Glossary | Mortgage & Real Estate Terms

Pre-Qualification: A lender’s informal estimate of how much you can afford based on unverified financial information. Often used as a first step in the home buying journey.
Pre-Approval: A more formal review that includes a credit check and documentation of income and assets. Strengthens your offer when competing in a hot market.
Conditional Approval: Issued when a borrower has submitted most documents but must meet additional requirements before closing.
Final Approval: Granted when all conditions have been met and verified by underwriting.
Rate Lock: Secures a quoted interest rate for a set period—usually 15 to 60 days.
Interest Rate: The base cost of borrowing, expressed as an annual percentage.
APR (Annual Percentage Rate): Includes the interest rate plus lender fees, expressed as a percentage for comparison shopping.
Amortization: Schedule of regular payments reducing both principal and interest over time.
Loan Term: The length of time (e.g., 15 or 30 years) over which the loan is to be repaid.
Buydown: Option to temporarily or permanently reduce your interest rate by paying points upfront (e.g., 3-2-1 buydown strategy).
Origination Fee: Lender charge for processing your mortgage application.

Conventional Loan: Loans not backed by government entities, including conforming loans underwritten to Fannie Mae and Freddie Mac guidelines.
FHA Loan: Government-backed mortgage with lower credit score and down payment requirements, popular with first-time buyers.
VA Loan: Guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. No down payment and no mortgage insurance required.
USDA Loan: Offers 100% financing for rural properties with income restrictions and geographic eligibility.
Jumbo Loan: Any mortgage that exceeds the conforming loan limits set by the FHFA. May require larger down payments and stricter qualifications.
Non-QM Loan: Non-Qualified Mortgage options for those with unique income scenarios or credit profiles that don’t meet traditional lending guidelines.
DSCR Loan: Debt Service Coverage Ratio loans allow investors to qualify based on property cash flow rather than personal income.
Bank Statement Loan: Designed for self-employed borrowers who use 12–24 months of personal or business bank statements to verify income.
Asset Depletion Loan: Converts retirement or investment assets into usable income for qualifying purposes.
ITIN Loan: Offered to individuals using an Individual Taxpayer Identification Number rather than a Social Security number.
DACA Loan: Loans available to Dreamers under Deferred Action for Childhood Arrivals, typically through FHA or non-QM lenders.
Foreign National Loan: For non-U.S. citizens living abroad who wish to purchase property in the United States.
Reverse Mortgage: Available to homeowners 62+, allows them to borrow against home equity without making monthly payments. Typically repaid when the home is sold.
HELOC: Home Equity Line of Credit is a revolving credit line secured by the borrower’s home equity.
Closed-End Second: A second mortgage with fixed payments and term, used alongside a primary mortgage.
Construction Loan: Short-term financing used to build a home. Converts to permanent financing once construction is complete.
Renovation Loan: Combines purchase and renovation costs into one mortgage. Includes FHA 203(k), VA Renovation, and Fannie Mae Homestyle options.
DPA Program: Down payment assistance programs offer grants, forgivable second liens, or low-interest loans to help cover upfront costs.
Medical Professional Loan: Tailored for physicians, dentists, and other medical professionals. Allows higher loan amounts, low or no down payment, and no PMI.

Manual Underwrite: Human-based review for loan approvals that don’t meet automated system guidelines. Common for low credit scores or complex income.
Automated Underwriting System (AUS): Algorithms used to assess risk and provide loan decisions based on borrower input. Fannie Mae’s “DU” and Freddie Mac’s “LP” are common types.
DTI (Debt-to-Income Ratio): The percentage of gross monthly income used to pay debts. Lenders consider both front-end (housing) and back-end (total) DTI.
Residual Income: Required on VA loans to ensure borrowers have enough income left after debts and obligations to support living expenses.
Credit Score: A number ranging from 300–850, used to predict borrower risk. Calculated based on payment history, utilization, length of credit, and more.
Collections: Past due accounts that have been turned over to debt collection agencies. May need to be resolved before loan approval.
Charge-Off: Debt the creditor has written off as uncollectible. It still affects credit score and may require explanation or settlement.
Mortgage Insurance: Protects lenders in case of borrower default. PMI is used on conventional loans; MIP is used for FHA.
Overlays: Additional lending rules that go beyond base agency requirements. One lender’s denial doesn’t mean you can’t qualify elsewhere.
Rapid Rescore: An expedited method to update a credit report during the loan process, usually after debt is paid down.

Appraisal: Independent evaluation of a home’s fair market value. Required by lenders to ensure the loan amount is justified.
Home Inspection: Optional but strongly recommended. Identifies potential issues with structure, systems, and safety.
WDO Inspection: Wood-Destroying Organism inspection. Required for many VA loans to check for termites and related damage.
Title Search: A review of public records to confirm property ownership and identify liens or legal issues.
Deed: The legal document that officially transfers property ownership.
Title Insurance: Protects buyers and lenders from title defects, undiscovered liens, or ownership disputes.
Survey: A professional measurement of property boundaries. Required for many transactions, especially new builds.

Listing Agent: Represents the seller and markets the property.
Buyer’s Agent: Represents the buyer’s interests during the transaction.
Escrow: A neutral account where money and documents are held during a transaction.
Earnest Money: Buyer deposit showing serious intent to purchase. Credited at closing.
Contingency: Contract condition that must be met before closing (e.g., financing, appraisal, home sale).
Multiple Listing Service (MLS): A database of property listings shared by real estate professionals.
Closing Costs: Fees paid at closing by buyer and/or seller. Includes lender fees, title insurance, taxes, and escrow.

Loan Estimate (LE): Given within three business days of application. Lists projected interest rate, monthly payments, and closing costs.
Closing Disclosure (CD): Final breakdown of your loan terms and settlement charges. Must be provided at least three business days before closing.
Promissory Note: Legal document in which the borrower agrees to repay the loan.
Deed of Trust: The legal instrument used in some states to secure the mortgage to the property.
Escrow Disclosure: Annual summary of tax and insurance disbursements from the escrow account.
HUD-1: Older closing form still used for reverse and cash transactions.
Initial Disclosures: Required federal forms provided early in the mortgage process. Includes notices of right to receive a copy of the appraisal and privacy disclosures.
Right of Rescission: A federal rule giving borrowers three business days to cancel a refinance or home equity loan secured by their primary residence.