120+ Terms · Plain English
Every term you'll hear during a mortgage — defined cleanly, with real examples. Search, scroll, or jump by letter. If anything's still confusing after you read it here, that's what the call is for.
A loan whose interest rate is fixed for an initial period (5, 7, or 10 years) and then adjusts periodically based on a market index plus a margin. Common formats: 5/1 ARM, 7/1 ARM, 10/1 ARM. Useful when you plan to sell or refinance before the adjustment period.
The schedule by which your monthly payment is split between interest and principal. Early in the loan, most of your payment is interest. By the end, most is principal. The math is fixed by your rate, term, and loan amount.
Your interest rate plus the loan's fees, expressed as a single yearly percentage. APR is always higher than the note rate and is the better number for comparing loans across lenders. Required disclosure on every Loan Estimate.
An independent professional valuation of the property, ordered by the lender. The appraised value sets the maximum loan amount. If the appraisal comes in below contract price, the buyer either renegotiates, brings cash to cover the gap, or walks.
A qualification method that converts liquid assets into "income" for underwriting. Typical formula: assets divided by 60–84 months. Useful for high-net-worth buyers without traditional W-2 income, especially in jumbo lending.
A mortgage that a buyer can take over from the seller, keeping the existing rate and terms. Most VA, FHA, and USDA loans are assumable. Conventional loans typically aren't. Valuable when current rates are higher than the seller's locked rate.
Your total monthly debt obligations (housing + car + credit cards + student loans + other minimum payments) divided by gross monthly income. Most conventional loans cap this at 43–50%. The number that actually constrains how much you can borrow.
A loan with low monthly payments for a set period (often 5 or 7 years), followed by a single large "balloon" payment for the remaining balance. Used in commercial and bridge lending. Rare in residential post-2010.
A non-QM loan that qualifies you on 12 or 24 months of business or personal bank deposits instead of tax returns. Built for self-employed borrowers, business owners, and 1099 earners with strong cash flow but heavy write-offs.
One one-hundredth of a percentage point. 25 basis points = 0.25%. Lenders use this to talk about rate moves and pricing adjustments — "rates dropped 12 basis points today" means down 0.12%.
A short-term loan that "bridges" the gap between buying a new home and selling the old one. Usually 6–12 months, higher rate, secured by the existing home. Useful when timing forces you to buy before you sell.
A seller- or builder-paid mechanism that reduces your interest rate for the first 1–3 years. A 2-1 buydown drops your rate 2% in year 1, 1% in year 2, and lands at the note rate in year 3. The seller pre-pays the discount at closing.
The maximum amount your ARM rate can change. Typical structure: 2/2/5 — first adjustment can move 2%, each subsequent adjustment 2%, and the lifetime cap is 5% above the initial rate. Caps protect you from runaway rate hikes.
The total dollar amount you bring to the closing table. This includes your down payment, closing costs, prepaid escrows, and any unpaid earnest money. Your Closing Disclosure shows the exact figure 3+ days before close.
A refinance where you borrow more than you owe and take the difference in cash. Limited to 80% LTV on conventional, 80–85% on FHA. Common for renovations, debt consolidation, or investment capital.
Fees paid at closing in addition to your down payment: lender fees (origination, underwriting), third-party fees (appraisal, title, recording), prepaid items (taxes, insurance, interest), and government fees. Typically 2–4% of purchase price.
A 5-page federally-mandated form that itemizes every cost in your loan. Lender must deliver it at least 3 business days before closing. Compare it line-by-line against your Loan Estimate — material changes require redisclosure.
Any unresolved claim or defect on a property's title — old liens, judgments, easement disputes, missing heirs. Must be cleared before close. The title company finds these during the title search.
A loan that meets Fannie Mae and Freddie Mac size and underwriting limits. For 2026, the baseline conforming loan limit is $806,500 (higher in some high-cost counties). Loans above this are jumbo.
A short-term loan used to build or substantially renovate a home. Funds disburse in stages as construction progresses. Often converts to a permanent mortgage at completion ("construction-to-perm").
A mortgage not insured or guaranteed by a government agency (FHA, VA, USDA). Conforms to Fannie Mae/Freddie Mac guidelines or follows portfolio rules. Down payments from 3% (for first-time buyers) to 20%+.
A 300–850 number summarizing your creditworthiness. Mortgage lenders pull all three bureaus (Experian, Equifax, TransUnion) and use the middle score. Conventional minimums typically 620; better pricing at 740+; jumbo often wants 700+.
Total monthly debt divided by gross monthly income. Lenders look at front-end (housing only) and back-end (all debt). Conventional caps at 43–50% back-end; FHA up to 56.99% with compensating factors. The single most-watched ratio in underwriting.
