Glossary

A

Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that may change periodically after an initial fixed period (for example, a 5/1 ARM).
Amortization: How your loan is paid off over time. Early payments go more toward interest; later payments go more toward principal.
Annual Percentage Rate (APR): The cost of your loan including interest and most fees, expressed annually.
Appraisal: A professional opinion of a property’s value, required by lenders to confirm the home is worth the purchase price or refinance amount.
Assumable Mortgage: A loan that allows a buyer to take over the seller’s existing mortgage, keeping the same interest rate and terms.

B

Balloon Payment Mortgage: A loan with a large final payment due at the end of the term rather than being fully paid down over time.
Bridge Loan: A short-term loan that helps you buy a new home before selling your current one.
Broker: A licensed professional who connects borrowers with lenders and helps arrange a mortgage.

C

Cash-Out Refinance: A new mortgage that lets you replace your current loan and take out some of your home’s equity as cash.
Closing Costs: Fees paid at the end of the homebuying process, which may include appraisal, title, and lender fees.
Closing Disclosure (CD): The document you receive three business days before closing that shows your final loan terms, costs, and payments.
Collateral: The asset pledged for a loan; in a mortgage, the home itself is the collateral.
Credit Score: A number that reflects your creditworthiness. It affects your ability to qualify for a loan and the interest rate you’ll receive.

D

Debt-to-Income Ratio (DTI): The percentage of your monthly income that goes toward paying debts, including your mortgage.
Deed: A legal document that transfers ownership of a property from one party to another.
Deed of Trust: A legal document used in Utah and other states in place of a mortgage, giving a trustee the right to foreclose if the borrower defaults.
Down Payment: The money you pay upfront toward the purchase price of a home. The remainder is financed.

E

Earnest Money: A deposit made with your offer to show the seller you are serious. It is usually applied to your down payment or closing costs.
Equity: The portion of your home you own outright. It’s the difference between your home’s market value and your loan balance.
Escrow: An account used by your lender to hold funds for property taxes and insurance, or the neutral third-party process that handles closing.
Escrow Agent: The neutral third party who manages funds and documents during the closing process.

F

FHA Loan: A government-backed loan program that allows lower down payments and more flexible credit requirements.
Fannie Mae & Freddie Mac: Government-sponsored enterprises (GSEs) that buy mortgages from lenders to keep funds flowing in the housing market.
Fixed-Rate Mortgage (FRM): A loan with an interest rate that stays the same for the entire term.
Foreclosure: The legal process where the lender takes back a property if the borrower fails to make payments.
Forbearance: A temporary pause or reduction in mortgage payments, usually granted during financial hardship.

G

Good Faith Estimate (GFE): A disclosure that used to outline loan terms and costs; replaced by the Loan Estimate but still a common reference.
Government-Backed Loan: Mortgages insured or guaranteed by the government, including FHA, VA, and USDA loans.
Grace Period: The extra time allowed after a payment due date before late fees are charged.
Ginnie Mae (GNMA): A government agency that guarantees mortgage-backed securities for FHA, VA, and USDA loans.

H

Home Equity Conversion Mortgage (HECM): The most common type of reverse mortgage, insured by the FHA. It allows homeowners age 62 and older to access their home equity without monthly mortgage payments.
Home Equity Line of Credit (HELOC): A line of credit that lets you borrow against your home’s equity as needed.
Home Inspection: A professional evaluation of a home’s condition before purchase.
HUD-1 Settlement Statement: A document that itemized closing costs; replaced by the Closing Disclosure but still a common term.

I

Interest Rate: The cost you pay to borrow money, shown as a percentage of your loan balance.
Interest-Only Loan: A loan where you pay only the interest for a set period before beginning to pay principal as well.
Investor Loan: A mortgage used to purchase rental or investment properties.

J

Jumbo Loan: A mortgage for amounts above standard loan limits, often used for higher-priced homes.
Joint Tenancy: A form of property ownership where two or more people own the property together with equal rights.

K

Kickback: An illegal payment or referral fee made in exchange for business. In mortgage lending, federal law (RESPA) prohibits kickbacks between lenders, brokers, and settlement service providers.
Knock-Down Rebuild Loan: Financing used when a borrower buys a property with the intent to demolish and rebuild a new home on the site. Sometimes offered through construction loan programs.

L

Loan Estimate (LE): A document provided after applying for a mortgage that outlines the estimated terms, costs, and monthly payment.
Loan-to-Value Ratio (LTV): The loan amount compared to the value of the home, expressed as a percentage.
Lock-In (Rate Lock): An agreement that guarantees your interest rate for a set period while your loan is processed.

