Mortgage Glossary

Disclaimer: This website provides general mortgage and financial information for educational purposes only. It does not constitute financial, legal, or mortgage advice. Housentia is not a licensed mortgage broker, lender, or loan originator.

Clear definitions of mortgage and housing terms. Use this glossary to understand loan types, ratios, documents, and processes. This content is for general educational purposes only and does not constitute financial or mortgage advice.

A

APR— Annual Percentage Rate — the cost of credit expressed as a yearly rate, including interest and certain fees.
Amortization— The process of paying off a loan over time through regular payments that cover principal and interest.
Ability to Repay (ATR)— Federal rule requiring lenders to make a reasonable, good-faith determination that the borrower can repay the loan.
Appraisal— An opinion of a property’s value by a licensed appraiser. Lenders use it to ensure the loan does not exceed the property…
Assumable Mortgage— A mortgage that allows a new buyer to take over the existing loan and its terms. Common with some FHA and VA loans.
ARM (Adjustable-Rate Mortgage)— A mortgage whose interest rate can change after an initial fixed period (e.g., 5/1 ARM: fixed 5 years, then adjusts annu…
ARM Rate Caps— Limits on how much an adjustable-rate mortgage’s rate can change at each adjustment and over the life of the loan.
Amortization Schedule— A table showing each payment’s split between principal and interest and the remaining balance over the life of the loan.
ARM Margin— A percentage added to the index to determine the ARM’s rate at each adjustment.
Affordability— How much home or monthly payment you can afford based on income, debts, and lender criteria.
Automatic PMI Termination— PMI must automatically end when the loan reaches 78% LTV (by schedule) or at the midpoint of an amortization schedule un…
Annual Cap (ARM)— The maximum the rate can increase in one year on an ARM.
ARM Conversion Option— A feature on some ARMs that allows converting to a fixed rate during a specified period.
Assumption Fee— A fee charged when a new borrower assumes an existing mortgage.
Annual MIP— The ongoing FHA mortgage insurance premium paid monthly with the mortgage payment.
Amount Financed— The principal amount borrowed, used for TILA disclosures.
Ability to Repay (ATR) Rule— Federal requirement that lenders make a reasonable determination that the borrower can repay the loan.
APOR (Average Prime Offer Rate)— A benchmark rate published by the CFPB used for QM and other rules.
Asset Depletion— Using assets (e.g., investments) to qualify by “depleting” them over the loan term as hypothetical income.
Adverse Action— A notice required when a loan is denied or offered on less favorable terms, explaining the reason (e.g., credit score).

B

Bridge Loan— Short-term financing used to “bridge” the gap between buying a new home and selling the current one.
Back-End DTI— All monthly debt payments (including housing) divided by gross monthly income. The DTI most commonly used by lenders.
Bank Statement Loan— A non-QM loan that uses bank statements instead of tax returns to verify income. Often used by self-employed borrowers.
Balloon Mortgage— A loan with small payments for a period, then a large “balloon” payment of the remaining balance at the end.
Biweekly Payment— Making half the monthly payment every two weeks. Results in one extra full payment per year and faster payoff.
Buydown— Paying extra upfront (or having the seller pay) to reduce the interest rate for an initial period or the life of the loa…
Bank Statement Program— A program that uses bank statements to verify income instead of tax returns. Common for self-employed.

