Mortgage Encyclopedia

A loan used to buy or refinance real estate, secured by the property itself. "Secured" is the important part: if the loan isn't repaid, the lender can take the property through foreclosure. A mortgage has two pieces — the promissory note, which is your promise to repay, and the mortgage or deed of trust, which pledges the house as collateral.

A licensed intermediary who takes your application and shops it to multiple wholesale lenders, rather than lending money directly. A broker is paid a commission on the loan and must disclose how. The practical difference from a bank: a bank offers you its own products, a broker puts several lenders in competition for the same file, which matters most when your situation is unusual.

The licensed individual who takes your application, advises on programs, and manages your file to closing. Loan officers at brokers and non-bank lenders must be individually licensed and hold an NMLS number; those at depository banks are federally registered instead. You can look up either on NMLS Consumer Access.

The Nationwide Multistate Licensing System, the registry for mortgage companies and loan officers. Every licensed broker and loan officer has an NMLS ID number, and the public can look up licences, employment history and disciplinary actions free at nmlsconsumeraccess.org. C2C Brokers Inc. is NMLS #2121587.

An informal estimate of what you might borrow, based on figures you state without documentation. It's a useful first conversation and nothing more — no credit is necessarily pulled and no underwriter has looked at anything. Most sellers won't treat a pre-qualification as meaningful.

A lender's conditional commitment to lend a stated amount, issued after reviewing your credit, income and assets. Stronger than a pre-qualification because someone has actually checked the documents. It is still conditional — on the property, the appraisal, and nothing changing in your finances before closing.

The amount borrowed, and later the amount still owed, not counting interest. Every payment splits between principal and interest; early in a loan most of it is interest, and the balance shifts toward principal over time.

The cost of borrowing, expressed as an annual percentage of the outstanding balance. On a standard mortgage, interest is charged in arrears on the remaining principal, which is why paying extra toward principal reduces the total interest you'll ever pay.

The part of the purchase price you pay from your own funds rather than borrowing. It sets your loan-to-value ratio, which in turn drives your rate and whether you pay mortgage insurance. Common minimums: 3% conventional, 3.5% FHA, 0% VA and USDA — but a larger down payment almost always prices better.

The difference between what the property is worth and what you owe on it. Equity grows three ways: paying down principal, the property appreciating, or improving the property. It's what you can borrow against later and what you walk away with when you sell.

The meeting — often now electronic — where the loan documents are signed, funds are disbursed and title transfers. Also called settlement or, in some states, escrow closing. The loan isn't final until documents are signed, funded and recorded.

Two different things share this word. In a purchase, escrow is the neutral third party holding the deposit and documents until conditions are met. In servicing, your escrow account is where the servicer holds the property tax and insurance money collected with your monthly payment.

The document in which you personally promise to repay the loan, setting out the amount, rate, payment and term. The mortgage or deed of trust secures this promise against the property. Two separate instruments doing two separate jobs: one is the debt, the other is the collateral.

A lender that funds loans submitted by brokers rather than dealing with the public. Wholesale pricing is generally better than the same lender's retail pricing because the broker has done the origination work — which is the mechanism by which a broker can beat a bank's own branch on the same product.

A lender that takes applications directly from consumers through its own branches or website, offering only its own products.

A company that underwrites and funds loans in its own name, then sells them to larger investors shortly after closing. Sits between a broker and a full retail bank, and the borrower often can't tell the difference.

Any mortgage not insured or guaranteed by a government agency. Most conventional loans are written to Fannie Mae or Freddie Mac guidelines so they can be sold to them — those are "conforming" loans. Generally the cheapest option for borrowers with good credit and steady documented income.

A conventional loan that meets Fannie Mae and Freddie Mac rules, including their maximum loan amount. For 2026 the baseline conforming limit is $832,750 for a one-unit property, rising to $1,249,125 in designated high-cost counties. Conforming loans usually price better than jumbo because there is a ready secondary market for them.

The largest loan Fannie Mae and Freddie Mac will buy, set annually by the FHFA. For 2026: $832,750 baseline for one unit, $1,249,125 in high-cost areas, with higher figures for two-, three- and four-unit properties and for Alaska, Hawaii, Guam and the U.S. Virgin Islands. Limits are set by county, so a loan can be conforming in one county and jumbo in the next.

