortgage. A deed of trust or mortgage is obtained, depending on the state in which the borrower will reside.
Default: The failure to make payments on a loan.
Delinquency: Late or non-payments of principal, interest, taxes, or insurance.
Deposit: A lump sum given in advance as security. A deposit is always paid of a larger amount to be paid in the future. In mortgage and real estate terms, this is called the “earnest money deposit.”
Depreciation: In real estate and mortgage terms, the decline in the property value.
Discount: Difference between the face amount of a note or mortgage and the price at which the instrument is sold in the secondary market.
Discount Points: Prepaid interest you can pay at closing to lower your interest rate. One point equals 1% of the loan amount. Whether points make sense depends on how long you expect to keep the loan; the break-even point tells you how many months it takes to recover the cost through the lower payment.
Down Payment: The part of the purchase price you pay in cash rather than borrow. Minimums vary by program: 3% on some conventional loans, 3.5% on FHA, and zero on VA and USDA loans. Putting less than 20% down on a conventional loan usually means paying private mortgage insurance.
Down Payment Assistance (DPA): Grants, forgivable loans or deferred second mortgages from state and local agencies that cover part of the down payment or closing costs for eligible buyers. California programs are offered through CalHFA and local housing agencies; income limits, home-buyer education and purchase-price caps usually apply.
Draw: The process of obtaining an advance against your available line of credit.
Draw Period: The period during which a borrower can obtain advances (also called draws) from an available line of credit. At the end of the draw period, borrowers may be able to renew the credit line or be required to pay the outstanding balance in full or in monthly installments.
Due-on-Sale Provision: A provision in a mortgage home loan that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the loan.

E 13 terms

Earnest Money Deposit: A deposit made by a potential home buyer to show that they are serious about purchasing the property.
Easement: A right for someone other than the owner to use part of a property for a specific purpose, such as a utility line or shared driveway. Easements are recorded against the title and transfer with the property.
Eminent Domain: The government right to take private property for public use depended on the payment of its fair market value.
Encumbrance: Any lien against a property or any restriction is used, such as an easement; a right or interest in a property held by one who is not the legal owner.
Equal Credit Opportunity Act (ECOA): The federal law that prohibits lenders from discriminating on the basis of race, color, religion, national origin, sex, marital status, age, or because income comes from public assistance. It also requires lenders to give you a written decision, including the reasons for a denial, within 30 days of a completed application.
Equity: The difference between the current market value of a property and the principal balance of all outstanding loans.
Escalator Clause: A clause in a loan providing for increases in payments or interest based on pre-determined schedules or on a specific economic index, such as the consumer price index.
Escrow: A third party agent that receives, holds, and/or disburses certain funds or documents upon the performance of certain conditions. For example, an earnest money deposit is put into escrow until the transaction is closed. Only then can the seller receive the deposit.
Escrow Analysis: An analysis performed by a lender each year to escrow accountholders to ensure that the correct amount of money is being collected to cover anticipated payments.
Escrow Fee: These costs cover the preparation and transmission of all home purchased-related documents and funds. Escrow fees range from several hundred to over a thousand dollars, based on the purchase price of your home. Not all states require funds to be put into escrow accounts for closing.
Escrow or Impound Account: An account that a borrower can hold with a lender once a purchase transaction is closed. This requires borrowers to pay more than the principal and interest each month. The overage is put into escrow, which the lender uses to pay items like property taxes and homeowner’s insurance when they are due. This eliminates the actual number of payments that a homeowner has to worry about, but not the amount that has to actually be paid.
Estate: The ownership interest an individual holds in real property. This is also the sum total of all the real property and personal property owned by an individual at time of death.
Eviction: The legal removal of real property occupants for unlawful actions carried out by those occupants.