C

Closing Disclosure— A form you receive at least three business days before closing that lists the final loan terms, closing costs, and cash …
Conforming Loan— A mortgage that meets Fannie Mae and Freddie Mac size and guideline limits, allowing sale on the secondary market.
Cash-Out Refinance— Refinancing for more than you owe and taking the difference in cash. The new loan pays off the old one and gives you fun…
Construction Loan— Short-term financing for building a home. Often converts to a permanent mortgage or is paid off when construction is com…
Closing Costs— Fees and charges paid at closing, including origination, appraisal, title insurance, and prepaid items.
Cash to Close— The total amount the borrower must bring to closing: down payment plus closing costs minus credits.
Conventional Loan— A mortgage not backed by the federal government (not FHA, VA, or USDA). Often conforms to Fannie/Freddie guidelines.
CLTV (Combined Loan-to-Value)— The sum of all liens on the property divided by the property value. Used when you have a first mortgage plus HELOC or se…
Credit Score— A number that summarizes your creditworthiness based on credit report data. Lenders use it to set rates and approve loan…
Condo (Condominium)— A unit in a building or complex with shared common areas. Condo loans may have project approval requirements.
Closing— The meeting where the loan is finalized, documents are signed, and ownership and funds are transferred.
Clear to Close— Lender approval indicating that conditions are satisfied and the loan can close.
Comparative Market Analysis (CMA)— A report comparing similar sold and listed properties to estimate value. Not an appraisal.
Construction-to-Permanent Loan— A single loan that finances construction and then converts to a permanent mortgage.
Credit Report— A record of your credit history used by lenders to evaluate risk. Errors can be disputed.
Community Property— In some states, property acquired during marriage is owned equally by both spouses. Affects title and sometimes liabilit…
Cooling-Off Period— Same as right of rescission — time to cancel the transaction.
Closing Disclosure 3-Day Rule— You must receive the Closing Disclosure at least three business days before closing to review.
Changed Circumstance— Events that may allow a lender to revise the Loan Estimate (e.g., change in your credit or loan terms).
Closing Disclosure Section D E— Sections for taxes and government fees (D) and prepaids and escrow (E).
Closing Disclosure Section F G— Section F: other costs (e.g., title); Section G: total loan costs and total other costs.
Correspondent Lender— A lender that funds loans with its own money and then sells them to another entity (e.g., Fannie Mae).
CFPB— Consumer Financial Protection Bureau — enforces consumer financial laws and issues mortgage rules (e.g., TILA, RESPA).
Chattel— Personal property. A chattel loan is used when the manufactured home is not permanently affixed and is titled as persona…
Co-Borrower— A person who applies for the loan with you and is equally responsible for repayment. Income and debt are included.
Co-Signer— Someone who signs the loan and is responsible if you don’t pay. May or may not be on title.
Counter-Offer— A loan offer with different terms (e.g., higher rate) when the initial application does not qualify for the best terms.
Conditional Approval— Approval subject to satisfying conditions (e.g., providing documents, clearing title).

D

DTI (Debt-to-Income Ratio)— Your monthly debt payments divided by your gross monthly income, expressed as a percentage.
Debt-to-Income Ratio— A ratio of your monthly debt payments to your gross monthly income, used by lenders to qualify you.
Discount Points— Points you pay to lower the interest rate. One point usually equals 1% of the loan amount and may reduce the rate by abo…
Down Payment— The portion of the purchase price you pay upfront. The rest is financed. Larger down payments can mean better rates and …
Deed of Trust— A document that gives a third party (trustee) a security interest in the property until the loan is paid. Used in many s…
DSCR (Debt Service Coverage Ratio)— For investment properties: net rental income divided by the mortgage payment. Lenders use it to assess if the property c…
Down Payment Assistance— Programs (grants, loans, or forgivable loans) that help eligible buyers with the down payment or closing costs.
Deed— The document that transfers ownership of the property. At closing, the seller delivers the deed to the buyer.
Due-on-Sale Clause— A provision that the full loan balance is due when the property is sold. Limits assumability of most conventional loans.
Delinquency— Being past due on a payment. Serious delinquency is often 90+ days and can lead to foreclosure.
Default— Failure to meet the terms of the loan (e.g., non-payment). Can lead to foreclosure.
Deed in Lieu of Foreclosure— Transferring the property to the lender to satisfy the loan and avoid foreclosure.
Dry Closing— A closing where documents are signed but funds are not yet disbursed. “Wet” closing means funds are disbursed at closing…

