A lender's reasonable, good-faith determination that a borrower has the income and assets to repay a mortgage before approving the loan.

A provision in a mortgage that lets the lender demand the entire loan balance become due immediately if the borrower defaults on the terms of the agreement.

A mortgage with an interest rate that changes periodically based on a published financial index. The rate is usually fixed for an initial period, then adjusts on a set schedule.

The gradual repayment of a loan through scheduled payments that cover both principal and interest, so the loan is paid off in full by the end of its term.

A table showing how each payment is split between principal and interest over the life of the loan, and the remaining balance after each payment.

A broader measure of the cost of borrowing than the interest rate alone. APR includes certain fees and costs, expressed as a yearly rate, making it easier to compare loan offers.

A professional, independent estimate of a property's market value, performed by a licensed appraiser. Lenders use it to confirm the home is worth enough to secure the loan.

A contract clause that lets a buyer cancel or renegotiate if the property's appraised value comes in below the agreed purchase price.

An increase in a property's value over time, influenced by market conditions, improvements, and local demand.

A mortgage that can be transferred to a new buyer when the home is sold, subject to lender approval. Some FHA and VA loans may be assumable under certain conditions.

Things of value a borrower owns — such as bank accounts, investments, retirement funds, and real estate — used to demonstrate financial strength during underwriting.

A computer-based system that evaluates loan applications against lender and investor guidelines to provide a fast preliminary approval decision.

A snapshot of a person's or company's assets, liabilities, and net worth at a given point in time, sometimes reviewed for self-employed or investment borrowers.

A type of non-QM mortgage where a self-employed borrower's income is verified using personal or business bank statements instead of traditional tax returns.

A loan with relatively small payments for a set period, followed by a single large 'balloon' payment that pays off the remaining balance at the end of the term.

One one-hundredth of one percent (0.01%). Interest rate changes are often described in basis points — for example, a 25-basis-point drop equals a 0.25% reduction.

The person who applies for and is legally responsible for repaying a mortgage loan.

A short-term loan that helps a buyer purchase a new home before selling an existing one, secured by the current property.

An independent professional who shops multiple lenders on a borrower's behalf to find a suitable loan, rather than lending their own funds directly.

A financing technique where the seller or borrower pays an upfront fee to temporarily or permanently lower the mortgage interest rate, reducing monthly payments.

Limits on how much an adjustable-rate mortgage's interest rate or payment can change — at each adjustment, over the life of the loan, and per payment period.

A refinance transaction in which the new loan amount is higher than the existing mortgage balance, with the extra funds paid to the borrower in cash for other uses.

The final underwriting sign-off confirming all conditions have been met and the loan is approved to proceed to closing.

The final step in the mortgage process, where the borrower signs loan documents, pays closing costs, and ownership of the property is officially transferred.

Fees and expenses paid at closing on top of the home's purchase price, including lender fees, title insurance, taxes, and prepaid items. They typically range from about 2% to 6% of the loan amount.

A standard document provided to borrowers at least three business days before closing that details the final loan terms, monthly payment, and all closing costs.

An asset the borrower pledges to secure a loan. With a mortgage, the home itself serves as collateral the lender can claim if the loan is not repaid.

The total of all loans on a property — such as a first mortgage plus a second lien — divided by the property's value, expressed as a percentage.

A formal document from a lender offering a loan under specific terms and conditions, sent after underwriting approval and before closing.

Recent sales of similar nearby properties that an appraiser uses to help determine a home's market value.

A unit in a multi-unit building or development where the owner holds title to their individual unit and shares ownership of common areas. Condo financing has its own approval requirements.

A mortgage that meets the loan-size limits and guidelines set by government-sponsored enterprises Fannie Mae and Freddie Mac, allowing it to be sold to them.

A short-term loan used to finance the building of a new home, typically disbursed in stages as construction progresses and later replaced by permanent financing.

A condition that must be met before a real estate contract becomes binding, such as a satisfactory appraisal, inspection, or loan approval.