M

Mortgage: A loan used to buy real estate, secured by the property itself.
Mortgage Insurance (PMI): Insurance required on many conventional loans when the down payment is less than 20%.
Mortgage Recast: A change to your loan that recalculates your payment schedule, often after making a large principal payment, to lower monthly payments.
Mortgage Servicer: The company that collects your payments, manages escrow, and handles customer service after your loan closes.
Origination Fee: A lender’s charge for processing a new loan, usually a percentage of the loan amount.

N

Negative Amortization: When loan payments are too low to cover interest, causing the balance owed to increase.
Non-Conforming Loan: A loan that doesn’t meet Fannie Mae or Freddie Mac guidelines, often jumbo or portfolio loans.
Note: The legal document that states the amount borrowed, interest rate, and repayment terms.

O

Origination: The process of creating and approving a new mortgage loan.
Owner’s Title Insurance: A policy that protects the homeowner against future ownership claims.
Overage: Extra interest charged by a lender beyond the approved rate; typically negotiated or avoided.

P

Points (Discount Points): Fees paid at closing to lower your interest rate over the life of the loan.
Pre-Approval: A lender’s review of your credit, income, and assets that shows what loan amount you qualify for.
Principal: The amount of money borrowed, not including interest.
Private Mortgage Insurance (PMI): Insurance that protects the lender when the borrower puts less than 20% down.

Q

Qualifying Ratio: The guidelines lenders use to determine how much of your income can go toward your mortgage payment.
Quitclaim Deed: A legal document that transfers property ownership without warranties.

R

Rate Lock: An agreement that guarantees your interest rate for a set time while your loan is processed.
Refinance: Replacing your existing mortgage with a new one, often to lower the rate, change the term, or tap into equity.
Real Estate Settlement Procedures Act (RESPA): A federal law that protects consumers by requiring lenders to disclose loan costs and prohibiting practices like kickbacks. RESPA ensures borrowers receive clear information about settlement services and fees throughout the mortgage process.
Reverse Mortgage: A loan available to homeowners age 62 or older that converts home equity into cash without monthly mortgage payments.

S

Second Mortgage: A loan that uses your home as collateral in addition to your primary mortgage.
Secondary Market: The financial market where lenders sell mortgages to investors, such as Fannie Mae, Freddie Mac, or Ginnie Mae.
Shared Appreciation Mortgage: A loan with a lower interest rate in exchange for the lender receiving a portion of the home’s future appreciation.
Subprime Loan: A mortgage offered to borrowers with lower credit scores, usually with higher interest rates.

T

Term: The length of time you have to repay your loan, such as 15 or 30 years.
Title Insurance: A policy that protects the lender or homeowner against ownership disputes.
Truth in Lending Act (TILA): A federal law requiring lenders to clearly disclose the true cost of borrowing. TILA ensures borrowers understand key terms such as the annual percentage rate (APR), total finance charges, and payment schedule before agreeing to a loan.

U

Underwriting: The lender’s process of reviewing your financial details and the property before approving a loan.
USDA Loan: A government-backed loan with zero down payment available for homes in eligible rural areas.
Uniform Residential Loan Application (URLA): The standard form used to apply for a mortgage.
Underwater Mortgage: When the amount owed on a home loan is more than the home’s current market value.

V

VA Loan: A loan for veterans, active-duty service members, and some surviving spouses that typically requires no down payment or PMI.
Variable-Rate Mortgage (ARM): Another name for an adjustable-rate mortgage, where rates can change over time.
Verification of Employment (VOE): A lender’s check with your employer to confirm your job and income.

W

Wraparound Mortgage: A junior loan that includes the balance of an existing mortgage plus additional financing.
Warehouse Line of Credit: A credit line used by mortgage lenders to fund loans before selling them on the secondary market.

X

X-Factor: The Xceptional Xperience of working with The Mortgage Expert. You get clear answers, Xact guidance, and support that keeps the process moving without leaving you Xhausted.

Y

Yield Spread Premium (YSP): Compensation once paid to brokers by lenders for charging borrowers higher rates; heavily regulated today.
Year-to-Date (YTD) Income: The amount of income earned from the beginning of the year to the present, used to verify qualification.

Z

Zero-Down Loan: A mortgage program that does not require a down payment, such as VA, USDA, or select Utah Housing programs.
Zoning: Local government rules that regulate property use and development, which can affect financing and property value.