E

Escrow Account— An account held by the lender into which you pay property taxes and insurance; the lender pays these on your behalf.
Earnest Money— A deposit made with an offer to show good faith. Typically held in escrow and applied to down payment or closing.
Escrow Disbursement— Payment of property taxes or insurance from the escrow account by the servicer.
Escrow Shortage— When the escrow account has insufficient funds to pay taxes or insurance. May result in higher monthly payments or a sho…
Escrow Analysis— An annual review of the escrow account to adjust the monthly escrow payment for the next year.
Earnest Money Credit— Applying your earnest money deposit toward the down payment or closing costs at closing.
Earnest Money Refund— Return of earnest money if the contract is terminated under allowed circumstances (e.g., financing contingency).

F

FHA Loan— A mortgage insured by the Federal Housing Administration (FHA), often allowing lower down payments and more flexible cre…
FHA MIP (Mortgage Insurance Premium)— Insurance required on FHA loans. Includes an upfront premium (UFMIP) and an annual premium paid in monthly installments.
Fixed-Rate Mortgage— A mortgage whose interest rate stays the same for the entire term (e.g., 30 years).
Foreclosure— The legal process by which a lender takes possession of the property when the borrower defaults on the loan.
Front-End DTI— Housing costs (PITI) divided by gross monthly income. A subset of total DTI that focuses on the mortgage.
Float Down— An option to lower your locked rate if market rates drop before closing. May have a fee or specific rules.
FHA 203(k)— An FHA program that finances the purchase (or refinance) of a home plus repairs or improvements in one loan.
First-Time Home Buyer— A buyer who has not owned a home in the past three years (for many programs) or meets other program definitions.
Forbearance— An agreement to temporarily pause or reduce payments. Common during hardship; terms vary by lender and program.
Final Walk-Through— A last visit to the property before closing to confirm condition and that agreed repairs were made.
Flood Certificate— A determination of whether the property is in a FEMA-designated flood zone. Lenders may require flood insurance.
First Mortgage— The primary loan on the property with first claim in case of foreclosure.
Finance Charge— The total cost of credit, including interest and certain fees. Disclosed under TILA.
Fannie Mae— Federal National Mortgage Association — a government-sponsored enterprise that buys and guarantees conforming mortgages.
Freddie Mac— Federal Home Loan Mortgage Corporation — a government-sponsored enterprise that buys and guarantees conforming mortgages…
FHFA— Federal Housing Finance Agency — regulator of Fannie Mae and Freddie Mac. Sets conforming loan limits.
Flipping (Property)— Buying a property and quickly reselling for profit. Lenders may have rules on recent resales (e.g., FHA anti-flipping).
Flood Insurance— Coverage for flood damage. Required in FEMA flood zones; often available through NFIP or private carriers.

G

Good Faith Estimate (GFE)— Pre-2015 form that estimated loan terms and closing costs. Replaced by the Loan Estimate for most applications.
Gift Funds— Money given to the borrower for the down payment or closing costs. Lenders often allow gifts from family with a gift let…
Grace Period— The number of days after the due date before a payment is considered late. Varies by lender.
GSE (Government-Sponsored Enterprise)— Fannie Mae and Freddie Mac. They have a federal charter but are not government agencies.
Ginnie Mae— Government National Mortgage Association — guarantees securities backed by FHA, VA, USDA, and other government loans.
General QM— Qualified Mortgage category based on the borrower’s APR vs the average prime offer rate (APOR).
Gift Letter— A signed letter stating that funds given to the borrower are a gift and do not need to be repaid.