F 23 terms

Fair Credit Reporting Act: A law that protects consumers that regulates the reporting of consumer credit by agencies and establishes procedures for correcting errors on an individual record.
Fair Market Value: The price a willing buyer and a willing seller would agree on when neither is under pressure and both know the facts. Appraisers estimate it mainly from recent comparable sales.
Fannie Mae (FNMA): The Federal National Mortgage Association, a government-sponsored enterprise that buys conforming mortgages from lenders and packages them into securities. It has been in federal conservatorship under the Federal Housing Finance Agency since 2008. Fannie Mae does not lend to borrowers directly.
Fannie Mae’s Community Home Buyer’s Program: A discontinued Fannie Mae affordable-lending program. Its successor is HomeReady, a conventional loan with a 3% minimum down payment, reduced mortgage insurance and flexible income rules for borrowers at or below 80% of area median income. Freddie Mac's equivalent is Home Possible.
Fee Simple: The best title that one can obtain; unqualified and conveys the highest bundle of rights.
Fees: Up-front costs associated with a loan.
FHA: Federal Housing Administration.
FHA Loan: A government-backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD).
FHA Streamline Refinance: A simplified refinance of an existing FHA loan into a new FHA loan. It requires a net tangible benefit, such as a lower payment, and typically no appraisal and limited income documentation. You cannot take cash out, and closing costs cannot be rolled into the loan.
FICO®: An acronym for Fair Isaac Corporation, which develops the mathematical formulas used to produce credit scores for assessing credit risk. FICO scores fall between a low of 300 and a high of 850. The higher the FICO score, the lower credit risk a consumer presents.
Finance Charge: The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.
Firm Commitment: A lender’s agreement to provide a loan to a specific borrower on a specific property.
First Mortgage: A mortgage that has priority over other mortgages.
First-Time Home Buyer: For most loan programs, anyone who has not owned a primary residence in the past three years, even if they owned a home before that. First-time buyers may qualify for lower down payments, down-payment assistance or reduced mortgage insurance, depending on the program and income.
Fixed-Rate Mortgage: A mortgage where the interest rate does not change for the life of the loan.
Fixed-Rate Option (Fixed-Rate Loan Option): An option available on certain home equity lines of credit allowing borrowers to fix the payments and interest rate on a portion of their outstanding principal balance for a specific term. Customers may be charged a fee for this privilege.
Float: Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower’s responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures.
Float-Down Option: A feature some lenders offer that lets you lower a locked rate once if market rates drop before closing, usually for a fee or a slightly higher starting rate. Terms vary, so get the float-down conditions in writing with the lock.
Floating Rate: A loan rate for which the lender has not 'locked' or committed to lend at a particular interest rate. The floating interest rate and any discount points are not guaranteed. Your actual interest rate and discount points will be based on the market price available for your loan product at the time your interest rate is locked.
Flood Certification: in most real estate cases a lender will require a flood certification before making a loan on a home. In areas where a property falls in a flood zone, the borrower may be required to purchase standalone flood insurance before a mortgage and/or home loan is approved.
Forbearance: The postponement for a limited time of a portion or all the payments on a loan when a borrower is delinquent.
Foreclosure: A legal procedure in which real estate is sold by the lender to pay a defaulting borrower’s debt .
Form 1003: commonly used mortgage loan application developed by Fannie Mae. Sometimes called the Uniform Residential Loan Application.

G 9 terms

Gift Funds: Money given to you toward the down payment or closing costs, typically by a family member, that does not have to be repaid. Lenders require a signed gift letter and documentation of the transfer. Each program sets rules on who may give a gift and how much of the down payment may be gifted.
Ginnie Mae (GNMA): Ginnie Mae, a government corporation within HUD. It guarantees securities backed by FHA, VA and USDA loans, which is what keeps money flowing into government-insured lending. It does not buy loans or lend to borrowers.
Good Faith Estimate: The pre-2015 form that estimated a borrower's closing costs. It was retired on October 3, 2015 and replaced by the Loan Estimate under the TILA-RESPA Integrated Disclosure (TRID) rule. You will not receive a Good Faith Estimate on a loan today.
Government Loan: A mortgage insured or guaranteed by a federal agency: FHA (the Federal Housing Administration), VA (the Department of Veterans Affairs), USDA Rural Development, or HUD's Section 184 program for Native American borrowers. The government backing lets lenders offer low or no down payments and more flexible credit standards.
Grace Period: A time allowed, usually 15 days, for making late payments without a penalty.
Grant Deed: The deed used in most California sales. The seller promises that they have not already transferred the property to someone else and that it has no undisclosed liens from their period of ownership. Title insurance covers defects beyond those promises.
Grantee: The person to whom an interest in real property is conveyed.
Grantor: The person conveying an interest in real property.
Gross Monthly Income: The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.