The legal document that transfers ownership of real property from one party to another. Recorded at the county recorder's office at closing. Different deed types (warranty, quitclaim, special warranty) carry different protections.
Optional upfront fees paid to permanently reduce your interest rate. One point = 1% of loan amount; typically buys ~0.25% rate reduction. Worth it only if you stay long enough to reach break-even (cost / monthly savings).
The portion of the purchase price you pay in cash. Conventional minimum 3% (first-time) or 5% (otherwise); FHA 3.5%; VA 0%; USDA 0%; jumbo typically 10–25%. Anything under 20% on conventional triggers PMI.
Programs (state, county, employer, nonprofit) that provide grants or second-lien loans to cover part of your down payment. Arizona's Home Plus program offers up to 5%. Most have income and credit requirements.
For investment property loans: monthly rental income divided by monthly PITIA. A DSCR of 1.0 means the property covers itself; 1.2+ is what most DSCR lenders prefer. Qualifies the property, not the borrower's W-2 income.
A good-faith deposit from buyer to seller, typically 1–3% of purchase price, that signals serious intent. Held in escrow and credited to your cash-to-close at closing. Forfeited if you back out outside contract contingencies.
The difference between your home's market value and what you owe on it. Equity grows as you pay down principal and as the home appreciates. Refinances and HELOCs let you tap equity without selling.
Two meanings. (1) The neutral third party that holds funds and documents during a real estate transaction until conditions are met. (2) The lender-managed account that collects monthly amounts for property taxes and insurance, then pays them when due.
An option (on some loans, with sufficient equity) to skip the lender-managed escrow account and pay your own taxes and insurance directly. Often comes with a small rate adjustment.
A mortgage insured by the Federal Housing Administration. Lower credit minimums (580 with 3.5% down; 500 with 10% down), more flexible DTI, but mortgage insurance (MIP) is typically permanent unless you refinance.
A loan whose interest rate stays the same for the entire term. Most common terms: 30-year and 15-year. Predictable payment; protection against rising rates. The default product for most homebuyers.
Float = leaving your rate unlocked, betting it'll drop before close. Float-down = a one-time option (with a fee) to relock at a better rate after the initial lock if rates fall. Useful in declining-rate markets.
A temporary pause or reduction of mortgage payments, granted in hardship situations. Missed payments are typically added to the end of the loan or repaid in a plan. Not forgiveness.
The legal process by which a lender seizes a property after the borrower defaults. In Arizona, most foreclosures are non-judicial (trustee sale) and can complete in 90+ days. Severely damages credit for 7 years.
Just your monthly housing payment (PITIA) divided by gross monthly income. Conventional preference is around 28%, but flexibility exists. The other half of the DTI conversation, alongside back-end DTI.
A one-time fee VA charges to keep the loan program self-sustaining. 2.15–3.3% of loan amount for first-use; lower for subsequent use; waived for veterans with service-connected disability. Can be financed into the loan.
Down payment money provided by a family member or qualifying donor. Requires a signed gift letter and a paper trail proving the funds came from the donor's account. Can fully fund down payments on most loan types.
The pre-2015 cost-disclosure form, replaced by the Loan Estimate (LE). The term still gets used colloquially to mean "the lender's pricing summary."
A short-term, asset-based loan from a private lender, secured by real estate. Higher rates (10–14%), faster funding (7–14 days), used by investors for fix-and-flip or bridge financing. Not a long-term hold.
A revolving line of credit secured by your home's equity. Variable rate, draw period (typically 10 years), then repayment period. Useful for renovations, business needs, or as an emergency reserve.
A conforming loan that exceeds the standard limit ($806,500 in 2026) but stays within the high-cost area limit (up to $1,209,750). Available only in counties designated high-cost — much of California, Hawaii, NYC area.
Required by every lender. Covers structure, contents, and liability. Annual premium typically 0.25–0.5% of home value. Paid through escrow on most loans. Arizona is relatively low-cost (no hurricanes, low theft).
Arizona protects up to $400,000 of equity in your primary residence from most creditors. Automatic on owner-occupied homes, no filing required. Different from California's filed homestead.
The market benchmark your ARM rate adjusts against. Common indexes: SOFR, Treasury, CMT. Your new rate at adjustment = current index + your loan's margin (which is fixed for the life of the loan).
A loan structure where you pay only interest for an initial period (5–10 years), then amortize fully over the remaining term. Lower initial payment; no principal reduction. Used in jumbo and investor lending.
The note rate — the percentage charged annually on the loan balance, used to calculate your monthly principal-and-interest payment. Different from APR, which folds in fees.