A mortgage insured by the Federal Housing Administration, designed for borrowers with smaller down payments or weaker credit. 3.5% down with a credit score of 580 or above; 10% down between 500 and 579. In exchange you pay mortgage insurance both upfront and annually. FHA is often the cheaper answer below roughly 680 credit, and conventional the cheaper answer above it — running both is the only way to know.

The maximum FHA-insured loan by county, tied to the conforming limit. For 2026 the floor is $541,287 (65% of the conforming limit) in most of the country and the ceiling is $1,249,125 (150%) in high-cost areas, with higher limits for multi-unit properties.

A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans and certain surviving spouses. No down payment, no monthly mortgage insurance, and typically easier credit treatment than conventional. Since 2020 there is no VA loan limit for borrowers with full entitlement. The main cost is the one-time funding fee, which is waived entirely for veterans receiving VA disability compensation.

A one-time fee that funds the VA loan program in place of monthly mortgage insurance. For a purchase with first-time use: 2.15% with less than 5% down, 1.5% at 5% or more, 1.25% at 10% or more. Subsequent use with less than 5% down is 3.3%. An IRRRL is 0.5%. It can be financed into the loan. Veterans receiving VA disability compensation — at any rating — are exempt, as are certain surviving spouses.

The VA document proving you qualify for a VA loan and showing how much entitlement you have available. Your loan officer can usually pull it electronically in minutes. Getting it early is worthwhile because it also reveals whether you've used entitlement before, which changes the funding fee.

The amount the VA will guarantee on your behalf. Full entitlement means no loan limit and no down payment. Partial or restored entitlement — if you have another VA loan outstanding or previously defaulted — can cap the zero-down amount.

A mortgage guaranteed by the U.S. Department of Agriculture for low-to-moderate income buyers in eligible rural and many suburban areas. Zero down payment, with income limits by household size and county and a property that must sit inside an eligible area — worth checking the map before assuming it doesn't apply, as the boundaries include a lot of places nobody would call rural.

A loan larger than the conforming limit for its county — above $832,750 in most of the country in 2026. Jumbos are held by banks or sold to private investors rather than to Fannie or Freddie, so guidelines are set by the individual lender and vary widely. Expect larger reserves, more documentation, and pricing that is sometimes better and sometimes worse than conforming.

A mortgage that doesn't meet the Qualified Mortgage definition, made to borrowers whose income or situation doesn't fit standard rules — self-employed borrowers, real estate investors, foreign nationals, recent credit events. Non-QM is not subprime: the loans are fully underwritten, just against different evidence. They carry higher rates than conventional, which is the trade for qualifying at all.

A non-QM program that qualifies self-employed borrowers on deposits into their bank accounts — typically 12 or 24 months — instead of tax returns. The lender applies an expense factor to arrive at usable income. Built for the very common case of a business owner whose returns are written down by legitimate deductions to the point that a traditional loan won't work.

Debt Service Coverage Ratio loan: an investment-property mortgage qualified on the property's rent rather than the borrower's personal income. The DSCR is rent divided by the property's payment; 1.0 means it breaks even, and most lenders want 1.0 to 1.25. No tax returns, no employment verification — which is why investors with many properties use them.

A non-QM program where a CPA-prepared profit and loss statement — sometimes with no bank statements at all — establishes self-employed income. Useful when deposits don't reflect the business, though it usually prices above a bank statement loan.

An underwriting method that converts liquid assets into a monthly income figure by dividing the balance over a set number of months. Used for retirees and others with substantial savings but little ordinary income. Also called asset amortization or asset-based lending.

Home Equity Line of Credit: a revolving second lien you draw from as needed, like a credit card secured by your house. Usually a variable rate tied to the prime rate, with a draw period — often 10 years, interest-only — followed by a repayment period. Useful when you don't know the total amount you'll need, or when your first mortgage rate is too good to refinance away from.

A fixed-rate, lump-sum second mortgage against your equity, repaid on a set schedule. The certainty is the point: fixed rate, fixed payment, fixed end date. Compared with a HELOC you give up flexibility and gain predictability, and like a HELOC it leaves a low first mortgage rate untouched.

A loan for homeowners generally 62 and older that converts equity into cash with no monthly mortgage payment; the balance grows and is repaid when the borrower sells, moves out permanently, or dies. The FHA-insured version is the Home Equity Conversion Mortgage. The borrower remains responsible for taxes, insurance and upkeep — failing to pay those can still trigger foreclosure.