H

HELOC— Home Equity Line of Credit — a revolving line of credit secured by your home equity. You draw and repay over a draw peri…
Home Equity Loan— A lump-sum loan secured by home equity. Fixed rate and payment, unlike a HELOC.
HECM (Home Equity Conversion Mortgage)— The most common type of reverse mortgage, insured by the FHA.
High-Cost Area— A region where conforming and FHA loan limits are higher due to elevated home prices.
Homeowner's Insurance— Insurance that covers damage to the property and liability. Lenders require it and it may be included in PITI via escrow…
Homestead— Legal protection of a primary residence from certain creditors. Varies by state.
HUD— U.S. Department of Housing and Urban Development — oversees FHA and housing programs.
High-Cost Mortgage— A loan that exceeds certain rate or fee thresholds and triggers additional consumer protections.
HOEPA— Home Ownership and Equity Protection Act — additional rules for high-cost mortgages.
Hazard Insurance— Insurance that covers physical damage to the property (fire, wind, etc.). Often used interchangeably with homeowner’s in…

I

Impound Account— Another name for an escrow account — holds funds for property taxes and insurance.
Interest— The cost of borrowing money, usually expressed as an annual percentage of the principal.
Interest Rate— The percentage of the loan amount charged as interest each year. Does not include fees (see APR).
Investment Property— A property purchased for rental income or resale, not as a primary or second home. Often has stricter loan terms.
Interest-Only Mortgage— A loan where you pay only interest for a set period; after that, principal (and sometimes higher payments) is required.
Impound— Same as escrow — holding funds for taxes and insurance.
Initial Cap (ARM)— The maximum the rate can increase at the first adjustment of an ARM.
Intent to Proceed— Your communication to the lender that you want to move forward. Required before the lender can charge fees (except credi…

J

Jumbo Loan— A mortgage that exceeds the conforming loan limits set by the FHFA. Often has stricter underwriting.
Joint Tenancy— Ownership by two or more persons with right of survivorship. When one dies, the other(s) get the share.

L

LTV (Loan-to-Value)— The loan amount divided by the property value (or purchase price), expressed as a percentage.
Loan Estimate— A standardized form lenders must provide within three business days of receiving a mortgage application, showing estimat…
Loan Limits— Maximum loan amounts for conforming, FHA, VA, and other programs. Vary by area and are updated annually.
Lender-Paid MI— Mortgage insurance where the lender pays the premium in exchange for a higher interest rate.
Loan Modification— A change to the original loan terms (e.g., rate, term) to make payments affordable. Often used to avoid foreclosure.
Loan-to-Value (LTV) Ratio— Loan amount divided by property value or purchase price, as a percentage. Key for PMI, pricing, and eligibility.
Lender— The entity that provides the funds for the mortgage. Can be a bank, credit union, or nonbank lender.
Loan Originator— The person or entity that takes the application and works with the borrower. May work for a lender or broker.
Loan Officer— A representative of a lender or broker who assists borrowers with the application and loan selection.
Lifetime Cap— The maximum rate increase allowed over the life of an ARM.
LIBOR— London Interbank Offered Rate — a former benchmark being phased out and replaced by SOFR.
Lien— A legal claim on property securing a debt. A mortgage is a lien; unpaid taxes or HOA fees can also create liens.
Loan-Level Price Adjustments (LLPAs)— Fees or credits applied by Fannie/Freddie based on loan and borrower characteristics (e.g., LTV, credit score).
Loan Origination— The process of taking the application, underwriting, and closing the loan.
Lock Period— The time during which your rate lock is in effect. Longer locks may have higher rates or fees.
Lock-In Fee— A fee sometimes charged to lock the rate. May be refunded at closing or applied to costs.
Loan Number— The identifier the lender or servicer assigns to your mortgage. Used for payments and account inquiries.
Late Fee— A fee charged when a payment is received after the grace period.
Loss Mitigation— Options to avoid foreclosure, such as loan modification, forbearance, or short sale.
Loan Estimate Expiration— The date after which the Loan Estimate is no longer valid. Lenders must honor it for a set period if you proceed.
Loan Estimate Section A B C— Sections of the Loan Estimate: A (origination), B (services you cannot shop), C (services you can shop).
Lender Credits— Credits from the lender that reduce your closing costs, often in exchange for a higher rate.
Loan Deposit— Funds deposited by the borrower (e.g., earnest money) held until closing.
Loan Denial— The lender’s decision not to approve the loan. You have the right to know the reason and to dispute errors.
Lender's Title Policy— Protects the lender’s interest in the property. Usually required and often paid by the borrower.
Loss Payable Clause— A clause in an insurance policy that pays the lender if the property is damaged or destroyed.