A mortgage not insured or guaranteed by a federal government agency. Conventional loans may be conforming or non-conforming and typically require stronger credit and a larger down payment than government-backed loans.

A response to an offer that changes one or more of its terms, creating a new offer that the other party can accept, reject, or counter again.

A detailed record of a person's credit history, including accounts, payment history, and outstanding debts, used by lenders to assess borrowing risk.

A number that summarizes a borrower's credit risk based on their credit history. Higher scores generally improve loan eligibility and interest rates, but approval depends on the whole financial picture.

Closing costs a seller agrees to pay on the buyer's behalf as part of the purchase agreement, reducing the cash the buyer needs at closing.

The percentage of a borrower's monthly gross income that goes toward paying debts, including the new mortgage. Lenders use DTI to gauge whether a borrower can comfortably afford the loan.

The legal document that transfers ownership of real estate from one party to another, recorded in public records at closing.

A security instrument used in some states instead of a mortgage, in which a trustee holds title until the loan is repaid. Florida primarily uses mortgages.

Failure to meet the legal terms of a loan, most commonly by missing mortgage payments, which can ultimately lead to foreclosure.

A loan status indicating payments are past due but the loan has not yet been declared in full default.

Optional upfront fees paid to the lender at closing to lower the interest rate on a mortgage. One point typically equals 1% of the loan amount.

The portion of a home's purchase price the buyer pays upfront in cash, with the remainder financed by the mortgage. Required amounts vary by loan program and borrower.

Programs — often state, local, or nonprofit — that provide grants, forgivable loans, or second mortgages to help eligible buyers cover their down payment and sometimes closing costs.

The phase of a HELOC during which the borrower can access funds from the credit line, typically making interest-only payments before the repayment period begins.

A timeframe in a purchase contract during which a buyer inspects the property and finalizes financing, often with the right to cancel for any reason.

Submitting more than one mortgage application for the same borrower and property, which can complicate credit and processing — work with one loan officer to avoid this.

A good-faith deposit made when an offer is accepted, showing the buyer's serious intent. It is usually applied toward the down payment or closing costs at closing.

A legal right for someone other than the owner to use part of a property for a specific purpose, such as utility access or a shared driveway.

The portion of a home's value the owner truly owns — the current market value minus any outstanding mortgage or liens against the property.

A neutral third party that holds funds, documents, or instructions until all conditions of a transaction are met, then releases them at closing.

An account the lender uses to collect and hold funds for property taxes and insurance, paying them on the borrower's behalf when they come due.

An annual lender review of an escrow account to confirm the right amount is being collected for taxes and insurance, adjusting payments if needed.

A government-sponsored enterprise that buys conforming mortgages from lenders, providing liquidity so lenders can offer more loans to homebuyers.

A government agency within HUD that insures mortgages made by approved lenders, helping borrowers with smaller down payments and more flexible credit qualify for financing.

A mortgage insured by the Federal Housing Administration. FHA loans are popular with first-time and other buyers for their lower down payment options and flexible qualifying guidelines.

A simplified refinance option for existing FHA loans that typically requires less documentation and may not need a new appraisal, designed to lower the rate or payment.

A widely used credit score model that summarizes a borrower's credit risk. Lenders commonly use FICO scores as one factor in loan and rate decisions.

A buyer who has not owned a primary residence in the recent past, as defined by the specific program. Many down payment assistance and grant programs target first-time buyers.

A mortgage with an interest rate that stays the same for the entire life of the loan, keeping the principal-and-interest payment unchanged.

Insurance required for properties in designated flood-risk zones, separate from standard homeowners insurance, that protects against flood-related damage.

The legal process a lender may use to take ownership of and sell a property when the borrower fails to repay the mortgage as agreed.

A non-QM mortgage designed for borrowers who are not U.S. citizens or residents, using alternative documentation to qualify based on income, assets, and the property.

A government-sponsored enterprise that, like Fannie Mae, purchases conforming mortgages from lenders to support a stable, liquid mortgage market.