Short-term financing that funds building in stages, with interest charged only on money drawn. A construction-to-permanent loan converts to a standard mortgage when the house is finished, so there's one closing instead of two.

A mortgage that finances the purchase or refinance plus the cost of improvements, based on the value the property will have once the work is done. FHA 203(k) and Fannie Mae HomeStyle are the common versions. The work is bid, escrowed and inspected as it completes.

Short-term financing that lets you buy the next house before the current one sells, secured against one or both. It solves a timing problem at a price — higher rate and fees — and depends on the departing residence actually selling.

Any loan secured by the property behind the first mortgage. Because the first lien gets paid first in a foreclosure, second liens carry more risk and higher rates. HELOCs and home equity loans are the common forms.

The Federal National Mortgage Association, a government-sponsored enterprise that buys mortgages from lenders, packages them into securities and sells them to investors. It doesn't lend to consumers; it sets the guidelines most conventional loans are written to, which is why its rules govern a loan you got from a local broker.

The Federal Home Loan Mortgage Corporation, the other government-sponsored enterprise, performing the same role as Fannie Mae with its own broadly parallel guidelines. Lenders often run a file through both, because one will sometimes approve what the other won't.

The Government National Mortgage Association, which guarantees securities backed by FHA, VA and USDA loans. Unlike Fannie and Freddie it doesn't buy loans — it guarantees the bonds, carrying the full faith and credit of the U.S. government.

The Federal Housing Finance Agency, regulator and conservator of Fannie Mae and Freddie Mac. It sets the conforming loan limits each year.

Where closed mortgages are bought and sold as investments. Its existence is why a small brokerage can offer the same rates as a large bank: the loan is sold on, so pricing reflects what investors will pay rather than one lender's balance sheet.

A bond backed by a pool of mortgages. Mortgage rates track MBS prices rather than the Federal Reserve's policy rate directly, which is why a Fed cut doesn't automatically lower mortgage rates and sometimes coincides with them rising.

USDA's equivalent of mortgage insurance: an upfront fee, usually financed into the loan, plus a smaller annual fee collected monthly. Both are set by USDA and are typically cheaper than FHA's premiums.

A scheduled release of construction or renovation funds as work reaches defined stages, paid after inspection. Interest is charged only on what has actually been drawn.

The rate used to calculate your interest charge, and therefore your monthly payment. It is not the same as APR, which folds in costs. Quoted rates assume a set of characteristics — credit score, loan-to-value, property type, occupancy, loan amount — and change when any of those do.

Annual Percentage Rate: the cost of the loan expressed as a yearly rate including interest and most lender fees. It exists so two offers can be compared on more than the headline rate. Its weakness is that it assumes you keep the loan for its full term, so it overstates the value of paying points if you'll move or refinance sooner.

A mortgage whose rate never changes for the life of the loan. Principal and interest stay identical from the first payment to the last — taxes and insurance can still move. The 30-year fixed is the default American mortgage for the simple reason that it moves all interest-rate risk to the lender.

A mortgage with a rate fixed for an initial period, then adjusting periodically against an index. A 7/6 ARM is fixed for seven years then adjusts every six months. Caps limit how far the rate can move at each adjustment and overall. ARMs make sense when the fixed period comfortably covers how long you'll hold the loan.

The published market rate an ARM adjusts against — most commonly SOFR now that LIBOR has been retired. Your new rate at each adjustment is the index plus your margin, subject to the caps.

The fixed percentage added to the index to set an ARM's rate after the initial period. Unlike the index, the margin never changes, so it is worth comparing between ARM offers — a lower margin is permanently better.

The limits on how much an ARM's rate can rise. Usually stated as three numbers, such as 2/1/5: the maximum change at the first adjustment, at each subsequent adjustment, and over the life of the loan.

The Secured Overnight Financing Rate, the benchmark that replaced LIBOR for U.S. adjustable-rate lending. Most ARMs written today adjust against a 30-day average of SOFR.

An upfront fee paid to lower the interest rate — one point is 1% of the loan amount. Whether points are worth it comes down to the break-even: monthly saving divided into the cost, giving the number of months you must keep the loan to come out ahead. Points paid on a purchase are often tax-deductible; ask your tax adviser.

The reverse of points: the lender pays some of your closing costs in exchange for a higher rate. Useful when cash at closing matters more than the long-term rate, which for many first-time buyers it does.

