Real Estate and Mortgage Glossary

A federal rule that requires a lender to make a reasonable, good-faith determination that a borrower can repay the mortgage.

The lender documents income, assets, employment, and credit. It is not a promise that the borrower will be approved.

Also called: ATR

A mortgage whose interest rate can change on a set schedule after an initial fixed period.

It is not a fixed-rate mortgage. How far the rate can move depends on the caps in the note.

Learn more: Everything You Want to Know About Adjustable-Rate Mortgages

Also called: variable-rate mortgage

The schedule for paying off a loan with regular payments of interest and principal.

On a fully amortizing mortgage, early payments are mostly interest and later payments pay down more principal. It is not the home's market value.

A yearly percentage that shows the cost of the loan, including the interest rate and certain fees.

APR is not the note rate. Use it to compare offers. The payment is based on the note rate, not the APR.

Learn more: APR vs. Interest Rate: What's the Difference?

Also called: APR

A licensed appraiser's opinion of a home's market value, written as a report.

It is not the tax assessor's value, and it is not the price the seller is asking.

Learn more: Understanding The Home Appraisal Process

An offer from an automated underwriting system to proceed without a new traditional appraisal.

It is not available on every loan, and a lender can still require an appraisal.

Learn more: Understanding The Home Appraisal Process

Also called: value acceptance

An increase in a home's value over time.

It can come from the market or from improvements. It is the opposite of depreciation, and it is not cash until the home is sold or refinanced.

Limits in an adjustable-rate note on how much the interest rate can change.

A note can cap the first change, each later change, and the change over the life of the loan. The rate does not move without those limits.

Learn more: Everything You Want to Know About Adjustable-Rate Mortgages

Also called: adjustment caps

The value a local tax authority assigns to a property in order to calculate property taxes.

It is not the appraised value and it is not the price a buyer pays.

A mortgage that a buyer may be allowed to take over from the seller, including the existing rate.

Not every loan can be assumed. The lender and the program have to allow it, and the buyer usually must qualify.

Learn more: The Assumable Mortgage: How It Works and Is It Right for You?

A system that evaluates a mortgage application against a set of guidelines and returns a recommendation.

The recommendation is not the same as a final approval. A person can still ask for more documents or decline the loan.

Learn more: Explaining the Home Loan Process Part 4: Mortgage Underwriting

Also called: AUS

A mortgage that is not fully paid off by the regular payments, so a large balance is due at the end of the term.

Some balloon notes can be reset. Others require the remaining balance to be paid in full. It is not a fully amortizing fixed-rate mortgage.

One one-hundredth of a percentage point, used to describe a change in a rate or a fee.

A move from 6.50% to 6.75% is 25 basis points. It is not the same thing as one percent.

Also called: bp

A short-term loan used to carry a buyer between the purchase of a next home and the sale of the current one.

It is paid off when the longer-term financing, or the sale, comes through. It is also used in commercial lending. It is not a permanent mortgage.

Learn more: What is a Bridge Loan & Who Should Get One?

Money paid up front, often by a seller or a lender, to reduce the interest rate.

A permanent buydown lowers the rate for the life of the loan. A temporary buydown lowers it for an early period only. See Temporary buydown.

Learn more: Reducing Your Mortgage Rate and Payment With a Buydown

Also called: buydown

A licensed real estate agent who represents the buyer.

The buyer's agent is not the seller's agent, even when both work under the same brokerage.

Learn more: The Real Estate Buyer’s Agent: Do I Need One?

The amount of money the borrower must bring to closing, after credits are applied.

It is shown on the Closing Disclosure. It is not the same figure as the down payment, because it also includes costs and prepaid items and subtracts deposits and credits.

Learn more: What’s Included in Closing Costs?

A new mortgage that replaces the current one and is larger than the amount owed, so the borrower receives the difference in cash.

The cash can be used for other purposes, such as paying off higher-interest debt or paying for home improvements. It is not a rate-and-term refinance.

Learn more: The Cash-Out Refinance: Is It Right for You?

Also called: cash-out

The VA document that shows a service member, veteran, or surviving spouse has home-loan entitlement.

It shows that the person may be eligible for a VA loan. It is not an approval for a specific house or loan amount.

Learn more: VA Loan Requirements: Who Qualifies and What You’ll Need

Also called: COE

The lender's notice that the conditions it asked for have been met and the file can be scheduled for closing.