A mortgage on a non-owner-occupied property. Higher rates (typically 0.5–1% above primary), larger down payment requirements (15–25%), stricter reserves. DSCR loans are a popular sub-category.
A form of property ownership in which two or more parties share equal ownership with right of survivorship — when one owner dies, their share automatically transfers to the surviving owners. Common between spouses.
A court-ordered claim against your property arising from an unpaid debt. Must be cleared before close on a purchase or refinance. The title company will find these during the title search.
A mortgage exceeding the conforming loan limit ($806,500 baseline for 2026). Different underwriting (often 700+ credit, 20%+ down, 6–12 months reserves), but rates are typically within 0.5% of conforming.
Pricing add-ons Fannie Mae and Freddie Mac charge based on risk factors: credit score, LTV, occupancy, property type. Why a 720 score gets worse pricing than 760, even at the same rate sheet.
A 3-page disclosure the lender must provide within 3 days of application. Shows rate, payment, closing costs, and key terms. Designed for apples-to-apples comparison across lenders. Replaced the old GFE in 2015.
Loan amount divided by home value, expressed as a percent. 80% LTV means 20% equity. PMI removal happens at 80% LTV (request) or 78% LTV (automatic). Critical metric for refinances and PMI decisions.
A guarantee from the lender that your rate won't change for a specified window (typically 30, 45, or 60 days) — even if market rates rise. If they fall, some lenders offer a one-time float-down. Standard practice once you're under contract.
The fixed amount added to the index to calculate your ARM's adjusted rate. Set at origination; never changes. A 2.5% margin + 4% index = 6.5% adjusted rate.
The date your final mortgage payment is due. On a 30-year loan originated today, the maturity date is 30 years from your first payment.
A loan secured by real estate. The borrower pledges the property as collateral; if they default, the lender can foreclose. Technically two documents: the note (the promise to pay) and the mortgage or deed of trust (the lien on the property).
FHA's version of mortgage insurance. Has both upfront (1.75% of loan) and monthly components. Typically required for the life of the loan unless you refinance into a non-FHA product.
The document where the borrower promises to repay the loan according to specified terms. The note is what gets sold and traded in the secondary market.
When your monthly payment doesn't cover the interest charged, and the unpaid interest gets added to the principal — meaning your loan balance grows. Common in option-ARM products from the 2000s; mostly extinct now.
Nationwide Mortgage Licensing System. Every loan officer and mortgage company has an NMLS number that you can verify on the public consumer website. Logan Sullivan is NMLS 2466872; Forward Loans is NMLS 2006640.
A loan that doesn't meet the Qualified Mortgage standard (typically because of alternative documentation like bank statements or asset depletion). Higher rates than QM loans, but enables financing for self-employed and complex-income borrowers.
A loan that doesn't fit Fannie/Freddie guidelines — usually because it's too large (jumbo) or has unusual property/borrower characteristics. Held in lender portfolios or sold to private investors.
The interest rate stated on your mortgage note. The number used to calculate your monthly principal and interest. Different from APR, which includes fees.
A lender fee charged for processing the loan, typically 0.5–1% of loan amount. Disclosed on Section A of the Loan Estimate. Negotiable on some products.
The lender's classification when you intend to live in the property as your primary residence. Best rates and lowest down payments. Requires you to occupy within 60 days of close and stay typically 12+ months.
The "no points, no rebate" rate — the rate where the lender neither charges discount points nor credits closing costs. Your starting point when deciding to buy down or take a credit.
A structure that combines an 80% first mortgage with a 10% second (HELOC or fixed) and 10% down — avoiding PMI without putting 20% down. Useful when you have cash but want to keep some liquid.
PITI = Principal, Interest, Taxes, Insurance. PITIA adds the "A" for HOA. The full picture of your monthly housing cost — and the number lenders actually use for DTI.
Required on conventional loans when down payment is below 20%. Protects the lender if you default. Typically 0.3–1.5% of loan amount per year, paid monthly. Can be removed at 80% LTV (request) or auto-removes at 78% LTV.
Either discount points (paid to lower rate) or origination points (paid as lender fee). Each point = 1% of loan amount.
A verified lending decision based on actual documents (credit, income, assets). Issued as a letter you can include with offers. The version sellers and agents take seriously. Different from pre-qualification, which is unverified.
A lender's quick estimate of how much you can borrow, based on self-reported information. No documents pulled, no underwriting. Useful for ballpark only; not strong for offers.
A fee some lenders charge if you pay off the loan within a defined period (typically 1–5 years). Banned on most QM consumer mortgages but still common in DSCR and non-QM products.