The rate at which a lender neither charges points nor gives a credit. Everything above par generates credit, everything below costs points. It's the reference point a rate sheet is built around.

A pricing adjustment Fannie Mae and Freddie Mac apply based on risk characteristics — credit score, loan-to-value, occupancy, property type, cash-out, subordinate financing. LLPAs are why two people quoted the same day get different rates, and why a twenty-point credit improvement can change your pricing tier.

A lender's commitment to honour a specific rate for a set period — commonly 30, 45 or 60 days — provided the loan closes in time and the file doesn't materially change. Longer locks cost more. If your lock expires before closing you may pay to extend, so lock length should match a realistic closing timeline, not an optimistic one.

Choosing not to lock, leaving your rate exposed to the market until you do. It's a bet, and one worth making consciously rather than by default.

An option on some locks allowing a one-time move to a lower rate if the market improves before closing. Usually costs something and has conditions on how far rates must fall.

An arrangement — often paid by a seller or builder — that reduces the borrower's rate for the first year or two, then returns it to the note rate. A 2-1 buydown means two points lower in year one, one lower in year two. The subsidy sits in an escrow account and is used up whether or not you keep the loan; you must qualify at the full note rate.

A weekly benchmark published by the CFPB representing rates offered to the most creditworthy borrowers. It matters because several rules are written against it: a loan's APR relative to APOR determines Qualified Mortgage status and whether a loan is a higher-priced mortgage.

The process of verifying everything in the file and deciding whether the loan meets guidelines. An underwriter checks capacity to repay, credit history, the assets you're using, and the property. Most approvals arrive with conditions attached rather than as a flat yes.

Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor — software that evaluates a file against agency guidelines and returns a recommendation and a list of documentation required. A strong AUS finding can reduce paperwork; it doesn't replace the human underwriter.

Your monthly debt payments divided by your gross monthly income, the single most important number in qualifying. The front-end ratio counts housing only; the back-end counts housing plus all other debts. Conventional loans commonly go to 45% and sometimes 50% with compensating factors; FHA can go higher still with strong credit and reserves.

The housing portion of DTI — proposed principal, interest, taxes, insurance and any HOA dues, divided by gross monthly income.

Total monthly obligations — housing plus car loans, student loans, credit card minimums, child support and other reported debts — divided by gross monthly income. Utilities, groceries and insurance premiums other than housing are not counted.

The loan amount divided by the property's value, expressed as a percentage. A $400,000 loan on a $500,000 house is 80% LTV. It drives pricing, mortgage insurance and program eligibility. On a purchase, value means the lower of price or appraised value.

All liens against the property divided by its value. A first mortgage at 80% plus a HELOC at 10% is 90% CLTV. Lenders limit CLTV as well as LTV, which is what constrains second mortgages.

Liquid assets left after closing, measured in months of housing payments. Two months is common on a primary residence; six or more is typical on investment properties and jumbo loans. Retirement accounts usually count at a discount.

The funds available for down payment, closing costs and reserves. Lenders verify them and care where they came from — a deposit that isn't obviously payroll will be questioned. Money must generally be seasoned, meaning it has sat in the account long enough to be documented.

How long something has existed in a documentable form — funds in an account, ownership of a property, or time since a credit event. Programs set seasoning requirements to prevent last-minute manoeuvring.

Money given, not lent, toward a down payment or closing costs, usually from a family member. It requires a signed gift letter stating no repayment is expected, plus a paper trail from the donor's account to yours. Conventional loans limit gifts on some occupancy types; FHA is more permissive.

Confirmation from your employer that you work there, at what income, in what role. Written at application and often re-verified verbally within days of closing — which is why changing jobs mid-process can derail a file.

Generally anyone owning 25% or more of a business. Traditional underwriting averages two years of tax returns after adding back non-cash deductions like depreciation, which often produces a qualifying income far below what the person actually earns. That gap is what bank statement and P&L programs exist to solve.

Non-cash expenses — depreciation, amortization, business use of home, one-off losses — added back to a self-employed borrower's net income because they reduced taxable income without reducing cash. Getting these right is often the difference between approval and decline.

A category of loan meeting CFPB standards that presume the lender assessed your ability to repay: no negative amortization, no interest-only, no balloon, no terms over 30 years, and limited points and fees. The old 43% DTI cap for General QM was replaced in 2021 by a price-based test comparing the loan's APR to the Average Prime Offer Rate. A first-lien loan under 1.5 percentage points over APOR gets safe-harbour status.