The portion of a borrower's gross monthly income that goes toward the housing payment (principal, interest, taxes, and insurance), one part of the overall debt-to-income analysis.

A written statement confirming that money given to a borrower for a down payment is a true gift with no expectation of repayment, which lenders require for gift funds.

A government agency that guarantees mortgage-backed securities backed by government loans such as FHA and VA, helping keep those programs funded.

An early estimate of loan terms and settlement charges. The modern equivalent for most mortgages is the Loan Estimate, provided within days of application.

A borrower's total income before taxes and deductions each month, used as the starting point for debt-to-income calculations.

An underwriting adjustment that increases non-taxable income (such as certain benefits) by a set percentage to reflect its tax-free value when calculating qualifying income.

A credit check that occurs when a lender reviews a borrower's credit report as part of a loan application, which can have a small, temporary effect on credit scores.

Insurance protecting the physical structure of a home against covered perils such as fire and wind. Lenders require it, and it is typically paid through the escrow account.

A revolving line of credit secured by a home's equity that lets a borrower draw funds as needed during a set draw period, similar to a credit card.

A lump-sum loan secured by a home's equity, repaid in fixed monthly payments over a set term, separate from the first mortgage.

The current market value of a home minus any outstanding mortgage balances, representing the portion the owner has paid off or gained through appreciation.

A professional evaluation of a home's structure, systems, and condition, usually ordered by the buyer to identify potential issues before closing.

An organization that manages shared amenities and enforces rules in a community or condominium, funded by monthly dues that affect a borrower's qualifying ratios.

Coverage that protects a home and the borrower's personal property against loss, required by lenders and typically paid through the escrow account.

Another term for the front-end ratio — the share of monthly income spent on housing costs, used with total debt ratio to qualify a borrower.

A published financial rate, such as SOFR, that an adjustable-rate mortgage's interest rate is tied to. The index plus a margin determines the adjusted rate.

A non-QM mortgage that allows borrowers who file taxes with an ITIN instead of a Social Security number to purchase or refinance a home using alternative documentation.

The first funds a borrower takes from a line of credit, such as a HELOC, after it is approved and opened.

A contract clause allowing a buyer to inspect the property and negotiate or withdraw based on the results, protecting against unexpected defects.

The cost of borrowing money, expressed as a percentage of the loan amount, paid by the borrower to the lender over the life of the loan.

The percentage charged on a loan's principal balance each year, which — together with the loan amount and term — determines the monthly payment.

A home purchased to rent or resell for income rather than to live in. Investment loans typically have different requirements than primary-residence mortgages.

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, used for higher-priced homes. Jumbo loans typically require stronger credit and larger reserves.

A mortgage or loan recorded after a first mortgage, such as a HELOC or home equity loan, which is repaid only after the first lien in the event of default.

A borrower's debts and financial obligations — such as credit cards, auto loans, and student loans — counted against income in debt-to-income calculations.

A legal claim against a property as security for a debt. A mortgage is a lien that gives the lender the right to take the property if the loan is not repaid.

The maximum interest rate an adjustable-rate mortgage can reach over the full life of the loan, regardless of how much the index rises.

A standardized form a lender provides within three business days of a mortgage application, outlining the estimated interest rate, monthly payment, and total closing costs.

A licensed professional who guides borrowers through the mortgage process — collecting application details, explaining loan options, and coordinating with underwriting and closing.

The loan amount divided by the property's value or purchase price, expressed as a percentage. A lower LTV generally means more equity and may improve loan terms.

A set timeframe during which a lender guarantees a specific interest rate, protecting the borrower from rate increases while the loan is processed.

The reason for the mortgage, such as a purchase, rate-and-term refinance, or cash-out refinance, which affects the loan program and qualifying requirements.

A fixed percentage added to an index to determine the interest rate on an adjustable-rate mortgage at each adjustment period.

The date on which a loan's final payment is due and the mortgage is scheduled to be paid in full.