M

Mortgage Points— Fees paid at closing in exchange for a lower interest rate. One point typically equals 1% of the loan amount.
Mortgage Servicing— The administration of a mortgage after origination: collecting payments, managing escrow, sending statements, handling p…
Manufactured Home— A factory-built home that meets HUD code. Financing may differ from site-built homes.
Mortgage Broker— An intermediary who connects borrowers with lenders and may process the loan. Does not fund the loan.
Mortgage Contingency— A contract clause that makes the sale contingent on the buyer obtaining financing. Protects the buyer if the loan is den…
Mortgage Insurance Premium (MIP)— FHA’s form of mortgage insurance: upfront and annual premiums.
MIP Duration— How long FHA MIP must be paid. For many FHA loans it is for the life of the loan unless LTV and other conditions are met…
Manufactured Housing— Homes built in a factory to HUD code. May be titled as personal or real property depending on state.
Modular Home— A factory-built home assembled on site and typically treated like site-built for financing.
Mortgagee Clause— The clause in an insurance policy that names the lender as payee for claims. Lenders require this.

N

Non-QM Loan— A mortgage that does not meet Qualified Mortgage criteria. May use alternative documentation (e.g., bank statements) or …
Negative Amortization— When the payment is too small to cover interest, so the loan balance increases. Rare in standard mortgages today.
Non-Warrantable Condo— A condo that does not meet Fannie/Freddie project requirements. May require a non-QM or portfolio loan.
No-Closing-Cost Refinance— A refinance where the lender covers closing costs, often in exchange for a higher rate or rolling costs into the loan.
Non-Borrowing Spouse— A spouse who is on title but not on the mortgage. Rules vary by state and program.
No Tolerance— Fees that can change without limit (e.g., prepaid items, services you choose).
Non-Occupant Co-Borrower— A co-borrower who will not live in the property. Allowed in some programs (e.g., FHA) with restrictions.

O

Origination Fee— A fee charged by the lender for processing and originating the loan. May be a percentage of the loan or a flat fee.
Origination Points— Fees charged for creating the loan, often expressed as a percentage of the loan amount. Not the same as discount points.
Overtime and Bonus Income— Lenders may count overtime and bonus income if it’s likely to continue. Often require a two-year history.
Owner's Title Policy— Protects the homeowner’s equity against title defects. Optional in many states but recommended.

P

Private Mortgage Insurance (PMI)— Insurance that protects the lender when the borrower puts less than 20% down on a conventional loan.
PITI— Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment.
Prepaid Interest— Interest charged from the closing date until the first regular payment date. Often listed as “per diem” interest at clos…
Principal— The amount borrowed (loan balance). Each payment reduces principal until the loan is paid off.
Promissory Note— A legal document in which the borrower promises to repay the loan under specified terms.
Prequalification— A preliminary estimate of how much you might borrow based on self-reported information. Not a commitment.
Pre-approval— A lender’s conditional commitment to lend after reviewing your finances. Stronger than prequalification; often involves …
Primary Residence— The home where you live most of the time. Many programs (FHA, VA, some conventional) require the property to be your pri…
Portfolio Loan— A loan the lender keeps in its own portfolio instead of selling to Fannie Mae, Freddie Mac, or others. May have more fle…
Paying Off Mortgage Early— Making extra principal payments or paying off the loan before the end of the term. May reduce total interest; check for …
Prepayment Penalty— A fee charged if you pay off or significantly pay down the loan within a specified period.
Payment Cap— A limit on how much the monthly payment can increase at each adjustment on some ARMs.
Payoff Statement— A document from the current lender showing the amount required to pay off the loan, often including per diem interest.
PMI Cancellation— Requesting removal of PMI once LTV reaches about 80% (by payment or value increase) or at the loan’s midpoint under some…
Piggyback Loan— A second loan used with a first mortgage to avoid PMI (e.g., 80-10-10: 80% first, 10% second, 10% down).
Permanent Buydown— Using discount points to lower the rate for the full term of the loan.
Payoff Amount— The total required to pay off the loan, including principal, interest to payoff date, and any fees.
Principal Curtailment— An extra payment applied directly to principal to reduce the balance and total interest.
Partial Payment— A payment less than the full amount due. Servicers may hold partial payments until full payment is received.
Points and Fees Cap— QM loans generally cannot exceed a cap on points and fees as a percentage of the loan amount.
Prior to Doc (PTD)— Conditions that must be met before the lender will prepare closing documents.
Prior to Funding (PTF)— Conditions that must be met before the lender will fund the loan.