The Dodd-Frank requirement that a lender make a reasonable, good-faith determination that you can repay before originating a mortgage. It's the rule that ended the stated-income lending of the mid-2000s. Non-QM loans still must satisfy ATR — they simply satisfy it with different evidence.

An underwriting decision approving the loan subject to specific items — an updated bank statement, a letter of explanation, proof a debt was paid. Normal, and not a sign of trouble. The file moves to clear-to-close once conditions are satisfied.

All conditions satisfied; the file is ready for closing documents. Scheduling and the three-business-day Closing Disclosure clock follow from here.

A short written explanation an underwriter asks for — a credit inquiry, an address gap, an unusual deposit, a period of unemployment. Plain and factual beats elaborate.

Strengths that offset a weakness elsewhere: large reserves, a long job history, a low payment shock, credit far above the minimum. They're how a file at the edge of a guideline gets approved.

The increase from your current housing payment to the proposed one. A large jump draws underwriter attention, particularly for first-time buyers with thin reserves.

A number, usually 300–850, predicting the likelihood you'll repay. Mortgage lending generally uses older FICO versions — often FICO 2, 4 and 5 from the three bureaus — which can differ from the score shown by a consumer app. Lenders typically use the middle of three scores, and the lower middle score when there are two borrowers.

A combined report pulling Equifax, Experian and TransUnion into one document, which is what mortgage lenders use rather than a single bureau.

Revolving balances as a percentage of available limits. It carries heavy weight in scoring and responds fast — paying a card down before the statement cuts can lift a score within a cycle, which is often the quickest available improvement before a rate lock.

A lender-initiated process to update a credit report within days after you pay down or correct something, rather than waiting for the normal cycle. Only worth doing when the change will actually move you into a better pricing tier.

A credit check tied to an application, visible to lenders and mildly score-affecting. Mortgage inquiries within a shopping window — typically 14 to 45 days depending on the scoring model — are treated as a single inquiry, so comparing several lenders does not compound the damage.

Negative entries: late payments, collections, charge-offs, judgments, foreclosures, bankruptcies. Programs set waiting periods after major events — commonly two years after a Chapter 7 discharge for FHA and four for conventional, with shorter periods where documented extenuating circumstances apply.

Too little credit history to generate a reliable score. Manual underwriting using alternative history — rent, utilities, insurance paid on time — is often the route through.

Underwriting by a person against program guidelines rather than an automated finding. Slower and more documentation-heavy, but the way many thin-file and unusual borrowers get approved.

The total of lender fees, third-party charges, prepaid items and escrow deposits paid at closing. Commonly 2% to 5% of the purchase price, though it varies widely by state because transfer taxes and title practices differ. Your Loan Estimate itemises them within three business days of application.

A standardised three-page disclosure the lender must provide within three business days of receiving your application, showing the rate, monthly payment, closing costs and how the loan can change. Because the format is identical everywhere, it is the right document to compare offers with — not a rate quote in an email.

The final five-page accounting of the loan and every dollar at closing. You must receive it at least three business days before consummation so there is time to compare it with the Loan Estimate. Certain changes — a different loan product, an APR increase beyond tolerance, adding a prepayment penalty — restart the three-day clock.

The lender's charge for making the loan, often around 1% but sometimes zero where the rate is higher instead. It appears in Section A of the Loan Estimate.

Amounts collected at closing that aren't fees but future costs paid early: interest from closing to month end, the first year of homeowner's insurance, and the initial escrow deposit for taxes and insurance. They inflate cash-to-close without being a cost of the loan.

Daily interest from your closing date through the end of that month, collected at closing. Closing later in the month reduces it — a small but real reason closing dates cluster at month end.

The total you must bring to closing: down payment plus closing costs and prepaids, less your deposit, any lender or seller credits, and loan proceeds. It's the number on the Closing Disclosure that actually matters on the day.

A good-faith deposit made when your offer is accepted, held in escrow and credited toward your costs at closing. If you withdraw for a reason your contract protects — financing, appraisal, inspection — it is generally refundable; walking away outside those contingencies can forfeit it.

Closing costs the seller agrees to pay on your behalf. Programs cap them by occupancy and loan-to-value — commonly 3% to 6% on conventional and up to 6% on FHA. A frequently better use of a concession than a price reduction, since it converts into cash you'd otherwise need at the table or into a rate buydown.