H 17 terms

Hard-Money Mortgage: A short-term loan from a private investor or fund, secured mainly by the property rather than the borrower's income or credit. Rates and fees are much higher than a conventional loan. Typically used by investors for purchases that need to close fast or properties that do not qualify for traditional financing.
Hazard Insurance: A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes.
High-Balance Conforming Loan: A conventional loan above the national conforming baseline but within the higher limit set for a high-cost county such as Los Angeles County. It follows Fannie Mae and Freddie Mac guidelines but is priced slightly higher than a standard conforming loan.
High-Risk Loan: A general term for a loan with a higher chance of default because of the borrower's credit, a high loan-to-value ratio, or an unusual feature. Lenders price the extra risk with a higher rate or require more down payment and reserves. See also: Non-QM Loan.
Home Equity Conversion Mortgage (HECM): The FHA-insured reverse mortgage, available to homeowners 62 and older. Funds can be taken as a lump sum, monthly payments, a line of credit or a combination. No monthly mortgage payment is required, but the borrower must live in the home and keep up taxes, insurance and maintenance. Since 2015 lenders must complete a financial assessment of the borrower's income and credit, and HUD-approved counseling is required before applying.
Home Equity Line of Credit (HELOC): A revolving line of credit secured by your home, usually in second position behind your first mortgage. You draw what you need during a draw period, typically 10 years, paying interest on the balance, then repay over a set term. Most HELOCs have a variable rate tied to the prime rate.
Home Inspection: A thorough assessment by a professional regarding the structural and mechanical condition of a property.
Home Price Index: financial and market tool that provides historical data on residential home prices in various regions.
Homeowner's Association: an association attached to a neighborhood, apartment, condo or town home complex that establishes certain rules of ownership. Common, but not exhaustive, responsibilities of a homeowner’s association includes collection of neighborhood dues for landscape maintenance or membership in recreation and entertainment facilities.
Homeowners Association (HOA) Dues: Monthly or annual fees paid to a condominium, townhome or planned-development association for shared amenities, insurance and maintenance. Lenders count HOA dues in your housing payment when qualifying and review the association's finances on condo loans.
Homeowner’s Insurance: An insurance policy that combines personal liability insurance and hazard insurance for a home and its contents.
Homeowner’s Warranty: An insurance policy that is purchased by a buyer that covers certain repairs, should they be necessary over a certain period.
House Flipping: the purchase of a house or property at a reduced market rate for the purpose of a quick turnaround, a “flip,” and profit. Most house flippers must do some renovation or home fix-up in order to turn a profit on a home.
Housing Co-Op: A corporation that owns a building; residents buy shares that entitle them to occupy a unit. Financing a co-op share is a share loan rather than a mortgage, and fewer lenders offer it.
Housing Ratio: The ratio of the monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio.
HUD: The U.S. Department of Housing and Urban Development. HUD oversees the FHA and Ginnie Mae and enforces the Fair Housing Act. Fannie Mae and Freddie Mac are regulated by the Federal Housing Finance Agency (FHFA), not HUD.
Hybrid ARM: An adjustable-rate mortgage with a fixed rate for an initial period, then adjustments at set intervals. A 5/6 ARM is fixed for five years and then adjusts every six months; 7/6 and 10/6 ARMs work the same way with longer fixed periods. Older ARMs adjusted annually, written as 5/1 or 7/1.

I 8 terms

Index: The published market rate that an adjustable-rate mortgage is tied to. Your rate equals the index plus the lender's margin, subject to the caps in your note. Common indexes today are the 30-day average SOFR and the one-year Constant Maturity Treasury. LIBOR and COFI, which older loans used, have been discontinued.
Initial Interest Rate, Introductory: the interest rate at which an Adjustable Rate Mortgage, ARM, will begin. See Adjustable rate mortgage.
Inspection Contingency: A clause in the purchase contract giving the buyer a set number of days to inspect the property and either negotiate repairs or credits, or cancel and recover the earnest money deposit. In California this is usually part of the standard 17-day contingency period unless the parties agree otherwise.
Interest: Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share, or title in property.
Interest Only: A term loan arrangement calling for payments of interest only, not to include any amount for principal.
Interest Rate: The percentage of an amount of money that’s paid for its use over a specified time period.
Intermediate-Term Mortgage: A mortgage loan with a stated maturity at the time of purchase that it is equal to or less than 20 years.
Investment Property: real estate bought for investment purposes as opposed to private residential. Often the property will be used for rental purposes, such as rental home, apartments or other spaces that give owners the opportunity to create profit and income over the long term.

J 4 terms

Joint ownership: a type of property ownership in which two people share equally in a home and/or property; common for spouses.
Joint Tenancy: a type of property ownership in which two or more people share.
Judicial Foreclosure: A court procedure used by lenders to secure clear title to a property under a defaulted real estate loan.
Jumbo Loan: A loan larger than the conforming limit for the county where the property sits. Because Fannie Mae and Freddie Mac cannot buy it, the lender keeps it or sells it privately, so underwriting is stricter: expect larger down payments, more reserves and higher credit score requirements. Rates may be higher or lower than conforming depending on the market.

