Mortgage glossary

A 15-year fixed mortgage is a fixed-rate home loan whose stated term is 15 years. The interest rate…

A 30-year fixed mortgage is a fixed-rate home loan whose stated term is 30 years. The interest rate…

Ability-to-repay is the federal mortgage standard that generally requires a lender to make a reasonable, good-faith determination that…

An adjustable-rate mortgage is a home loan whose interest rate can change after a set introductory period. Later…

An adverse action notice is the written notice a creditor gives when it takes an adverse action on…

Amortization is the scheduled process of paying down loan principal over time. Each regular payment typically covers interest…

An amortization schedule is the table of planned loan payments. It shows how each scheduled installment is applied…

The annual percentage rate (APR) expresses the cost of a mortgage as a yearly rate that includes the…

Appraised value is the opinion of a property’s value stated in an appraisal. It is the figure the…

Area median income, or AMI, is a HUD income benchmark that describes typical household income in a local…

Asset verification is the lender’s review of documents that show funds a borrower claims to have. It is…

An assumption is a transfer of an existing mortgage to a new borrower, if the loan documents and…

Automated underwriting is an underwriting method that uses an automated system to assess the risk of a mortgage…

An automatic payment is a recurring mortgage payment the borrower arranges to be taken from a bank account…

Back-end DTI is a debt-to-income ratio that includes the proposed housing payment plus other monthly debt payments, divided…

A balloon mortgage is a loan whose scheduled payments do not fully pay off the principal by the…

A bank charter is the official authorization that creates a bank as a chartered institution. It is not…

A basis point is one one-hundredth of a percentage point. Official market material uses it to describe small…

The borrower is the person or people who take out the mortgage and are responsible for repayment. More…

A bridge loan is a short-term loan used to cover a timing gap, such as buying a home…

A buydown is an arrangement that lowers a borrower’s early mortgage payments in exchange for money paid up…

Cash to close is the estimated amount a borrower must bring to complete the transaction. It can include…

A cash-out refinance replaces an existing mortgage with a new, larger loan and delivers the extra proceeds to…

Chain of title is the sequence of ownership transfers for a property. It is not a title search…

Closing costs are the fees and other charges paid to complete a mortgage transaction. They are not the…

The Closing Disclosure is an official form that states the final loan terms and closing costs for a…

Combined loan-to-value compares all mortgages and other loans secured by a property with the property’s value. CLTV is…

A community land trust is a shared-equity housing arrangement in which the trust typically retains the land and…

Compensating factors are strengths a lender may weigh against other risk when deciding whether a borrower can repay…

The complaint database is the Consumer Financial Protection Bureau’s public collection of consumer complaints about financial products and…

A conforming loan is a mortgage that meets Fannie Mae or Freddie Mac purchase standards, including the size…

A construction loan is financing used to build a home. Funds are typically advanced as work progresses, and…

The Consumer Financial Protection Bureau is a U.S. federal agency that writes and enforces many consumer financial rules…

A contingency is a written condition in a purchase contract. If it is not met, the buyer may…

A conventional loan is a mortgage that is not insured or guaranteed through a federal housing program such…

A credit inquiry is a recorded request to review a credit report. Hard inquiries are typically made when…

A credit report is a record of a person’s credit accounts, balances, and payment history. Mortgage underwriting commonly…

A credit score is a number built from credit-history information and used in many lending decisions. Different companies…

Credit utilization is the share of available revolving credit a consumer is already using. Lenders and scoring models…

Debt-to-income ratio (DTI) is monthly debt payments divided by gross monthly income. It is one way lenders look…

A deed is the document that transfers legal ownership of the property to the buyer. It is not…

A deed in lieu of foreclosure is an agreement to transfer the home to the loan owner or…

A deed of trust is a security instrument that gives the lender rights in the property if the…

Default is a failure to meet the mortgage contract. Missed payments are the usual path, but the note…

Deferment is a temporary arrangement to pause or reduce required mortgage payments, if the servicer offers and agrees…

A deferred second loan is a subordinate loan that postpones repayment. It is not automatic forgiveness, not ordinary…

Delinquency means a required mortgage payment has not been made when it was due. It describes the missed-payment…

Disaster assistance is the broader set of help that may be available after a disaster, including federal, state…

