Glossary of Mortgage Terms


 Glossary of Mortgage Terms


A verbal or written acceptance of an offer to buy a home made from the seller to the buyer.



This is a land measurement that is commonly used in the U.S. for property negotiations. One acre equals 43,560 square feet.


Adjustable rate mortgage, ARM

Is a mortgage loan that is characterized by an interest rate which automatically adjusts or fluctuates with certain market indexes.  An Adjustable Rate Mortgage generally begins with an introductory or initial interest rate which then can rise or fall, but monthly payments may not exceed the ARM loan cap.


The process of a loans value over a period of time it often amortization is laid out on an amortization schedule or measured by an amortization calculator.


Annual percentage rate, APR

This is the truest cost of a home loan. Per the Truth in Lending Act, all mortgage lenders must disclose their APR. (Annual Percentage Rate) In the mortgage industry, APR may include fees such as documentation fees, private mortgage insurance and more.



It is the measurable value that increases on the home or property.  Market improvements and home renovations often drive appreciation value.


Assessed value

Is the value determined by local government assessors and used to calculate annual property or real estate taxes.


Assumable mortgage

Is a mortgage that can be transferred, this includes the interest and all, from the seller to the buyer.


Attorney fees

There can be fees due during closing.


Balloon mortgage

It is a loan that is short term.  This high risk loan leaves the borrower with a potentially very high balance at the end of the term of the loan.



An individual or individuals extended a loan and mortgage for the purchase of a house and/or property. The borrower is responsible for making all payments and fees associated with the loan over the life of the loan.


Bridge loan

Is a short term loan that is used to quickly effect the sale while pending for more conventional real estate financing. This is not a popular loan but, it can be very useful in certain commercial real estate deals.


Buy down

This is where the seller or the lender puts in a sum of money in order to lower the initial interest rate on a home loan this makes the sale more appealing for the buyer.


Buyer’s agent

A real estate agent works on behalf of the home buyer.



The maximum monthly payment a borrower is expected to pay on a loan


Capital gain

The profit earned on an asset, such as a home or property.


Capital gain tax

A tax levied against the profit made on the sale of a home and or property


Cash out refinance

Is a second mortgage in which the borrower extracts home equity at the same time a refinance deal is made an alternative to a home equity loan.



The formal documented sale of a home and or property that includes signing all documents associated with the exchange and payment of required closing fees. A closing agent usually oversees this process.


Closing agent

Is the person responsible for mediating the closing, documenting the process and assuring all associated paperwork is completed. May be an attorney or official from a title or mortgage company.


Closing costs

A real estate transaction related fees payable by the buyer and seller during a closing. A wide variety of fees may be included, such as title search, attorney’s fees, origination fees, documentation fees and more.


Closing statement

An itemized list of closing costs



A borrower with good credit that agrees to take on shared responsibility for a home loan so that the primary borrower may purchase property.


Combination loan

This loan combines an initial loan which is normally a new home construction, with a second conventional home loan that supplants the first.


Commitment letter

A document from a lender to a borrower that officially lays out the terms of a loan.


Comparable sales, comps

Similar to a home sale prices in the region used as a metric in the calculation of a home’s appraised value.


Conforming loan

Is a conventional loan that is characterized by loan limits that fall within those guidelines laid out by Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae?


Construction loan

This is a short term loan for new home construction it is supplanted with a conventional long term home loan.



A number of common clauses added to real estate agreements that provide buyer or seller rights during various stages of a transaction


Conventional mortgage

This mortgage is offered by any one of the Government sponsored entities, it is different from a FHA loan.



Money extended from a lender to a borrower based on that borrower’s credit history.


Date of closing

The date upon which all paperwork associated with a mortgage/property sales exchange is finalized.


Date of possession

The actual date upon which the buyer will move into a home or property; it is usually the closing date, but may be another agreed upon date as well.



The amount of money a borrower owes to creditors. A metric used to calculate creditworthiness.



An official and public document that establishes property ownership.


Deed of Reconveyance

Is when a borrower has paid in full on a mortgage, the lender then awards the borrower a deed of Reconveyance? This document becomes also a part of public record. This is also known as Reconveyance deed and recon.


Deed of trust

This is a document that in some states is used in place of a mortgage. A deed of trust may be held by a third party, similar to a mortgage



The inability of borrower to make regular and consecutive payments on a loan



The measure of loss in value of a home or property. Depreciation could be driven by poor economic factors or property damage.