L 20 terms

Lease: A written agreement between a property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.
Lease Option: A rental agreement indicating a tenant’s option to purchase a property. Monthly payments consists not only of rent, but an overage that can be applied towards a down payment on an already established amount.
Leasehold Estate: An estate for a fixed length of time, established when a landlord gives up possession of real estate to a tenant, giving the tenant an equitable interest in the property, as defined by lease terms.
Lender: The institution that funds the loan. As a mortgage broker, Theós Financial arranges loans with wholesale lenders; we do not fund loans ourselves. Many lenders sell loans after closing, so the company you make payments to may change.
Lender Credit: Money the lender contributes toward your closing costs in exchange for a slightly higher interest rate. The opposite of paying discount points. Credits appear on the Loan Estimate and Closing Disclosure.
Lender Fees: typically included in fees associated with closing costs, sometimes called processing fees; designed to cover costs incurred by lenders during the loan process.
Leverage: Using someone else’s money for the purchase of property.
Liability Insurance: Insurance that protects property owners against claims that alleges negligence or inappropriate action that resulted in bodily injury or property damage to another party.
Lien: A legal claim by one party against the property of another as security for a debt. Must be paid off when property is sold. A mortgage or a first trust deed is a lien.
Life of Loan Cap: The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate.
Loan: The principal, or amount of total borrowed money, that is repaid with interest.
Loan Amount: The amount of money that you intend on borrowing from a financial institution for the purchase of your home. Subtracting the down payment from the purchase price of the home will provide you with the loan amount.
Loan Estimate: The three-page federal form a lender must deliver within three business days of receiving your application. It lists the loan terms, projected payments and every closing cost, and it replaced the Good Faith Estimate and the initial Truth in Lending disclosure in October 2015.
Loan Origination: What the process of obtaining new loans is called.
Loan Servicing: A service performed by a lender to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.
Loan-Level Price Adjustment (LLPA): Fannie Mae and Freddie Mac fee adjustments based on risk factors such as credit score, loan-to-value ratio, occupancy and property type. They are built into the rate or charged as points and explain why two borrowers can be quoted different rates on the same day.
Loan-to-Value Ratio: The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and paying 10% as a down payment. For purchases, the value of the property is assumed to be the purchase price, for refinances the value is determined by an appraisal.
Lock (to lock a rate): To commit to an interest rate with the lender. Until you lock, your rate floats with the market. Ask for the lock confirmation in writing; a Loan Estimate alone does not mean your rate is locked.
Lock Period: The period, in days, during which the lender guarantees your rate and points. Common lock periods are 30, 45 and 60 days. If the loan does not close before the lock expires, an extension fee may apply.
Lock-in Clause: Clause in a loan agreement that states that the borrower cannot repay a loan prior to a specified date.

M 18 terms

Margin: The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate.
Maturity: The “Due Date” of a loan.
Mello-Roos: A special tax in some California communities, including many newer neighborhoods in and around Valencia,that repays bonds issued to build schools, roads and other infrastructure. It appears on the property tax bill, lasts for a set number of years, and is included in the housing payment when you qualify. The seller must disclose it.
Merged Credit Report: A credit report that reports data from two or more major credit repositories.
Modification: Any change to the original terms of a mortgage.
Monthly Housing Expense: Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.
Mortgage: A legal document that pledges property to a creditor for the repayment of the loan, and is the term used to describe the loan itself. Some states use the term First Trust Deeds to refer to mortgage loans.
Mortgage Banker: A lender that funds loans with its own money or credit lines and usually sells them to Fannie Mae, Freddie Mac or private investors, or pools them into Ginnie Mae securities. Unlike a broker, a mortgage banker offers only its own products.
Mortgage Broker: A licensed company that arranges loans between borrowers and wholesale lenders but does not fund them. A broker can shop one application across many lenders and is paid a disclosed fee, either by the borrower or by the lender, never both on the same loan.
Mortgage Company: could be either a brokerage business or a direct lender.
Mortgage Constant: The factor used for rapid computation of the annual payment needed to amortize a loan.
Mortgage Insurance: Insurance that protects the lender if you default. Conventional loans require private mortgage insurance (PMI) when the down payment is under 20%; it can be cancelled once you reach 20% equity and ends automatically at 78% of the original value. FHA loans charge an upfront premium plus an annual premium that, for most loans, lasts the life of the loan. VA loans have no monthly mortgage insurance.
Mortgage Insurance Premium (MIP): The mortgage insurance on an FHA loan. There is an upfront premium, which is usually financed into the loan, and an annual premium collected with the monthly payment. On most FHA loans with less than 10% down, the annual premium continues for the life of the loan unless you refinance.
Mortgage Originator: The person or company that takes your application and works with you through closing. Individual mortgage loan originators must be licensed or registered through the Nationwide Multistate Licensing System (NMLS); you can verify any originator at nmlsconsumeraccess.org.
Mortgage-Backed Security: A fixed-income security which derives its cashflow from payments on a pool of underlying residential or commercial mortgages.
Mortgagee: The lender in a mortgage agreement.
Mortgagor: The borrower in a mortgage agreement.
Multidwelling Units: Properties that provide separate housing units for more than one family, although only a single mortgage is secured.