The home you live in most of the year. Best loan terms, lowest rates, lowest down payment requirements. Lender requires you to occupy within 60 days of close.
The rate banks charge their most creditworthy commercial customers. Set at 3% above the federal funds rate. HELOCs and some other variable-rate products price off prime.
The unpaid balance of your loan. Each monthly payment splits between interest (cost of borrowing) and principal (paying down what you owe). Early payments are mostly interest; later payments mostly principal.
Annual tax assessed by your county, typically a percentage of assessed value. Arizona averages 0.6% (one of the lowest in the country). Usually escrowed monthly by the lender and paid in two installments.
The income lenders count toward your DTI calculation. Some income is straightforward (W-2 base salary). Other income (bonus, overtime, commission, self-employment, rental) requires a 2-year history and an averaging calculation.
A category of loan that meets CFPB safe-harbor standards: no risky features, points/fees capped, ATR (ability-to-repay) verified. Most conforming and FHA loans are QM. Bank statement and DSCR are non-QM.
A re-amortization of your existing mortgage after a large lump-sum principal payment. Same rate, same term — just lower monthly payment based on the new balance. Cheaper than refinancing if rates haven't dropped.
Paying off your existing mortgage with a new one. Reasons: lower rate, shorter term, drop PMI, cash out equity, or change loan type. Has its own closing costs, so the math has to work.
Liquid assets you have left after closing. Lenders typically want 2–6 months PITIA depending on loan type, occupancy, and property type. Investor loans want more (6–12 months); jumbo even more.
A loan for seniors (62+) that converts home equity into cash payments. No monthly payment due; balance grows over time and is repaid when the home is sold or the borrower passes away. HECM is the FHA-insured version.
On a refinance of a primary residence, federal law gives you 3 business days after closing to cancel the transaction. Only applies to refinances and HELOCs — not purchases. Funds release after the rescission period.
A non-primary residence the borrower occupies for personal use part of the year. Better terms than investor loans (small rate premium, 10% down minimum), but stricter than primary. Cannot be a rental.
A loan secured by your home that sits behind (subordinate to) your first mortgage. HELOCs and home equity loans are second mortgages. Higher rates than firsts because of subordinate position.
Where mortgages get bought, sold, and packaged into mortgage-backed securities after origination. Fannie Mae, Freddie Mac, and Ginnie Mae are the dominant agency buyers. Allows lenders to keep originating new loans.
Money the seller agrees to pay toward your closing costs at closing. Limited by loan type (typically 3–6%). A common negotiation lever: seller agrees to a higher purchase price in exchange for a credit that reduces your cash-to-close.
The administrative side of your mortgage after closing: collecting payments, managing escrow, sending statements, processing payoffs. Originators sometimes keep servicing; sometimes sell it. Doesn't affect your loan terms.
Another name for the closing — the final exchange of documents and funds that transfers ownership and funds the loan. Conducted by a title company, settlement attorney, or escrow officer depending on the state.
A document that keeps an existing second lien (HELOC, home equity loan) in second position when you refinance the first. Required by the new first lender; the second-lien holder must agree to sign it.
Protects against title defects discovered after closing. Two policies: lender's (required, protects the lender) and owner's (optional but recommended, protects you). One-time premium paid at closing.
The pre-close investigation of public records to confirm the seller has clean title to convey. Done by the title company. Catches liens, judgments, and ownership disputes before they become your problem.
Federal law requiring disclosure of credit terms in plain language. The reason you get a Loan Estimate, Closing Disclosure, and right of rescission. Enforced by the CFPB.
The lender's process of evaluating your full file — credit, income, assets, property — and deciding whether (and on what terms) to fund the loan. Manual or automated (DU/LP). Issues conditions; final approval clears all conditions.
A USDA-guaranteed mortgage for moderate-income buyers in eligible rural areas. 0% down, low MI, but income limits and geographic restrictions apply. Worth checking — eligibility maps include surprising areas.
A Department of Veterans Affairs-guaranteed loan for service members, veterans, and eligible surviving spouses. 0% down, no PMI, competitive rates, and assumable. Has a one-time funding fee. The best deal in residential lending if you qualify.
Generic term for any rate that can change over time. ARMs and HELOCs are variable; fixed-rate mortgages are not.
A seller-financing structure where the seller's existing mortgage stays in place and the buyer pays the seller, who continues to pay the original lender. Risky and rare in standard practice; check the original mortgage's due-on-sale clause.
The pricing credit a lender pays a broker for delivering a higher rate than par. Disclosed transparently post-Dodd-Frank. Used to fund lender credits toward closing costs.
Run your numbers in the calculator, then call Logan and turn an estimate into a real rate.