A legal agreement in which a property serves as collateral for a loan used to buy or refinance a home. The borrower repays the loan over time; the lender can foreclose if the borrower defaults.

A lender that originates and funds loans, often using its own funds or a line of credit, and may sell them to investors after closing.

An independent professional who works with multiple lenders to find a borrower a suitable loan, rather than lending their own funds directly.

Insurance that protects the lender if a borrower defaults. It is typically required on conventional loans with a down payment below 20% and on most FHA loans.

The legal document in which a borrower promises to repay the loan, stating the amount, interest rate, term, and payment schedule.

The lender in a mortgage transaction — the party that provides the funds and holds the lien on the property.

The borrower in a mortgage transaction — the party who receives the loan and pledges the property as collateral.

When a payment is too small to cover the interest due, the unpaid interest is added to the loan balance, causing the amount owed to grow over time rather than shrink.

A person's total assets minus total liabilities, sometimes considered by lenders when evaluating a borrower's overall financial strength.

A non-qualified mortgage that does not meet the standard QM guidelines, offering flexible documentation and qualifying options for borrowers whose income or property doesn't fit conventional guidelines.

The base interest rate stated on the mortgage note, used to calculate the monthly principal-and-interest payment, separate from the APR.

A formal notice a lender files when a borrower falls behind on payments, often the first public step in the foreclosure process.

A charge by a lender for processing a loan application, expressed as a percentage of the loan amount, paid at closing.

A property the borrower intends to live in as their primary residence, which typically qualifies for better loan terms than an investment or second home.

A significant increase in a borrower's monthly payment, which underwriters consider when evaluating adjustable-rate or interest-only loans.

Interest charged for the number of days between the closing date and the first day of the next month, collected at closing.

An acronym for Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment when escrow is used.

Upfront fees paid to a lender at closing in exchange for a lower interest rate, also known as discount points. One point equals 1% of the loan amount.

A lender's conditional commitment to lend a specific amount based on a review of a borrower's credit, income, and assets, before a property is selected. It strengthens a buyer's offer.

A fee some lenders charge if a borrower pays off a mortgage early. Most modern residential loans do not include prepayment penalties, but it is important to confirm.

An informal, quick estimate of how much a borrower might be able to borrow, based on basic information without full documentation. It is less binding than a pre-approval.

Amounts paid at closing in advance for items such as property taxes and homeowners insurance, held in the escrow account to cover future bills.

The home a borrower lives in most of the time. Primary-residence loans generally offer the best rates and lowest down payment options.

The original amount of money borrowed, or the remaining balance of the loan that has not yet been repaid, excluding interest.

The two main components of a mortgage payment — principal reduces the loan balance while interest is the cost of borrowing — separate from taxes and insurance.

Insurance on conventional loans that protects the lender when the down payment is less than 20%, typically cancelable once the loan reaches a certain equity threshold.

The stage after application in which a loan processor collects and organizes documents, verifies information, and prepares the file for underwriting.

Documentation — such as pay stubs, W-2s, tax returns, or bank statements — that verifies a borrower's earnings for underwriting.

A legally binding contract between a buyer and seller that sets the terms of a home sale, including price, contingencies, and closing timeline.

The interest rate a lender uses to determine how large a loan a borrower can afford, which may differ from the actual note rate on adjustable-rate loans.

A deed that transfers any interest a person has in a property without guaranteeing clear title, often used between family members or to clear minor title issues.

A refinance that replaces an existing mortgage with a new one to obtain a better interest rate, change the loan term, or both — without taking additional cash out.

A lender's commitment to hold a specific interest rate for a set period while the loan is processed, protecting the borrower from rate increases before closing.

A federal consumer protection law that requires lenders to disclose settlement costs and prohibit certain referral fees in residential mortgage transactions.

The process of replacing an existing mortgage with a new loan, typically to lower the interest rate, change the term, or access equity.

The phase of a HELOC after the draw period ends, during which the borrower can no longer borrow and must repay the outstanding balance over a set term.