It is not a commitment letter, and it is not the funding of the loan. A new issue can still delay closing.

Also called: CTC

The person or company that handles the closing, including disbursing funds, arranging title insurance, and recording the deed.

The closing agent is not the loan officer. In some states this role is an escrow officer, a title company, or an attorney.

Also called: settlement agent; escrow officer

The fees and prepaid items due to complete the purchase or refinance, apart from the price of the home.

They can include lender charges, title charges, taxes, and insurance. They are not the same as the down payment.

Learn more: What’s Included in Closing Costs?

The final five-page form that lists the loan terms, the projected payments, and the cash due at closing.

The borrower receives it before closing. It is the form to compare with the Loan Estimate. It is not the promissory note.

Learn more: Explaining the Home Loan Process Part 5: The Closing Process

Also called: CD

An itemized list of the amounts each side pays and receives at closing.

The borrower's required federal form for most mortgages is the Closing Disclosure. A closing statement is the settlement ledger, often prepared by the title or escrow company.

Also called: settlement statement

A person who applies for the loan with the borrower and is responsible for repaying it.

A co-borrower usually also takes ownership. A cosigner agrees to repay if the borrower does not, and does not take ownership. A co-borrower is not defined by having good credit.

Learn more: What is a Co-Borrower?

One loan that finances construction and then converts to a permanent mortgage when the home is finished.

It is also called a construction-to-permanent loan. It is not two separate applications if the permanent financing is built into the same loan.

Also called: construction-to-permanent loan

The total of the mortgage balances on a home divided by the value of the home, expressed as a percentage.

Loan-to-value counts the first mortgage only. CLTV also counts a second mortgage or a HELOC. A drawn HELOC and the full credit line are not always counted the same way.

Also called: CLTV

A letter from the lender stating the terms on which it will make the loan.

It is still subject to the conditions in the letter. It is not the same as clear to close, and it is not the Closing Disclosure.

Recent sales of similar homes, used to help estimate a home's value.

Appraisers use them. They are not the subject home's assessed value.

Learn more: Understanding The Home Appraisal Process

Also called: comps

A home in which the buyer owns the unit and shares ownership of the common areas.

The building or project often has to be approved before a lender will make the loan. A condominium is not the same thing as a planned unit development or a multi-family rental property.

Learn more: Your Ownership Roadmap: Condo Pros, Cons and Mortgage Options

Also called: condo

A mortgage that meets the loan-size and other standards so Fannie Mae or Freddie Mac can buy it.

A loan can be conventional and still be non-conforming if it is too large or does not meet those standards. Conforming is not a synonym for conventional.

Learn more: Conforming vs. Non-conforming Loans: Which Is Best for You?

A loan that pays for building a home, usually in draws as the work is completed.

When construction ends, the loan is either converted to a permanent mortgage or paid off with a new loan. See Combination loan.

Also called: construction loan

A condition in a purchase contract that lets the buyer cancel and recover the deposit if the condition is not met.

Common contingencies include financing, appraisal, inspection, and the sale of the buyer's current home. A contingency is not the same as a denial after the contingency period has ended.

A mortgage that is not insured or guaranteed by the FHA, VA, or USDA.

It can be conforming or jumbo. Private mortgage insurance may be required. It is not an FHA, VA, or USDA loan.

Learn more: What is a Conventional Loan?

A number that summarizes how a person has used and repaid credit.

Lenders use it as one sign of whether a borrower is likely to repay. It is not the same as a credit report, and it is not the only factor in an approval.

Learn more: How To Improve Your Credit Score

Monthly debt payments divided by gross monthly income, shown as a percentage.

It counts more than the mortgage. The housing expense ratio counts housing costs only.

Learn more: The Debt-to-Income (DTI) Ratio Explained

Also called: DTI

The legal document that transfers ownership of real estate.

It is recorded in the public land records. It is not the promissory note and it is not the mortgage.

A security instrument in which the borrower gives a trustee the power to sell the home if the loan is not repaid.

It serves the same purpose as a mortgage in the states that use it. Signing it does not mean the lender holds title while the borrower is paying.

A transfer of the home's deed to the lender by agreement, instead of going through foreclosure.

The lender has to agree. It is not a short sale, because the home is not sold to a third-party buyer. It does not, by itself, say whether any remaining balance is still owed.