N 8 terms

Negative Amortization: Essentially occurs when a borrower makes a minimum payment that may not cover the interest that is due. Loan balance then increases as a result.
Net Effective Income: Gross income less federal income tax.
No-Cost Loan: A no-cost loan can either be: 1) a loan that has no “lender costs” associated with it or, 2) a loan that also covers purchases or refinancing costs, which may be incurred in buying a home, obtaining and/or refinancing a loan, but are not directly charged by the lender. The interest rate on this type of loan is higher.
Non-Judicial Foreclosure: The foreclosure process used for most California home loans, carried out under the power-of-sale clause in the deed of trust without a court case. It begins with a recorded notice of default and, after at least three months and a notice of sale, ends in a trustee's sale. California's Homeowner Bill of Rights requires the servicer to review loss-mitigation options first.
Non-QM Loan: A loan that does not fit the Qualified Mortgage definition, usually because income is documented differently (bank statements, 1099s, rental income) or the borrower has a recent credit event. Lenders still must verify the ability to repay. Rates and down payments are typically higher than conventional loans.
Note: A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
Note Rate: The stated interest rate on a mortgage note.
Notice of Incomplete Application, NOIA: a form sent to the buyer that indicates missing or incomplete loan application information. Buyer must provide all required information for the lender to complete the application process.

O 5 terms

Occupancy: How you will use the property: primary residence, second home or investment property. Occupancy drives the down payment, rate and program eligibility, and you certify it when you sign. Misstating occupancy to get better terms is mortgage fraud.
Offer: a verbal and written offer to buy a home for a certain dollar amount made from a buyer to a seller.
Origination Fee: The fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.
Owner Financing: A property purchase that is partly or wholly financed by the seller.
Owner’s Title Policy: A policy protecting the buyer for the amount of the purchase price in the event of a future title dispute.

P 35 terms

Package Mortgage: A mortgage that /includes equipment and appliances located on the premises in addition to the real property itself.
Partial Entitlement: Under VA loans, the amount of guarantee still available to an eligible veteran who has used his previous entitlement.
Partial Payment: A payment that is not sufficient enough to cover the month payment. During times of economic hardship, a borrower can make this request of the loan servicing collection department.
Participation Financing: A loan in which more than one mortgagee or more than one mortgagor harbors an interest. It can also be a loan in which the mortgagee receives partial ownership of the property being financed.
Payment Change Date: The date when a new monthly payment amount takes effect on an adjustable rate mortgage (ARM) or a graduated payment mortgage (GPM). The payment change date occurs the month immediately after the interest rate adjustment date.
Periodic Payment Cap: The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable-rate mortgage (ARM) where the interest rate and principal fluctuate independently of one another.
Periodic Rate Cap: The limit on the amount that payments can increase or decrease during any one adjustment period in an ARM (adjustable rate mortgage), regardless of how high or low the index fluctuates.
Personal Property: Movable property that does not fit the definition of realty.
Piggyback Loan: A second mortgage or HELOC closed together with a first mortgage, typically to avoid private mortgage insurance or to keep the first mortgage within the conforming limit. A common structure is 80/10/10. Whether it is cheaper than one loan with mortgage insurance depends on the rates at the time.
PITI: PITI stands for principal, interest, taxes, and insurance. An “impounded” loan means that the monthly payment covers all of these, and perhaps mortgage insurance, if your loan so calls for it. If one does not have an “impounded” account, then the lender still calculates these amounts separately and uses it as part of determining one’s debt-to-income ratio.
PITI Reserves: A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI (principal, interest, taxes, and insurance) must equal the amount that the borrower would have to pay for PITI for a determined number of months.
Planned Unit Development (PUD): A type of ownership where individuals actually own the building or unit they reside in, but shared areas are owned jointly with the other members of the development or established association.
Power of Attorney: a legal document that grants an individual the rights to act on behalf of another. For example, if a borrower dies or becomes incapable of managing his or her home loan or mortgage, a power of attorney assigned by that individual could manage his or her mortgage and related decisions.
Pre-Approval: A term used to mean that a borrower has completed a loan application and provided debt, income, and savings information that has been reviewed and pre-approved by an underwriter.
Pre-Foreclosure Sale: A procedure in which the borrower is allowed to sell his or her property for an amount less that what is owed on it to avoid foreclosure, fully satisfying the borrower’s debt.
Pre-Paids: Expenses such as taxes, insurance, and assessments, which are paid in advance of their due date, and on a prorated basis at closing.
Pre-Payment: Any amount paid so as to reduce the principal before the due date.
Pre-Qualification: After a loan officer has made inquiries about a borrower’s debt, income, and savings, he or she can write a written statement (pre-qualification) about the borrower’s chances for qualifying for a home loan.
Preferred Lender: a lender that is closely affiliated with a brokerage based on reputation and other industry factors. A mortgage lender that is recommended by a broker.
Preliminary Title Report: In California, the title company's report issued early in escrow showing who holds title and every recorded lien, easement and restriction on the property. The buyer and lender review it before closing; items that must be cleared, such as an old lien, become conditions of the loan.
Prepayment Penalty: Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule.
Primary Mortgage Market: Where loans are made to borrowers: banks, credit unions, mortgage bankers and the wholesale lenders brokers work with. Contrast with the secondary market, where those loans are sold to investors.
Prime Rate: Interest charged by financial institutions to top-rate borrowers.
Principal: The amount of debt, not counting interest, left on a loan.
Principal Balance: the amount currently owed on a home loan
Private Mortgage Insurance (PMI): Insurance on a conventional loan with less than 20% down that protects the lender if you default. Under the Homeowners Protection Act you can ask to cancel it once your balance reaches 80% of the original value with a good payment history, and it ends automatically at 78%. It can be paid monthly, as a single premium, or by the lender in exchange for a higher rate.
Processing Fees: lender fees associated with creating the loan or mortgage, usually part of closing costs.
Promissory Note: A written promise to repay a specified amount over a specified period of time.
Property Address: the physical street address of a home or property, required for mortgage application.
Property Appraisal: a fair market value of property performed by a licensed appraiser; takes into account not only condition, but also the value of similar local properties or comparable sales.
Property Taxes: annual local taxes charged against the value of a homeowner's property.
Prorations: The allocation of charges and credits to the appropriate parties at a real estate sale and/or loan closing at a real-estate sale and/or loan closing.
Purchase Agreement: A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Purchase-Money Mortgage: Mortgage given by a borrower to the seller as part of the purchase price of the property.
Purchase-Money Transaction: The acquisition of property through the payment of money or its equivalent.