Funds a borrower has remaining after closing — such as savings or investment accounts — that some lenders require as a cushion, especially for jumbo or investment loans.

A loan for older homeowners that lets them convert part of their equity into cash without selling the home, with repayment typically deferred until the borrower moves or passes away.

A borrower's legal right to cancel certain refinance transactions within three business days of closing without penalty, protecting homeowners from high-pressure decisions.

A property used by the owner for part of the year but not as a primary residence, such as a vacation home, with loan requirements between those of a primary residence and an investment property.

A loan taken out behind a first mortgage, such as a HELOC or home equity loan, which is repaid only after the first lien if the property is sold or foreclosed.

A loan backed by collateral — for a mortgage, the home itself — so the lender can claim the property if the borrower fails to repay.

A borrower whose income comes from owning a business rather than from an employer's W-2, often qualifying with alternative documentation such as bank statements or profit-and-loss statements.

A credit from the seller toward the buyer's closing costs, negotiated as part of the purchase agreement to reduce the cash needed at closing.

The ongoing management of a loan after closing — collecting payments, managing escrow, and handling customer service — which may be done by the original lender or a separate company.

A document, commonly the Closing Disclosure, that itemizes all final financial details of a real estate transaction for both buyer and seller.

A sale in which the lender agrees to accept less than the full mortgage balance owed, allowing a distressed borrower to sell the home and avoid foreclosure.

A benchmark interest rate based on overnight borrowing costs that many adjustable-rate mortgages use as their index.

A professional measurement and map of a property's boundaries, structures, and easements, used to confirm the legal description and identify encroachments.

A service that monitors property tax payments on a mortgaged property and alerts the lender if taxes become delinquent, protecting the lender's lien position.

The length of time over which a loan is scheduled to be repaid, such as 15, 20, or 30 years, which affects the monthly payment and total interest paid.

The legal right to own and use a property, documented by a deed and recorded in public records.

Insurance that protects the lender and, optionally, the owner against losses from defects in the property's title discovered after closing, such as undisclosed liens or ownership disputes.

A review of public records to confirm a property's legal ownership and identify any liens, judgments, or other claims before the sale is finalized.

The total of a borrower's monthly debt payments — including the new mortgage — divided by gross monthly income, also known as the back-end ratio.

A federal law that requires lenders to clearly disclose the true cost of credit, including the APR and finance charges, so borrowers can compare offers.

A residential property with two to four units, one of which the borrower may occupy as a primary residence, with rental income that can sometimes help qualify.

The lender's process of evaluating a borrower's credit, income, assets, and the property to decide whether to approve a loan and on what terms.

A mortgage offered through a U.S. Department of Agriculture program that helps eligible buyers purchase homes in qualifying rural and suburban areas with little to no down payment.

The USDA program that provides guaranteed and direct loan options to support homeownership in eligible rural communities.

A one-time fee on most VA loans that helps keep the program self-sustaining, which may be financed into the loan. Certain exemptions apply, such as for eligible disabled veterans.

The Interest Rate Reduction Refinance Loan — a streamlined VA refinance that lowers the rate or payment on an existing VA loan with reduced documentation and no appraisal in many cases.

A mortgage backed by the U.S. Department of Veterans Affairs that helps eligible active-duty service members, veterans, and surviving spouses purchase or refinance a home, often with no down payment.

A lender's confirmation that a borrower is employed and earning the income stated on the application, typically through the employer or recent pay documentation.

A final inspection by the buyer shortly before closing to confirm the property's condition matches the contract and that any agreed repairs have been completed.

A deed that guarantees the seller holds clear title to the property and has the right to sell it, providing the strongest protection for the buyer.

A lender that offers loans to borrowers through mortgage brokers rather than directly, often giving an independent broker access to a broad range of programs and rates.

The electronic transfer of funds used to send closing money — such as the down payment and closing costs — to the title company or attorney handling the closing.

A loan option that requires no upfront down payment, such as VA and certain USDA loans for eligible borrowers, though other closing costs may still apply.