Discount points are optional amounts paid at closing to lower the interest rate on a mortgage. They are…

A down payment is the portion of a home’s purchase price that the buyer pays from their own…

Down-payment assistance is help from a government or nonprofit program that can reduce the cash a buyer must…

Earnest money is a deposit a buyer pays after signing a contract to buy a home, to show…

The Equal Credit Opportunity Act, or ECOA, is the federal law that makes credit discrimination illegal and holds…

Equity is the owner’s interest in a property after subtracting the mortgage and other liens secured by it…

Error resolution is the federal mortgage-servicing process for a written notice that a servicer made an error. It…

A mortgage escrow account holds a portion of each payment so the servicer can pay certain property bills…

An escrow analysis is the servicer’s review of an escrow account. It estimates upcoming tax and insurance disbursements…

An escrow shortage is the amount by which an escrow account is below its target balance when the…

An escrow surplus is the amount by which an escrow account exceeds its target balance when the servicer…

An escrow waiver means the borrower pays property taxes and insurance directly instead of through a mortgage escrow…

An extra principal payment is money paid above the scheduled amount and applied to unpaid principal. It is…

Fair lending is the consumer name for federal protection against illegal discrimination in credit, including home loans. ECOA…

An FDIC certificate number is the unique number the Federal Deposit Insurance Corporation assigns to an insured depository…

FEMA assistance is federal disaster help administered by the Federal Emergency Management Agency, including Individual Assistance. It is…

An FHA loan is a mortgage typically made by a private lender and insured under the Federal Housing…

An FHA mortgage insurance premium is the mortgage-insurance charge required on many FHA-insured loans. It can include an…

A finance charge is the total dollar cost of borrowing over the life of the mortgage, including interest…

A first lien is the senior mortgage or other lien with first claim on the property. It is…

A first-time home buyer is a person who meets a housing program’s first-time-buyer definition. Official consumer material notes…

A fixed-rate mortgage is a home loan whose interest rate does not change over the life of the…

To float a mortgage rate is to leave the interest rate unlocked so it can still move before…

Flood insurance is a policy that covers certain flood damage to a property. Mortgage lenders commonly require it…

Forbearance is a loss-mitigation arrangement in which the servicer temporarily allows reduced or paused mortgage payments. Missed amounts…

Force-placed insurance is insurance the servicer buys when the borrower does not have a required policy, or the…

Foreclosure is the process a lender or servicer uses to take a mortgaged home and sell it after…

A forgivable loan is a loan that can be reduced or canceled over time if program conditions are…

Form 1098 is the IRS information return used to report mortgage interest a lender or servicer received. It…

Front-end DTI is a debt-to-income ratio that counts only the proposed housing payment divided by gross monthly income…

Gross income is income before taxes and most deductions. Mortgage underwriting commonly uses a gross monthly figure when…

A hard inquiry is a credit inquiry typically recorded when a consumer applies for new credit. Soft inquiries…

Hazard insurance is property insurance against covered hazards such as fire. In mortgage servicing the phrase often refers…

A higher-priced mortgage loan is a federal category of mortgages whose APR is higher than a benchmark rate…

HOA dues are the regular fees a homeowners association charges owners for shared property and services. They are…

The Home Affordable Refinance Program, or HARP, was a historical refinance program for certain underwater GSE loans. It…

A home equity line of credit is a revolving credit line secured by a home. Borrowers may draw…

A home equity loan is a closed-end loan secured by a home, usually taken as a single amount…

A home inspection is an examination of a home’s condition, often hired by the buyer to review structure…

The Home Mortgage Disclosure Act (HMDA) is a federal law that requires many covered financial institutions to collect…

Homebuyer education is counseling or coursework that helps a buyer understand the purchase and mortgage process. It is…

A homeowners association is an organization that manages shared property and community rules for a group of homes…

Homeowners insurance is a policy that helps cover certain damage to a home and, in many policies, related…

A HUD-approved counselor is a housing counselor or counseling agency approved by HUD to provide housing counseling. The…

An initial escrow deposit is the amount paid at closing to start an escrow account, if the lender…

An insurance premium is the amount an insurer charges for coverage. On a mortgage, homeowners, flood, or mortgage-insurance…