Discount points

Is a measure of interest; 1 point = 1% of the home loan value. Homebuyers may pay points up front, a type of buy-down, in order to lower their overall interest rate and mortgage payment.



Earnest money

Is the sum of money that is usually put up by the buyer when an offer on a home or property. The purpose of earnest money is as a token of good faith, a symbol that the buyer is seriously pursuing purchase.





It is the measurable value of a home or property above and beyond that owned on a loan.  This is a value many homeowners often borrow.


Escrow account

Is a separate account held by a mortgage lender out of which required property bills, separate from the loan payment, are made. Property taxes and insurance are examples of costs paid out of escrow. Also called an “impound account.”



The price for a piece of property will bear in the current market.


Fannie Mae

This is a private mortgage corporation that began as a government subsidized entity in the late 30s. Today Fannie Mae, along with Freddie Mac, is a government sponsored enterprise (GSE) and together they are responsible for setting annual conforming loan limits and assuring that most Americans are able to finance a home. Fannie Mae is commonly known as a secondary mortgage market and lends to mortgage lenders which in turn extend mortgages to borrowers.



Federal Housing Administration


FHA loan

This loan is extended by FHA-approved lenders and it is designed to assist borrowers that are unable to obtain approval for conventional home loans.


First time buyer

Is a home loan for a borrower who has never taken out a mortgage before; it often qualifies for various discounts for these first-time buyers.


Fixed rate mortgage

Is a conventional mortgage with a fixed interest rate over the life of the loan? Monthly payments are the same from month to month.


Flood certification

In the majority of real estate cases a lender will require a flood certification before making a loan on a home. In areas where a property falls in a flood zone, the borrower may be required to purchase standalone flood insurance before a mortgage and/or home loan is approved.



The repossession of a home and/or property by a lender in the event of borrower loan default or the inability to meet mortgage agreements.


Freddie Mac

Works in concert with Fannie Mae, Freddie Mac is a leading government sponsored enterprise (GSE) and is responsible for maintaining reasonable mortgage market stability, this assuring that Americans are able to purchase homes. Freddie Mac is a secondary mortgage market, meaning the corporation lends to lenders, which in turn extend mortgage products directly to borrowers.

Good Faith Estimate

An itemized list of anticipated loan costs and closing fees passed from a lender to a potential borrower within three days of an application for a home loan. This is a required step in the loan application process per the Real Estate Settlement Procedures Act.

Hazard insurance

Is also known as homeowner’s insurance; extra insurance taken out on a home that protects the borrower and lender in the event of damage. Usually covers the value of the home.


High-risk loan

This home loan is extended to borrowers that have poor credit history or that fall outside the conventional or conforming loan limits set by Fannie Mae and Freddie Mac. Sub-prime loan is an example of a high-risk loan.


Home inspection

A comprehensive and exhaustive examination of a home by a licensed inspector.  It is often required as part of a mortgage and home loan process.


Home inspection contingency clause

A clause added to an offer letter that gives the buyer certain rights pending home inspection. A buyer may ask the seller to repair defects discovered during the home inspection or even request release from the offer to buy in light of a home inspection.


Home loan

This is not a mortgage it is the actual amount of money a buyer owes the lender in the purchase of a home.


Home price index

Is a financial and market tool that provides historical data on residential home prices in various regions.


Homeowner’s association

An association attached to a neighborhood, apartment, condo or town home complex that establishes certain rules of ownership.  It is Common but not exhaustive, it covers the responsibilities of a homeowner’s association includes collection of neighborhood dues for landscape maintenance or membership in recreation and entertainment facilities.


Homeowner’s insurance

Insurance that protects the value of the home for both lender and borrower. Homeowner’s insurance typically covers the cost of replacing the home and various parts of the same. Most mortgage lenders require borrowers to carry a term of insurance.


House flipping

Is the purchase of a house or property at a reduced market rate for the purpose of a quick turnaround you flip and you profit. Most house flippers must do some renovation or home fix-up in order to turn a profit on a home.


Housing co-op

Is a real estate corporation in which buyers own a share of real estate holdings and may reside in a co-op unit? Shareholders do not have mortgages, but pay on a cut of the shares and earn equity over the long term.


HUD loan

This type of loan is available to HUD homebuyers that want t purchase and fix up a home. The loan is subsequently absorbed into the mortgage. The term “HUD loan” is often confused with “FHA loan.”