Q 3 terms

Qualified Mortgage (QM): A loan that meets the safe-harbor standards of the Ability-to-Repay rule: no interest-only or negative-amortization features, no balloon payment, a term of 30 years or less, points and fees within limits, and a rate within a set spread of the market. Conventional, FHA, VA and USDA loans are generally QM.
Qualifying Ratio: The debt-to-income ratios lenders use to size a loan. The front-end ratio is your housing payment (principal, interest, taxes, insurance and any HOA dues) divided by gross monthly income; the back-end ratio adds all other monthly debt payments. The traditional guideline is 28/36, but conventional loans are routinely approved up to 45% and FHA loans up to the mid-50s with strong compensating factors. Ratios are one factor among several; talk to a licensed loan officer about your own situation.
Quitclaim Deed: A deed that transfers, without warranty, whatever interest or title a grantor may have at the time the conveyance is made.

R 27 terms

Rate Lock: A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.
Rate-and-Term Refinance: A refinance that changes the interest rate, the term, or both, without taking out more than a small amount of cash. It is priced better than a cash-out refinance and is the usual choice when rates have dropped or you want to shorten the term or remove mortgage insurance.
Real Estate: A portion of the earth’s surface extending downward to the center to the earth and upward into space, including all things permanently attached thereto by nature or man and all legal rights therein.
Real Estate Agent: A person licensed to negotiate and transact the sale of real estate.
Real Estate Investment Trust: securities or mutual funds that invest directly in real estate.
Real Estate Settlement Procedures Act (RESPA): An act requiring the revelation of all costs involved in a real estate closing to all participants.
Realtor: A real estate agent, broker, or associate that holds an active membership in a local real estate board that is affiliated with the National Association of Realtors.
Recast: Re-amortizing an existing loan after a large lump-sum principal payment. The rate and remaining term stay the same, but the monthly payment drops because it is recalculated on the lower balance. Most conventional servicers allow a recast for a small fee; FHA and VA loans generally cannot be recast.
Reconciliation: Determining the final estimate of value by weighing the results of the various approaches in an appraisal.
Reconveyance Clause: The clause in a trust deed that gives the title back to the borrower when the loan is paid in full.
Recording: The formal filing of documents affecting a property’s title.
Refinancing: The process of paying off one loan with the proceeds from a new loan, using the same property as security.
Remaining Balance: The current balance owed on a home loan.
Remaining Term: The current amount of time remaining in the length of the loan.
Rent-Loss Insurance: Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty, resulting in the tenant being excused from paying rent.
Rental Income: Income from an investment property or an accessory unit that lenders can count toward qualifying. Conventional and FHA programs generally use 75% of the market rent or lease amount to allow for vacancy and maintenance; DSCR programs use the full rent against the full payment.
Repayment Plan: An agreement between a lender and a delinquent borrower regarding mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making scheduled payments.
Reserves: Cash or liquid assets you still have after closing, measured in months of the full housing payment. Programs require anywhere from none to twelve months depending on the loan type, property and credit profile. Retirement accounts usually count at a discount.
Residual Income (VA): VA's residual income test. After the proposed house payment, taxes, debts and estimated living expenses, a VA borrower must have a minimum amount of income left over each month, set by family size and region. It is used alongside the debt-to-income ratio.
Restrictions: Rules imposed on the use of real estate in an effort to preserve property values.
Retirement Plan Loan (401(k) / 403(b)): A loan against your employer retirement plan balance. It is an acceptable source of down payment for most programs, and because you are borrowing from yourself the payment is usually not counted in your debt-to-income ratio. Check the plan rules and tax consequences before borrowing.
Reverse Mortgage: A loan for homeowners 62 and older that converts home equity into cash without a monthly mortgage payment. The balance grows over time and is repaid when the last borrower sells, moves out or passes away. Most reverse mortgages are FHA-insured HECMs; proprietary jumbo versions also exist. Counseling from a HUD-approved agency is required.