Learn more: Deed-in-Lieu of Foreclosure

Also called: deed in lieu

A failure to meet a term of the loan, most often by falling behind on payments.

Default can lead to foreclosure if the loan is not brought current or another workout is not reached. Being one day late is not, by itself, the foreclosure.

Learn more: Behind On Your Mortgage Payments? Here’s How to Avoid Foreclosure

A decrease in a home's value.

It can come from the market or from damage. It is the opposite of appreciation.

A fee paid at closing to lower the interest rate. One point is 1% of the loan amount.

Points are prepaid interest. They are not the same as an origination fee, and they raise the cash due at closing in exchange for a lower rate.

Learn more: Mortgage Origination & Discount Points: Understanding the Basics

Also called: points

The portion of the purchase price the buyer pays up front, rather than borrowing.

The amount required depends on the loan program. It is not the same as closing costs or cash to close.

Learn more: Do You Need 20% Down to Buy a Home?

A buyer's deposit that shows the buyer intends to complete the purchase.

It is held in escrow and is usually applied to the down payment or closing costs. It is not the lender's fee. If the buyer cancels under a contingency, the contract says whether it is refunded.

Learn more: How Much Do You Really Need to Buy a House?

Also called: good-faith deposit

A legal right for someone else to use part of a property for a stated purpose.

A shared driveway or a utility line is a common example. An easement is not an ownership share.

Learn more: All About Easements: How They Affect Your Property

A mortgage that can include the cost of eligible energy-saving improvements.

The cost can be part of a purchase or a refinance. Green mortgage is another name for this idea. Availability depends on the program.

Also called: green mortgage

The difference between a home's value and the amount still owed on it.

Equity is not cash in hand. A home equity loan or a cash-out refinance is one way owners borrow against it.

Learn more: A Comprehensive Guide to Home Equity

The account a neutral third party uses to hold the buyer's funds, the deed, and the instructions until the sale closes.

This is the purchase escrow. It is not the monthly tax and insurance account on an existing mortgage.

Learn more: The Role of Escrow Accounts in Real Estate Transactions

Also called: closing escrow

An account the servicer keeps to collect money with the mortgage payment and pay property taxes, homeowners insurance, and mortgage insurance when those bills are due.

It is not the escrow account used to hold funds for the purchase. See Escrow (pre-closing). The servicer, which may not be the original lender, is the company that maintains it.

Learn more: Mortgage Escrow Accounts Explained: Taxes, Insurance and Monthly Payments

Also called: impound account

The servicer's review of the escrow account that sets the escrow portion of the next year's payment.

It is the review that can change the monthly payment when taxes or insurance change. It is not, by itself, a change to the interest rate.

Learn more: Mortgage Escrow Accounts Explained: Taxes, Insurance and Monthly Payments

An extra balance a servicer may hold in the escrow account for bills that come due before the next payments are collected.

Federal rules cap how large that cushion can be, and a servicer is not required to collect one. A positive balance can still be below the target.

Also called: escrow reserve

The amount by which the escrow balance is below the target balance when the servicer reviews the account.

A shortage can increase the monthly payment. It is not the same as a deficiency, which is a negative balance after the servicer has advanced money.

The amount by which the escrow balance is above the target balance when the servicer reviews the account.

A surplus can be refunded or left in the account, depending on the amount and the status of the loan. It is not a payment the borrower can request at any time during the year.

The price a willing buyer would pay a willing seller in the current market, with neither side under unusual pressure.

It is an estimate used in appraisal and in conversation. It is not the assessed value.

Learn more: Understanding The Home Appraisal Process

Also called: market value

A government-sponsored enterprise that buys mortgages from lenders so those lenders can make more loans.

Fannie Mae is not the lender on a Pennymac application, and it is not a government agency that insures the loan. It sets standards for the loans it will buy.

Learn more: Understanding Fannie Mae and Freddie Mac

Also called: Federal National Mortgage Association

A government agency that insures mortgages made by approved lenders.

The FHA does not lend the money. An FHA loan is not a conventional loan, and its mortgage insurance is not private mortgage insurance.

Learn more: FHA Home Loans

Also called: FHA

The broadest form of private ownership of real estate, including the land and the buildings, within the limits of the law.

A mortgage does not change fee-simple ownership into something else. The owner may still sell, lease, or will the property, subject to the loan and other recorded claims.