Impound account (Look at Escrow account)


Initial interest rate, introductory

Is the interest rate at which an Adjustable Rate Mortgage, ARM, will begin (Refer to: Adjustable rate mortgage).



Interest rate

A figure calculated as a percentage that is used in the financial industry to indicate the rate charged for use of money in a loan. Interest rates may be fixed or variable. (Refer to:  Annual percentage rate).


Investment property       

Real Estate bought for investment purposes as opposed to private residential. Often the property will be used for rental purposes, such as rental home, apartments or other spaces that give owners the opportunity to create profit and income over the long term.


Joint ownership

Is a type of property ownership in which two people share equally in a home and/or property; common for spouses.


Joint tenancy

It is property ownership in which two or more people share.


Jumbo mortgage

It is a high-risk loan, or non-conforming loan, in which the loan limit is higher than a conventional loan.


Lender fees

Is typically included in fees associated with closing costs, sometimes called processing fees; designed to cover costs incurred by lenders during the loan process.


Lender, mortgage lender

Is when the bank or finance company that directly awards home loan or mortgage money to a borrower or homebuyer.



It is a formal, legal symbol of money owed on a major asset. (Example: property, a mortgage).



It is when money is lent from a financial institution to a creditworthy borrower(s) over a specified period of time and at a particular interest rate.



Is typically applied to the term of a home loan or mortgage; the life span of a mortgage; for example, a 15-year loan matures in 15 years, the period of time in which the debt must be paid off.



Is a legal document between a mortgagor and a mortgagee to establish a home and/or property as security for a home loan.


Mortgage broker

Is the entity that acts as a go-between for the homebuyer and mortgage lender, they handle the paperwork and finally executing a mortgage. A broker does not make direct loans to buyers, but works to find the best deal and finally collects fees as part of the mortgage process.


Mortgage calculators

An online financial tools that is available on many sites that allow potential buyers to plug in various personal financial figures to arrive at a mortgage value they can afford.



Mortgage Company

Can either be a brokerage business or a direct lender.


Mortgage insurance

Is when buyers take out a mortgage with less than a certain dollar percentage to put down on the loan, and lenders require them to pay mortgage insurance, a monthly premium that is added to the mortgage. This protects the lender should a buyer default on the home loan.


Mortgage Insurance Premium, MIP

It is the required 1.5% fee added into a FHA loan, paid at closing.


Mortgage originator

The actual company that lends the mortgage is the “originator.”


No-fee mortgage

This is a sales tactic to attract buyers who may not be able to pay out of pocket closing fees. Normally a no fee cost mortgage is bundled with a slightly higher interest rate that makes up the difference in the no fees over the life of the loan.


Notice of Incomplete Application, NOIA

Is a form sent to the buyer that indicates missing or incomplete loan application information. Buyer must provide all required information for the lender to complete the application process.



A verbal and written offer to buy a home for a certain dollar amount from it is from the buyer to the seller.


Origination fee

A fee, calculated as a small percentage of the value of the loan, charged by a mortgage lender for processing the loan.  A fee that is often due at closing and one that must be disclosed on the Good Faith Estimate when a buyer first completes a loan application.


Payment cap

Is designed for an adjustable rate mortgage, this is the maximum payment amount a buyer could ever be expected to pay per month.


Piggyback loan

It is a second mortgage piggy backed onto a first mortgage and used in lieu of mortgage insurance. It is cost effective loan depending on the current market factors.


Portable mortgage

This mortgage can be carried by the borrower from one home purchase to the next.


Power of attorney

Is a legal document that grants an individual the rights to act on behalf of another. For example, if a borrower dies or becomes incapable of managing his or her home loan or mortgage, a power of attorney assigned by that individual could manage his or her mortgage and related decisions.


Preferred lender

A lender that is closely affiliated with a brokerage based on reputation and other industry factors. This is a mortgage lender that is recommended by a broker.




Pre-paid costs or fees

Are any of a number of fees associated with a mortgage and usually paid out of pocket at the time of closing; includes origination fees, underwriting fees, attorney fees, etc.



Is the process in which a homebuyer may find out how much of a home loan he or she would be approved for with a lender; gives many buyers more flexibility when shopping for a home.


Primary mortgage market

Simple…. direct lenders


Prime loan

Is a conforming loan, this loan is for those who fall within the limits set by Fannie Mae or Freddie Mac. It is often given to borrowers who have good credit.



The amount borrowed on a home loan.


Principal balance

The amount currently owed on a home loan.