The county charge for entering the deed and mortgage in the public record, which is what makes the lien enforceable against the world.

A state, county or city tax on transferring real estate, sometimes called a documentary stamp or deed tax. Who pays is set by local custom and by the contract, and the amount varies enormously between jurisdictions.

An independent opinion of the property's market value by a licensed appraiser, ordered by the lender to confirm the collateral supports the loan. Lenders must order it through a process that keeps the loan officer from influencing the appraiser.

The shortfall when a property appraises below the contract price. The lender lends against the lower figure, so the gap must be covered with cash, renegotiated, or the deal ends — which is what an appraisal contingency preserves the right to do.

Recent sales of similar nearby properties, adjusted for differences, that support the appraiser's value conclusion.

An offer from Fannie Mae or Freddie Mac's automated system to accept their value estimate instead of a full appraisal, on eligible low-risk loans. Saves several hundred dollars and a week or more of calendar time.

Legal ownership of the property, and the collection of rights that come with it. A title search examines the public record for anything that clouds it — liens, easements, judgments, errors in past deeds.

Insurance against losses from defects in title that existed before you bought. The lender's policy is required and protects the lender for the loan amount; the owner's policy is optional in most places, usually a one-time premium, and is the only one that protects you.

The examination of public records establishing the chain of ownership and identifying claims against the property, done before closing so problems surface while there is still time to clear them.

Any unresolved claim or irregularity — an old unreleased mortgage, a contractor's lien, a boundary dispute — that must be cleared before clean title can transfer.

A legal claim against property securing a debt. A mortgage is a voluntary lien; tax liens and mechanic's liens are involuntary. Liens are paid in order of priority when a property sells or forecloses.

The order of priority among claims, generally set by recording date, with property tax liens jumping ahead regardless. First position is repaid first, which is why first mortgages carry the lowest rates.

An agreement moving one lien behind another, commonly needed when refinancing a first mortgage while leaving a HELOC in place — the HELOC lender must agree to stay in second position. It takes time and a fee, and is a routine cause of refinance delays.

The instrument that transfers ownership. A warranty deed guarantees clear title; a quitclaim deed transfers only whatever interest the grantor has, with no guarantee.

Used instead of a mortgage in many states, it involves three parties — borrower, lender and trustee — with the trustee holding title until the loan is repaid. The practical difference is that it generally allows faster non-judicial foreclosure.

Filing the deed and security instrument with the county so they appear in the public record. Recording is what establishes lien priority and makes ownership public.

How you will use the property — primary residence, second home, or investment. It is a major pricing factor and a term of the loan; stating one and doing another is occupancy fraud.

A property held to rent or resell rather than to live in. Expect a larger down payment, higher rate, and more reserves. Projected rent can often be used toward qualifying, usually discounted for vacancy.

An organisation governing a condominium or planned community, funded by dues and empowered to enforce rules. HOA dues count in your debt-to-income ratio, and for condos the association's finances and insurance are underwritten alongside you.

Review of the condo project itself — owner-occupancy ratio, budget and reserves, litigation, insurance, single-owner concentration. A perfectly qualified borrower can be declined because the building doesn't qualify, so the project should be checked early.

A drawing of the property's boundaries showing improvements, easements and encroachments. Required in some states and by some lenders, and the way boundary problems get found before rather than after closing.

A right for someone else to use part of your land for a defined purpose — a utility line, a shared driveway, access to a neighbouring parcel. Easements run with the land and survive a sale.

What a property will be worth once planned renovations are complete. Renovation loans lend against this rather than the as-is value, which is what lets a buyer finance a house that wouldn't otherwise appraise.

Principal, Interest, Taxes and Insurance — the four parts of a typical monthly payment, and the figure lenders use for qualifying. Add HOA dues and mortgage insurance where they apply. A quoted "payment" that is only principal and interest will understate the real cost substantially.

Insurance protecting the lender on conventional loans above 80% loan-to-value. Cost depends on credit score and LTV, typically a few tenths of a percent of the loan annually. Under the Homeowners Protection Act you may request cancellation at 80% of the original value, and the servicer must terminate it automatically at 78% — this is the crucial difference from FHA's premium, which for most loans never comes off.

FHA's mortgage insurance. For 2026: an upfront premium of 1.75% of the loan, usually financed, plus an annual premium most borrowers pay at 0.55%, collected monthly. With 10% or more down the annual premium ends after 11 years; with less, it lasts the life of the loan, and the usual way out is refinancing to conventional once you have equity.