Revolving Debt: A credit arrangement that allows a customer to borrow against a pre-approved line of credit used to purchase goods and services. The borrower is responsible for the actual amount borrowed plus any interest due.
Right of First Refusal: A provision that states that a property to be first offered to a specific person before it can be offered for sale or lease to other parties.
Right of Rescission: Your right under the Truth in Lending Act to cancel a refinance or home equity loan on your primary residence within three business days after signing. The lender cannot fund the loan until the period ends. It does not apply to purchase loans or to investment or second-home properties.
Rollover Loan: A loan that /includes a call date earlier than its normal amortization period.
Rule of 78: A pre-computed interest method once used on some consumer loans. Federal law bans it on loans longer than 61 months, so it does not apply to mortgages. Mortgage interest is simple interest, calculated on the outstanding balance each month.

S 25 terms

Sale-Leaseback: A financing arrangement whereby an investor purchases real estate owned and used by a business corporation, then leases the property back to the business.
Sales Contract: a real estate sales agreement is a formal written contract made between a homebuyer and seller. The document includes property address, condition, purchase price, inspections, date of closing, date of possession and more.
Seasoning: The length of time an account, deposit or loan has existed. Lenders want down-payment funds seasoned, usually two months in your account, and require a loan to be seasoned for a set number of months before certain refinances, such as six months for most cash-out loans.
Second Mortgage: A mortgage that has a lien position subordinate to the first mortgage.
Secondary Mortgage Market: A market where mortgage originators may sell them, freeing up funds for continued lending and distributes mortgage funds nationally from money-rich to money poor areas.
Section 184 Loan: A HUD home loan guarantee program for enrolled members of federally recognized Native American tribes and Alaska Native villages. It allows low down payments and flexible underwriting, and can be used on or off tribal land in eligible areas.
Secured Loan: A loan that is backed by collateral.
Security: Something given, deposited, or pledged to make secure the fulfillment of an obligation, usually the repayment of a debt.
Seller Carry-Back: An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
Seller Credit: Money the seller agrees to contribute toward the buyer's closing costs or a temporary buydown, negotiated in the purchase contract. Each loan program caps seller credits at a percentage of the price, generally 3% to 9% depending on the down payment, and credits cannot exceed actual costs.
Seller’s Agent: a real estate agent that works on behalf of the home seller.
Senior Loan: A real estate loan in first priority position.
Servicer: An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
Servicing: The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
Settlement Costs: See Closing Costs.
Short Sale: useful tool for lenders and homeowners when foreclosure could be a worst-case scenario. In a real estate short-sale lenders give homeowners permission to discount the home value (an outstanding loan balance) to effect a quick sale, thereby averting foreclosure.
Sinking Fund: Monies deposited in advance in anticipation of satisfying a debt in the future.
SOFR: The Secured Overnight Financing Rate, the index most new adjustable-rate mortgages use since LIBOR was discontinued in 2023. Your ARM rate is the 30-day average SOFR plus the margin in your note, subject to the caps.
Stop Date: Date on a term loan when the balloon payment is due.
Subordinate Financing: Any mortgage or other lien that has a priority lower than that of the first mortgage, or senior loan.
Subordination Agreement: A document in which the holder of a second mortgage or HELOC agrees to stay in second position when the first mortgage is refinanced. Without it, the new first mortgage would record behind the existing second. The second lender may charge a fee and take several weeks.
Subprime Loan (historical): A term from before 2008 for loans made to borrowers with weak credit, often with risky features such as negative amortization. Those products largely disappeared after the Ability-to-Repay rule. Today, loans outside Fannie Mae, Freddie Mac and government guidelines are called non-QM and must still document the borrower's ability to repay.
Supplemental Tax Bill: A one-time California property tax bill issued after a purchase or new construction, covering the difference between the previous owner's assessed value and your new assessed value for the remainder of the tax year. It is separate from the regular bill and is usually not paid from your escrow account, so budget for it.
Survey: A drawing or map the shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Sweat Equity: Increase in property value due to improvement by owners.