Private label mortgage outsourcing

This is when a private bank or financial lender outsources mortgage products to another lender.


Private mortgage insurance, PMI

Is a type of insurance many homebuyers are required to purchase, particularly when they are unable to put down a certain dollar amount on the loan; protects the lender in the event of borrower default.


Processing fees

The lender fees associated with creating the loan or mortgage, usually part of closing costs.


Property address

It’s the physical street address of a home or property, required for mortgage application.


Property appraisal

The fair market value of property performed by a licensed appraiser; takes into account not only condition, but also the value of similar local properties or comparable sales.


Property taxes

The annual local taxes charged against the value of a homeowner’s property.


Property valuation (Refer to Property appraisal)


Quit claim deed

Is a document that releases one party in a home title from any responsibility and grants all responsibility to the.  This is normally used for spouses or in family situations in which more than one individual has an interest in a mortgage or property title.


Rate commitment option, RCO (Refer to Rate lock)



Rate lock

It is a short-term agreement by a lender to “hold” a certain interest rate on a home loan while the buyer negotiates a sale transaction.  (A rate commitment option).


Real estate investment trust

It is securities or mutual funds that invest directly in real estate.


Real Estate Settlement Procedures Act (RESPA)

This act was passed in 1974 it informed the public of hidden costs, fees and kickbacks that had become widespread among real estate entities. Per this act all fees and costs must be disclosed to both buyers and sellers.


Real estate tax (Refer to Property tax)



Is the process by which a borrower/homeowner may negotiate a lower interest rate on a mortgage, thereby lowering monthly payments.


Remaining balance

The current balance owed on a home loan.


Remaining term

It is the current amount of time remaining in the length of the loan.


Repayment schedule

The mortgage payments laid out over the life of the loan. Some mortgage calculators let borrowers see their repayment schedule based on the amount of the home loan, the interest rate and monthly payments. See also Amortization.


Reverse mortgage

This type of mortgage designed for homeowners over 62 years of age it gives them access to home’s equity in cash payments it frees up money for them to use for other important finances or to make home repairs.


Sales contract

Is a real estate sales agreement is a formal written contract made between a homebuyer and seller. The document includes property address, condition, purchase price, inspections, date of closing, date of possession and more.


Second mortgage

This is also known as a home equity loan, a second mortgage gives the borrower’s flexibility to access the cash equity in their home.  It is normally useful for high-dollar expenses like college loans.


Secondary mortgage market

This is the segment of the mortgage and real estate securities market deal with the investment of mortgages but not direct mortgage lenders.


Seller’s agent

A real estate agent works on behalf of the person selling a home.


Short sale

This is a great tool for lenders and homeowners when foreclosure could be on the horizon. In a real estate short-sale lenders give homeowners permission to discount the home value (the outstanding loan balance) to effect a quick sale, thereby averting foreclosure.


Speculative home market

Is one in which investors snatch up homes for quick re-sale hoping to cash in on improving markets; considered risky by some.


Sub-prime loan

This is a high-risk loan that is packaged with non-conforming loan limits and interest rates which make it possible for homebuyers with poor credit to qualify for a mortgage.



Is a formal survey of property that establishes boundary lines and defines any types of limits on construction and other features that could affect the value of property in many cases lenders require buyers to purchase a property survey.


Swing loan (Refer to Bridge loan)


Tenancy in common

Is one or more persons may possess the property title, but ownership may be declared in various percentages.


Third-party fees (Refer to see closing costs)



The official document used in the real estate industry that specifies at any one time who owns a piece of property.


Title Company

A title company typically handles all tasks associated with the property title, including insurance and search.


Title insurance

This insurance is taken out on the property title that protects both borrower and lender in the event of a title dispute.


Title search

It allows research on a property title usually conducted by a title company to determine if there exist any outstanding liens against the property prior to a sales transaction.


Truth in lending disclosure

Is a document that all lenders are required to provide when a borrower applies for a home loan. The document discloses interest rates, the amount to be loaned, plus the final cost of the loan upon maturity.


Turnaround loan (Refer to Bridge loan)



It is the company or service that evaluates a borrower’s credit prior to the loan or mortgage approval.


VA loans

These are special often discounted home loans that are designed exclusively for military veterans.


Warranty deed

It indicates no past liens or disputes against the property; the holder of the property deed has the right to sell it to another.


1003 form

Commonly used mortgage loan application developed by Fannie Mae. Often called the Uniform Residential Loan Application.