Mortgage insurance the lender buys in exchange for a higher rate, so there is no separate monthly MI line. It usually can't be cancelled at 80% the way borrower-paid PMI can, so it favours borrowers who expect to refinance or move before that point.

Property insurance covering the structure and liability, required by every lender for at least the replacement cost or loan amount. In coastal Florida this is a substantial part of the payment and should be quoted early — an insurance figure that arrives late can change qualifying.

Separate coverage required when the property sits in a FEMA Special Flood Hazard Area, available through the National Flood Insurance Program or private carriers. Standard homeowner's policies exclude flood.

A FEMA designation describing flood risk. Zones beginning with A or V are high-risk and trigger a flood insurance requirement; X is outside the high-risk area. A flood zone determination is ordered on every loan.

The account your servicer uses to collect and pay property taxes and insurance with your monthly payment. Most loans require one; conventional loans at 80% LTV or below can often waive it for a small pricing adjustment. The point is that a large annual bill becomes a predictable monthly one.

The annual review reconciling what your escrow account collected against what was paid, adjusting the monthly amount and refunding a surplus or spreading a shortage. A rise in taxes or insurance changes your total payment even on a fixed-rate loan — the most common reason a "fixed" payment goes up.

Annual tax levied by local government based on assessed value. Rates and assessment practices vary widely, and in some states a sale triggers reassessment — so the seller's current tax bill may badly understate yours.

The property tax rate expressed in mills — dollars per thousand of assessed value. A rate of 20 mills on a $300,000 assessment is $6,000 a year.

A reduction in taxable value for an owner-occupied primary residence, along with other protections in some states. Florida's is a notable example, and its Save Our Homes cap limits how fast assessed value can rise for existing homesteads.

Replacing an existing mortgage with a new one, paying off the old loan. Done to lower the rate, change the term, remove mortgage insurance, take cash out, or move off an adjustable rate.

A refinance that changes the rate, the term, or both, without taking meaningful cash out. Prices better than cash-out because the risk is lower.

A refinance for more than you owe, with the difference paid to you at closing. Limits are usually 80% LTV on a primary residence and lower on investment property. It trades equity for cash at mortgage rates, which are almost always lower than unsecured borrowing — but it also resets the clock and, in today's market, often means giving up a low first-mortgage rate on the whole balance.

How long you must keep a new loan for the savings to cover its costs — total costs divided by the monthly saving. The single most useful number when deciding whether a refinance or paying points is worth it, because it converts an abstract comparison into a date.

A simplified refinance of a government loan into the same program, with reduced documentation and often no appraisal. FHA calls it a Streamline; VA calls it an IRRRL. Cash out is not permitted, and the borrower must generally benefit from the change.

Interest Rate Reduction Refinance Loan — the VA streamline. Refinances an existing VA loan to a lower rate with minimal documentation, usually no appraisal, and a reduced funding fee of 0.5%.

A refinance where the lender credits the closing costs in exchange for a higher rate. Nothing is free — you pay through the rate — but it can make sense when you may refinance again soon, since there are no costs to recover.

Applying a large lump sum to principal and re-amortising the remaining balance over the original term, lowering the payment while keeping the existing rate and loan. Far cheaper than refinancing and enormously valuable when your current rate is below market, though not every servicer offers it.

The schedule by which a loan is paid off through regular payments of principal and interest. Early payments are mostly interest because interest is charged on a large balance; the ratio flips over time. An amortization schedule shows the split for every payment across the life of the loan.

When a payment doesn't cover the interest due and the unpaid portion is added to the balance, so the debt grows despite payments being made. Not permitted on Qualified Mortgages.

The company that collects your payments, manages escrow and handles the loan day to day — often not the lender that originated it. Servicing is routinely sold, which changes where you send money but nothing about your loan's terms.

The sale of servicing rights to another company. You must receive notice in advance, and payments sent to the old servicer within 60 days of the transfer can't be treated as late.

A fee for paying a loan off early. Prohibited on Qualified Mortgages and rare on consumer mortgages generally, but still found on some investment and non-QM products — always worth asking about on a DSCR loan.

A temporary pause or reduction in payments agreed with the servicer during hardship. Payments are not forgiven; they are repaid later, through a lump sum, a repayment plan, or a modification.

