Your complete guide to mortgage and real estate terminology—from pre-approval to closing. Know what each term means and how it impacts your home financing journey.
Glossary | Mortgage & Real Estate Terms
Navigate the Mortgage Process with Confidence
Whether you’re buying your first home, refinancing your current property, or investing in real estate, understanding mortgage and real estate terminology can make the entire process more manageable. At JD.Mortgage, we believe education is key to making smart financial decisions. This glossary was built to help buyers, sellers, and agents understand the full scope of lending terms, loan programs, and real estate processes—all in plain English.
This is not your average dictionary of definitions. We’ve included industry-specific terms used by lenders, underwriters, and real estate agents. That means you’ll not only learn common terms like escrow and earnest money, but also deep-dive into technical phrases like residual income, manual underwriting, and debt-service coverage ratio (DSCR).
It’s all here—from pre-qualification to closing disclosures, from FHA and VA loans to newer lending options like bank statement loans, reverse mortgages, and second lien HELOCs. Ready to take the next step? Start with our online pre-approval form or explore your loan options now.
Loan Terms & Approval
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.
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.
Loan Programs
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.
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.
Underwriting & Credit
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.
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, Inspection & Title
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.
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.
Real Estate Terms
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.
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.
Disclosures & Documents
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.
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.
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