A mortgage whose interest rate stays the same for the entire term.

The principal and interest payment does not change because of the market. The total monthly payment can still change if taxes or insurance change.

Learn more: Fixed- vs. Adjustable-Rate Mortgage: What's the Difference?

A determination of whether a property is in a flood zone that requires flood insurance.

The federal flood maps drive the result. The certification is not the insurance policy.

A separate policy that covers damage from flooding.

A standard homeowners policy does not cover flood. A lender requires flood insurance when the home is in a Special Flood Hazard Area and the loan is covered by the federal flood rules.

A temporary agreement to pause or reduce mortgage payments.

The missed amounts are still owed. Forbearance is not forgiveness, and it is not a permanent change to the rate or the term. See Loan modification.

The legal process a servicer uses to take and sell a home when the loan is not brought current.

It is the end of the default process, not the first notice. A borrower can still ask about a repayment plan, modification, short sale, or deed-in-lieu before a sale, if the timeline allows.

Learn more: Understanding Foreclosure: A Guide for Imperiled Homeowners

A government-sponsored enterprise that buys mortgages from lenders and pools them for investors.

Like Fannie Mae, Freddie Mac is not the company that takes the application. A loan it can buy has to meet its standards.

Learn more: Understanding Fannie Mae and Freddie Mac

Also called: Federal Home Loan Mortgage Corporation

Money given to a buyer, usually for the down payment or closing costs, that does not have to be repaid.

The gift has to be documented. It cannot be a loan described as a gift. Who may give the gift depends on the loan program.

Learn more: Do You Need 20% Down to Buy a Home?

A government corporation that guarantees timely payment on mortgage-backed securities made up of FHA, VA, USDA, and other government-backed loans.

Ginnie Mae does not buy loans the way Fannie Mae and Freddie Mac do, and it is not a government-sponsored enterprise.

Also called: Government National Mortgage Association

A financial company chartered by Congress to support the mortgage market. Fannie Mae and Freddie Mac are the examples in housing.

A GSE is not a federal agency, and it is not the lender. Ginnie Mae is a government corporation, not a GSE.

Learn more: Understanding Fannie Mae and Freddie Mac

Also called: GSE

A mortgage insured or guaranteed by a federal agency, which reduces the lender's loss if the borrower defaults.

FHA, VA, and USDA loans are the common types. The government does not make the loan. A conventional loan is not government-backed.

Learn more: Your Home Loan Options

Another name for an energy efficient mortgage: a loan that can include the cost of eligible energy-saving improvements.

See Energy Efficient Mortgage. It is not a separate government program under this name on every loan.

Also called: energy efficient mortgage; EEM

A credit check that happens when a person applies for credit, and that can affect the credit score.

A soft inquiry, such as a person checking their own score, does not. Several mortgage inquiries in a short shopping period are often treated as one inquiry by the scoring models.

Also called: hard pull

Coverage for physical damage to the home, such as fire or wind, that the lender requires.

It is the dwelling coverage inside a homeowners policy, or a separate dwelling policy. It is not flood insurance, and it is not mortgage insurance.

Also called: homeowners insurance, dwelling coverage

A loose label for a loan that sits outside a lender's standard credit, down-payment, or documentation guidelines.

It is not a government loan category, and it is not the defined term “high-risk loan” in the private-mortgage-insurance statute.

A federal program, ended on December 31, 2018, that helped some homeowners with unaffordable or underwater mortgages change their loan terms and avoid foreclosure.

The program is closed. A borrower who needs help now asks the servicer about current retention options. This entry is not an offer of a modification.

Also called: HAMP

A credit line secured by the home. The borrower can draw, repay, and draw again during the draw period, up to the credit limit.

The rate is usually variable. A HELOC is not a home equity loan, which pays out a lump sum. Drawing on it can raise the combined loan-to-value.

Learn more: Everything You Need to Know About a Home Equity Line of Credit (HELOC)

Also called: HELOC

A second mortgage that pays out a lump sum, secured by the equity in the home.

The borrower repays it with a separate payment. It is not a HELOC, and it is not a cash-out refinance of the first mortgage. The rate can be higher than the rate on the first mortgage.

Learn more: Everything You Need to Know About Home Equity Loans

An index that tracks how prices of single-family homes change in a market.