A permanent change to the terms of an existing loan — rate, term, or balance — to make it affordable after hardship. Unlike a refinance, it changes the loan you have rather than replacing it.

Being behind on payments. Reporting to the credit bureaus generally begins at 30 days past due, which is why the grace period matters less than people assume.

The legal process by which a lender takes and sells the property after default. Judicial foreclosure runs through the courts and takes far longer; non-judicial foreclosure, available in deed-of-trust states, is faster. Either way it is a severe and lasting credit event.

Selling for less than the mortgage balance with the lender's agreement to accept the shortfall. Damages credit less than a foreclosure and carries shorter waiting periods before you can borrow again.

Voluntarily transferring the property to the lender to avoid foreclosure. Generally treated somewhat better than a foreclosure, though the lender must agree.

Taking over a seller's existing mortgage at its existing rate. FHA, VA and USDA loans are generally assumable with lender approval; conventional loans usually are not. When the existing rate is far below market this is worth real money, though the buyer must cover the seller's equity in cash or a second lien.

The recorded document releasing the lien once the loan is repaid in full — the paperwork that proves the house is yours free and clear.

The TILA-RESPA Integrated Disclosure rule, which created the Loan Estimate and Closing Disclosure and set their timing: the Loan Estimate within three business days of application, the Closing Disclosure at least three business days before consummation. It exists so borrowers can compare offers and see the final numbers before signing rather than at the table.

The federal law requiring disclosure of credit terms and cost, including the APR, so borrowers can compare offers on a consistent basis.

The Real Estate Settlement Procedures Act, governing settlement services. It requires certain disclosures and prohibits kickbacks and unearned fees for referrals — the reason referral arrangements between lenders, agents and title companies are tightly constrained.

Prohibits discrimination in lending on the basis of race, colour, religion, national origin, sex, marital status, age, or because income comes from public assistance. It also gives you the right to a written reason for a denial.

Prohibits discrimination in housing transactions, including lending, on the basis of race, colour, national origin, religion, sex, familial status or disability.

The written notice a lender must send when an application is denied, stating the specific reasons and the credit information relied on. If you receive one, the reasons are the roadmap to fixing the file.

On a refinance of a primary residence, the borrower's right to cancel within three business days after closing. Funds are not disbursed until that period expires, which is why a refinance funds a few days after signing. It does not apply to purchases.

The Home Mortgage Disclosure Act, requiring lenders to report application and origination data so regulators and the public can identify discriminatory patterns. It's why you're asked about ethnicity, race and sex on an application — you may decline to answer.

The standard mortgage application, form 1003 — pronounced "ten-oh-three" — covering borrower, employment, income, assets, liabilities and property. Its modern electronic equivalent underlies most online applications.

Funds withheld at closing to complete work that couldn't be finished beforehand — often weather-dependent repairs. Released when the work is done and inspected.

A document authorising someone to sign on a borrower's behalf. Lenders accept them only in specific circumstances and usually need to approve the form in advance, so it should never be arranged at the last minute.

The theft of closing funds by criminals impersonating your lender, agent or title company and sending false wiring instructions, usually by email. It is the single largest financial risk in a real estate transaction. Never accept or act on wire instructions received by email or text — call the number you already have on file and confirm every digit verbally before sending money.

A condition in a purchase contract that must be satisfied or the buyer can withdraw with their deposit intact. The common three are financing, appraisal and inspection. Waiving them strengthens an offer and transfers real risk to the buyer.

The period after an offer is accepted and before closing, while contingencies are worked through, the loan is underwritten and title is examined.

A buyer-ordered examination of the property's condition. Distinct from an appraisal, which is about value for the lender — an inspection is about what you're buying, for you.

A final visit shortly before closing to confirm the property is in the agreed condition and any negotiated repairs were made.

The lender wiring the loan proceeds. On a purchase this usually happens at or right after signing; on a refinance of a primary residence it comes after the three-day rescission period.

How long a lender is currently taking at each stage — underwriting, conditions review, docs. It varies with volume and is the honest answer to "how fast can you close?"

Paying to extend a rate lock that will expire before closing. Usually priced per day, and usually avoidable with a realistic lock in the first place.

Any value given by one party to the other — closing costs paid, repairs credited, a rate buydown funded. Lender caps apply to what may be credited.

A term in an offer automatically raising the price above competing offers up to a stated maximum. It can win a bidding war but doesn't change what the property will appraise for.