Q

Qualified Mortgage (QM)— A category of mortgage that meets federal ability-to-repay rules. Lenders get certain legal protections for QM loans.
Qualification— Meeting a lender’s criteria for credit, income, assets, and property to be approved for a mortgage.
Quitclaim Deed— A deed that transfers whatever interest the grantor has, with no warranty of title. Often used between family or to clea…
QM Patch— Former temporary provision that gave QM status to certain Fannie/Freddie loans. Expired; GSEs now use general QM or othe…

R

Rate Lock— A guarantee that your interest rate (and sometimes points) will not change for a set period, usually until closing.
RESPA (Real Estate Settlement Procedures Act)— Federal law that governs closing and settlement disclosures and limits kickbacks. Loan Estimate and Closing Disclosure a…
Refinance— Replacing an existing mortgage with a new one, often to get a lower rate, change the term, or access equity.
Rate and Term Refinance— Refinancing to change the interest rate and/or loan term without taking cash out. No increase in principal.
Refinance Break-Even— The point at which savings from a refinance equal the closing costs. After break-even, you save money.
Reverse Mortgage— A loan that lets homeowners 62+ convert home equity into cash. No monthly principal/interest payments; loan is repaid wh…
Rate Index— A benchmark rate (e.g., SOFR, Treasury) to which an ARM’s rate is tied after the initial fixed period.
Recording Fee— A fee paid to the county or other office to record the deed and mortgage in public records.
Rate Sheet— A lender’s internal list of rates and fees for different loan products and scenarios.
Rent vs Buy— Comparing the costs and benefits of renting versus buying a home. Calculators can illustrate break-even.
Rate and Term Refinance (summary)— Refinancing to change rate or term without taking cash out.
Recast— Recalculating the payment after a large principal payment while keeping the same rate and term. Lowers future payments.
Release of Liability— When the VA releases a veteran from obligation on a VA loan after the buyer assumes it (in a VA assumption).
Right of Rescission— The right to cancel certain loans (e.g., refinances on primary residence) within three business days. TILA requirement.
Red Flag (Loan Estimate)— Notices on the Loan Estimate that highlight key terms (e.g., rate increase on ARM, balloon payment).
Retail Lender— A lender that originates loans directly to borrowers (e.g., bank or nonbank retail channel).
Reserves— Liquid assets left after closing. Expressed in months of PITI. Higher reserves can help approval and pricing.