It describes the market. It is not the value of one house.

A service contract that helps pay for covered repairs to home systems or appliances.

It is not homeowners insurance. A claim is limited to what the contract covers, and the buyer does not have to buy one to get a mortgage.

An organization that manages shared areas in a condominium, townhome community, or subdivision, collects dues, and enforces the community's rules.

Dues are a housing cost. They are not property taxes, and they are not included in PITI unless the payment quote says so.

Learn more: A Homeowner’s Guide to HOAs

Also called: HOA

A policy that covers damage to the home and certain other losses, such as fire.

Lenders require it. Flood is not included. The first year's premium is often collected at closing. See Hazard insurance.

Learn more: Buying a Home? Here’s What You Need to Know About Homeowners Insurance

Also called: homeowners insurance

Buying a home, improving it, and reselling it in a short time in order to make a profit.

Lenders treat a quick resale differently from a typical purchase. It is not, by itself, a loan program.

The federal department that oversees housing programs, including FHA mortgage insurance, and enforces fair-housing law.

HUD is not the lender. An FHA case number and FHA insurance are HUD programs administered through approved lenders.

Also called: HUD; Department of Housing and Urban Development

The monthly housing payment divided by gross monthly income, shown as a percentage.

The housing payment usually includes principal, interest, taxes, insurance, and any association dues. It is also called the front-end ratio. Debt-to-income includes other debts as well.

Also called: front-end ratio

Another name for the escrow account a servicer uses to pay property taxes and insurance.

See Escrow account. It is not the purchase escrow.

Learn more: Mortgage Escrow Accounts Explained: Taxes, Insurance and Monthly Payments

Also called: escrow account

The two parts of an adjustable rate after the fixed period: an index that moves with the market, and a margin that is added to it.

The note states which index and what margin. Caps can keep the rate from moving as far as the index plus the margin.

Learn more: Everything You Want to Know About Adjustable-Rate Mortgages

A buyer's examination of a home, looking for defects in the structure and systems.

A lender does not usually require a general home inspection in order to approve the loan. The lender's valuation is the appraisal. An inspection contingency is a contract term, not a loan condition.

Learn more: A Home Inspection Checklist for New Buyers

The percentage of the loan balance charged for borrowing the money, usually stated as an annual rate.

This is the note rate that the principal-and-interest payment is built from. It is not the APR.

Learn more: APR vs. Interest Rate: What's the Difference?

Also called: note rate

A VA refinance of an existing VA loan, with less documentation than a full refinance, used to reduce the rate or the payment.

It is also called a VA streamline refinance. It is not a cash-out refinance. A funding fee can still apply. VA loans do not charge monthly mortgage insurance on either the old loan or the new one.

Learn more: VA IRRRL Streamline Refinance

Also called: VA streamline refinance; VA IRRRL

Real estate bought to produce rent or a later resale profit, rather than to live in as a primary home.

Lenders price and underwrite it differently from a primary residence or a second home.

Learn more: How to Build Wealth and Passive Income by Buying Rental Property

Ownership of a property by two or more people.

The shares and what happens at death depend on how the title is held. Joint ownership is not always joint tenancy, and it does not always include a right of survivorship.

Ownership by two or more people in equal shares, with a right of survivorship.

If one owner dies, that share passes to the surviving owners rather than through the deceased owner's will. It is one form of joint ownership, not the only form.

Also called: joint tenants with right of survivorship

A mortgage larger than the conforming loan limit, so Fannie Mae and Freddie Mac will not buy it as a standard conforming loan.

It is a type of non-conforming loan. It is not a government-backed loan.

Learn more: Big Possibilities: The Homebuyer’s Guide to Jumbo Loans

Also called: jumbo loan

A mortgage that is paid after a senior, or first, mortgage if the home is sold through foreclosure.

A junior mortgage can be a second, third, or later lien. “Second mortgage” is the common name when there is only one loan ahead of it.

Learn more: Subordinate Mortgages: Everything You Need to Know

Also called: subordinate mortgage

Charges the lender collects for making and processing the loan.

They appear on the Loan Estimate and the Closing Disclosure. They are not the down payment, and they are not third-party charges such as the appraisal or title policy unless the form says the lender is charging them.

Learn more: How Much Do You Really Need to Buy a House?

Private mortgage insurance on a conventional loan where the premium is built into the rate or paid by the lender, rather than billed to the borrower as a monthly premium.