Interest is the cost charged for borrowing money. On a mortgage it is the dollar amount that accrues…

The interest rate is the rate charged on the amount borrowed. It is the price of the credit…

An interest-only mortgage is a loan that, during an interest-only period, requires payments that cover interest but do…

Interested-party contributions, or IPCs, are funds a seller or another interested party pays toward a buyer’s costs on…

A jumbo loan is a mortgage larger than the size limit Fannie Mae, Freddie Mac, and their regulator…

A late fee is a charge that may apply when a mortgage payment is not made on time…

A Legal Entity Identifier (LEI) is a unique 20-character alphanumeric code that identifies a legal entity in a…

The lender is the party that makes or extends the mortgage credit. That role is about originating the…

Lender credits are amounts a lender credits toward the borrower’s closing costs. They appear on the Loan Estimate…

License status is the current state of a mortgage license in official records—such as whether it is active…

A lien is a legal claim against property that secures a debt. A mortgage or deed of trust…

Loan amount is the amount of money borrowed in the mortgage. On consumer disclosures it is related to…

The Loan Estimate is an official form that lists estimated loan terms and estimated closing costs after a…

A loan modification is a change to the terms of an existing mortgage, agreed as loss mitigation. It…

A loan officer is an individual who takes mortgage applications or offers or negotiates mortgage terms for a…

The loan term is the agreed length of time for repayment of the mortgage. It is a duration…

A loan-level price adjustment, or LLPA, is a GSE pricing adjustment that can change the cost of delivering…

Loan-to-value ratio (LTV) compares the loan amount with the property’s value. It describes how much of the value…

The Loan/Application Register is the Home Mortgage Disclosure Act data file a covered institution submits about mortgage applications…

A lock period is the stated time frame of a rate lock. If the loan does not close…

Loss mitigation is the set of options a mortgage servicer may use to limit the loss from a…

Low-to-moderate income, or LMI, is a regulatory income classification used in Community Reinvestment Act work and related mortgage-data…

Manual underwriting is an underwriting method in which a human underwriter performs the comprehensive risk assessment instead of…

The monthly payment is the amount due each month on the mortgage. It often includes principal and interest…

A mortgage is a loan secured by real property. People often use one to buy or refinance a…

A mortgage broker is a person or firm that takes a mortgage application and connects the borrower with…

A Mortgage Credit Certificate, or MCC, can provide a federal tax credit for part of the mortgage interest…

Mortgage insurance is coverage that protects the lender, not the borrower, if the loan is not repaid. It…

A mortgage license is an authorization, usually issued by a state regulator and recorded in NMLS, that allows…

A mortgage payoff is the amount required to pay the loan in full as of a stated date…

A mortgage revenue bond is a tax-exempt housing-finance bond that some state or local housing finance agencies use…

A mortgage servicer is the company that administers a mortgage after it has been made. It applies payments…

A mortgage statement is the periodic statement a servicer sends that shows the payment due and recent account…

Mortgage-backed securities, or MBS, are securities whose payments come from pools of mortgage loans. They are a secondary-market…

The Nationwide Multistate Licensing System & Registry (NMLS) is a system participating state and territorial agencies use to…

An NCUA charter number is the unique number the National Credit Union Administration assigns to a credit union…

NMLS Consumer Access is the official public website for looking up many mortgage companies, branches, and licensed or…

An NMLS ID is the unique identifier NMLS assigns to a company, branch, or individual record. It is…

A no-closing-cost mortgage is a marketed loan or refinance that still involves origination costs. Official consumer material explains…

A non-conforming loan is a mortgage that does not meet Fannie Mae or Freddie Mac purchase standards. Size…

A non-QM loan is a mortgage that is not a qualified mortgage. The label is the negative of…

An origination fee is a charge the lender imposes for making the mortgage loan, including work such as…

A partial payment is a payment that is less than the full amount due. It is not the…

A payoff statement is the statement of the amount needed to pay the mortgage in full on a…

A piggyback loan is a second mortgage originated together with a first mortgage on the same home. An…

A preapproval is a lender’s conditional finding that a borrower appears able to qualify for a mortgage, after…

Prepaid interest is daily interest collected at closing for the days between closing and the period covered by…

Prepaids are amounts paid at closing for items that come due later, such as interest, taxes, or insurance…