S

Streamline Refinance— A simplified refinance (FHA or VA) with reduced documentation and sometimes no appraisal. Focus is on rate/term improvem…
Second Home— A property you occupy part of the year but is not your primary residence. Lenders have specific rules for second-home fi…
Short Sale— Selling the home for less than the mortgage balance with the lender’s approval. The lender may forgive the shortfall.
SOFR (Secured Overnight Financing Rate)— A benchmark rate that has replaced LIBOR for many ARMs and other loans.
Subordination— When a lien (e.g., HELOC) agrees to remain in second position behind a new first mortgage, such as after a refinance.
Seller Concessions— Closing costs or other expenses the seller agrees to pay. Limits may apply based on loan type and LTV.
Second Lien— A loan or lien that is subordinate to the first mortgage (e.g., HELOC, home equity loan, second mortgage).
Single-Payment MIP— Option to pay FHA upfront MIP in one sum at closing instead of financing it.
Seller Credits— Same as seller concessions — the seller pays certain closing costs.
Secondary Market— Where mortgages are sold (e.g., to Fannie Mae, Freddie Mac, or investors). Frees up lender capital for new loans.
Source of Funds— Documentation showing where the money for down payment and closing costs came from (e.g., savings, gift, sale of asset).
Seasoning— The time a borrower has owned a property or had a loan. Refinance and some programs require seasoning (e.g., six months)…
Survey— A map showing property boundaries and improvements. Lenders may require it for certain loans.

T

TILA (Truth in Lending Act)— Federal law requiring disclosure of loan terms and costs so borrowers can compare offers. APR and right of rescission co…
Title Insurance— Insurance that protects the lender (and optionally the owner) against defects in the property’s title.
Transfer of Servicing— When the right to collect your payments and manage your loan is sold or transferred to another company.
Teaser Rate— An initial lower rate on an ARM that later adjusts to a higher rate. The “teaser” is the initial discount.
Title Search— A review of public records to confirm ownership and uncover liens or other claims on the property.
Temporary Buydown— A buydown that lowers the rate for the first one to three years, then the rate steps up.
Tenancy in Common— Ownership by two or more persons without right of survivorship. Each can sell or will their share.
Total of Payments— The sum of all payments you will make over the life of the loan if you pay as scheduled.
Tolerance (Closing Cost)— Limits on how much certain closing costs can increase from the Loan Estimate. Zero tolerance for some fees.
Table Funding— When a broker closes the loan in the lender’s name and the lender provides funds at the table.
Tiny Home— A very small dwelling. Financing depends on whether it’s on a foundation and meets code (e.g., conventional, FHA) or is …
Title Commitment— A preliminary report from the title company listing requirements to issue the policy and any liens or defects.
Title Policy— The insurance policy that protects against title defects. Lender’s policy is usually required; owner’s policy is optiona…
Title Endorsement— An addition to a title policy that expands or clarifies coverage.

U

USDA Loan— A mortgage backed by the U.S. Department of Agriculture for eligible rural and suburban properties. No down payment in m…
UFMIP (Upfront Mortgage Insurance Premium)— One-time FHA mortgage insurance premium paid at closing or financed into the loan.
Underwriting— The process of evaluating a borrower’s credit, income, and the property to decide whether to approve the loan and on wha…
Underwater (Upside Down)— Owing more on the mortgage than the property is worth. Limits refinance and sale options.
USDA Guarantee Fee— An upfront and annual fee on USDA loans that helps fund the program.
Umbrella Insurance— Liability coverage above your auto and homeowner policies. Not required for the mortgage but can protect assets.

V

VA Loan— A mortgage guaranteed by the Department of Veterans Affairs for eligible veterans and service members. Often no down pay…
VA Funding Fee— A one-time fee on VA loans that helps fund the program. Amount depends on down payment and whether you’ve used VA benefi…

W

Warranty Deed— A deed in which the seller guarantees clear title. Common in many sales.
Wire Fraud— Scams where criminals trick you into wiring closing funds to them. Verify wiring instructions in person or by known phon…
Wet Closing— A closing where the loan is funded and disbursed at the same time as signing.
Wholesale Lender— A lender that works through brokers rather than directly with borrowers.
Warehouse Line— A line of credit lenders use to fund mortgages before selling them to investors.
W-2 Income— Wage income reported on a W-2. Easiest for lenders to verify and use for qualification.

Y

Yield Spread Premium (YSP)— Compensation to a broker when the borrower takes a higher rate. Disclosed on the Loan Estimate.

Z

Zero Tolerance— Fees that cannot increase from Loan Estimate to Closing Disclosure (e.g., lender fees for services it chose).

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