T 16 terms

Takeout Mortgage: A permanent mortgage, obtained by pre-arrangement between a builder and a financial institution, to repay the interim mortgagee at the completion of construction.
Tax Lien: A claim against real estate for the amount of its unpaid taxes.
Tenancy in Common: one or more persons may possess the property title, but ownership may be declared in various percentages.
Term: The number of years or months over which the loan is scheduled to be repaid. Common mortgage terms are 30, 20 and 15 years. A shorter term means a higher payment but much less total interest.
Third-Party Origination: A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
Title: A legal document showing a person’s right to or ownership of a property.
Title Company: A company that specializes in examining and insuring titles to real estate.
Title Insurance: Title Insurance policies typically insure a homebuyer against any title-search errors or mistakes, and against loss due to disputes over property ownership. Title Insurance can additionally offer protection to the lender under similar circumstances. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.
Title Search: A check of the title records to make sure that the seller is the actual legal owner of the property, and that there are no liens or other claims outstanding.
Total Debt Ratio: Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.
Transfer of Ownership: The means by which the ownership of a property changes hands. Examples of such include the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchases, and any exchange of possession of the property under a land sales contract or any other land trust device.
Transfer Tax: State or local tax payable when the title passes from one owner to another.
TRID: The TILA-RESPA Integrated Disclosure rule, in effect since October 3, 2015. It created the Loan Estimate and the Closing Disclosure and sets the timing for delivering each one.
Truth in Lending Act (TILA): The federal Truth in Lending Act (TILA), implemented by Regulation Z. It requires lenders to disclose the APR, finance charge and other credit terms in a standard way, gives you a three-day right of rescission on most refinances of your primary residence, and sets the rules for the Loan Estimate and Closing Disclosure.
Truth in Lending disclosure: The pre-2015 form that showed the APR, finance charge and total payments on a home loan. Since October 2015 that information appears on the Loan Estimate and the Closing Disclosure instead.
Two-Step Mortgage: A loan where the interest rate is fixed for the first seven years and then is adjusted one time for the balance of the loan period.

U 2 terms

Underwriter: The person at the lender who reviews your credit, income, assets and the appraisal against the program guidelines and decides whether to approve the loan. Most files are first run through an automated underwriting system, then reviewed by a human underwriter.
USDA Loan: A mortgage guaranteed by USDA Rural Development for moderate-income buyers in eligible rural and some suburban areas. It allows zero down payment and charges an upfront guarantee fee plus a low annual fee instead of mortgage insurance. Income limits and property location rules apply.

V 6 terms

VA Funding Fee: A one-time fee charged on most VA loans, paid to the VA to keep the program running. It varies with the down payment, whether it is your first VA loan, and the loan type, and can be financed into the loan. Veterans receiving VA disability compensation and certain surviving spouses are exempt.
VA IRRRL: The VA Interest Rate Reduction Refinance Loan, also called a VA streamline. It refinances an existing VA loan to a lower rate or from an ARM to a fixed rate with reduced documentation, usually no appraisal, and a reduced funding fee of 0.5%.
VA Loan: A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members and certain surviving spouses. VA loans allow zero down payment, have no monthly mortgage insurance, and charge a one-time funding fee that many disabled veterans are exempt from. The loan comes from a private lender, not the VA.
Variable Rate Mortgage: See Adjustable Rate Mortgage.
Verification of Employment (VOE): The lender's confirmation of your job and income directly with your employer or through a third-party service. A verbal verification is usually repeated within ten business days of closing.
Vested: Means that one has a right to use a portion of a fund, such as an individual’s retirement fund.

W 2 terms

Warranty Deed: A deed in which the seller guarantees clear title and promises to defend it against any claims. In California most sales use a grant deed, which carries more limited warranties; title insurance covers the gap.
Wholesale Lender: A lender that funds loans brought to it by mortgage brokers rather than dealing with the public directly. Wholesale pricing is often lower than retail because the lender's marketing and origination costs are lower. Theós Financial works with multiple wholesale lenders.

Z 1 term

Zoning: The right of a community, under its police power, to dictate the use of property within its boundaries.

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Mortgage Glossary