Prepayment is paying a mortgage faster than the schedule requires—by sending extra principal or by paying the loan…

Prequalification is an early estimate of how much mortgage a borrower might obtain, usually based on information the…

Principal is the unpaid amount of the loan itself—the debt remaining, not the interest charged for using that…

Private mortgage insurance (PMI) is insurance on a conventional mortgage that protects the lender if the borrower does…

A promissory note is the signed promise to repay the mortgage loan according to its terms. It is…

A property appraisal is a professional opinion of a property’s value, prepared for a mortgage or related purpose…

Property tax is a tax assessed on real property by a local government. Mortgage servicers often collect it…

A purchase contract is the written agreement between buyer and seller to purchase a home. Official consumer material…

The purchase price is the amount the buyer and seller agree for the home in the contract. It…

A qualified mortgage is a federal category of loans that have more stable features intended to make it…

A qualified written request, or QWR, is written correspondence a borrower or someone acting for the borrower can…

A rate lock, also called a lock-in, is an agreement that the offered interest rate will not change…

A rate-and-term refinance replaces an existing mortgage with a new loan mainly to change the interest rate or…

The Real Estate Settlement Procedures Act, or RESPA, is the federal law that governs many real-estate settlement and…

Recording is the official filing of the deed, mortgage, or related documents in local land records. It is…

A referral fee, in the RESPA sense, is a fee, kickback, or other thing of value given or…

A refinance replaces an existing mortgage with a new loan, usually on the same property. The new loan…

Refinance seasoning is the elapsed time or payment-history concept some refinance programs require before a new loan may…

A repair escrow holds funds so specified repairs can be finished after closing. It is not an ordinary…

A repayment plan is a servicing arrangement that lets a borrower catch up past-due amounts by paying extra…

Reserves are liquid or near-liquid assets that remain available to the borrower after the mortgage closes. They are…

A reverse mortgage is a loan that lets an eligible older homeowner borrow against home equity. Instead of…

The right of rescission is a federal right to cancel certain refinance or home-equity credit transactions after signing…

An RSSD ID, also called ID_RSSD, is a unique identifier the Federal Reserve assigns to an entity in…

A second mortgage is a loan secured by a home that stands behind an existing first mortgage in…

A servicing transfer is a change in which company services the mortgage. The borrower starts sending payments to…

A settlement agent is the person or company that conducts the closing and handles the closing documents and…

A short sale is a sale of the home for less than the amount still owed on the…

A soft inquiry is a credit inquiry typically recorded for account review, prequalification, or the consumer’s own report…

A special assessment is an extra charge for a specific project, often levied by a homeowners association or…

A state housing finance agency, or HFA, is a state or local public body empowered to finance housing…

A streamline refinance is a reduced-documentation refinance offered inside certain government loan programs, especially FHA. It is not…

A subordinate lien is a junior claim on the property that stands behind a first lien. A second…

Subordination is an agreement about lien priority. It is not the subordinate lien itself. A second mortgage or…

A survey is a drawing that shows the lot, the house, and other structures on the property. It…

In mortgage servicing, a suspense or unapplied-funds account holds a partial payment until it equals a periodic payment…

A tax assessment is the value a local taxing authority assigns to a property when it calculates property…

Title insurance protects against certain past problems with ownership of the property. Owner’s and lender’s policies are two…

A title search is a review of recorded documents to see who owns the property and what claims…

Total interest percentage, or TIP, is a Loan Estimate disclosure that shows how much interest will be paid…

A transfer tax is a local tax that may be charged when real property changes hands. It is…

The Truth in Lending Act, or TILA, is the federal law that requires meaningful disclosure of consumer credit…

Underwriting is the lender’s evaluation of a mortgage application—the review of credit, income, assets, and the property—to decide…

UDAAP is the federal consumer-protection standard that makes unfair, deceptive, or abusive acts or practices unlawful in connection…

A USDA loan is a mortgage made under U.S. Department of Agriculture Rural Development housing programs. It is…

A VA IRRRL is the Department of Veterans Affairs Interest Rate Reduction Refinance Loan, a refinance of an…

A VA loan is a mortgage made under Department of Veterans Affairs rules for eligible servicemembers, veterans, and…