The borrower does not see a separate monthly mortgage-insurance charge. The rate is often higher than a loan with borrower-paid mortgage insurance. It is not FHA mortgage insurance.

Learn more: What Is Enterprise Paid Mortgage Insurance (EPMI)?

Also called: LPMI; enterprise-paid mortgage insurance (EPMI)

A policy the servicer buys for the home when the borrower's own hazard insurance has lapsed or was never provided.

The cost is charged to the borrower. The policy can cost more than a policy the borrower buys, and it may cover less. It is not mortgage insurance.

Also called: force-placed insurance

A legal claim against a property that has to be paid or released before the owner can transfer clear title.

A mortgage is a voluntary lien. A tax lien or a judgment lien is not. Lien position decides which claim is paid first in a foreclosure.

The three-page form a lender gives after a mortgage application, showing the rate, the payment, and estimated closing costs.

It replaced the Good Faith Estimate for most closed-end consumer mortgages. It is an estimate. The Closing Disclosure has the final figures.

Learn more: How Much Do You Really Need to Buy a House?

Also called: LE

A permanent change to one or more terms of an existing mortgage, such as the rate, the term, or the amount treated as principal.

Servicers consider it for a borrower who cannot afford the current payment. It is not forbearance, which is temporary and does not change the note.

Learn more: The Loan Modification Guide: Understand Your Options

A person who works with a borrower to take a mortgage application and explain the lender's loan options.

A loan officer employed by a lender is not a mortgage broker. A broker shops among lenders. This entry does not describe a fiduciary duty.

Learn more: Real Estate Agent vs Loan Officer: What's the Difference?

Also called: mortgage loan originator

The loan amount divided by the value of the home, shown as a percentage.

On a purchase, value is generally the lower of the price and the appraised value. LTV does not include a second mortgage. See Combined loan-to-value.

Learn more: What Is Loan-to-Value (LTV) Ratio?

Also called: LTV

A home built in a factory to the federal HUD building code and then transported to the site.

It is not the same as a site-built home or a modular home. Loan eligibility depends on the home, the land, and whether the home is classified as real estate.

A loan secured by real estate, and the legal document that gives the lender a claim against the home if the loan is not repaid.

In states that use a mortgage, the borrower keeps title and the lender holds a lien. In states that use a deed of trust, a trustee holds the power of sale. The lender does not take title just because the loan is open.

Learn more: The Mortgage Loan Process – What You Need to Know From Start to Finish

The mortgage insurance on an FHA loan. It protects the lender if the borrower defaults.

MIP is not private mortgage insurance, and it is not a VA funding fee or a USDA guarantee fee. FHA can charge both an upfront premium and an annual premium.

Learn more: The Facts About Mortgage Insurance

Also called: MIP; FHA mortgage insurance

The company that funds the mortgage.

The lender may later transfer the right to collect payments to a servicer. The lender is not the same role as the servicer, the broker, or the loan officer.

Also called: mortgage originator

The regular payment on the mortgage.

It usually includes principal and interest, and it often includes escrow for taxes and insurance. Association dues and utilities are not part of it unless a quote says so.

Learn more: PITI: Understanding Your Mortgage Payments

The company that collects the payments, manages the escrow account, and answers questions about the loan after closing.

The servicer may be the original lender or a company that later receives the servicing. A servicing transfer does not, by itself, change the rate or the amount owed.

Learn more: Why Was My Mortgage Sold to Another Company?

Also called: servicer

A disclosure that says whether the lender intends to keep servicing the loan or may transfer it after closing.

It is a disclosure about who will collect the payment. It is not the servicing-transfer notice a borrower receives later if the loan is actually transferred.

A residential property with two or more separate dwelling units, such as a duplex, triplex, or fourplex.

A single condominium or townhome is not a multi-family property just because other people live in the building.

A database brokers use to share homes listed for sale.

It is a broker tool. It is not a public government record, and a home can be for sale without being in the local MLS.

Also called: MLS

Income left after taxes and other payroll deductions.

Many mortgage guidelines start with gross income, before those deductions. A borrower should not assume the lender will use take-home pay.

A newly built home that has not been lived in.

It is underwritten differently from a resale, and the builder's contract is part of the file. It is not a construction loan by itself.

A mortgage that does not meet the standards for sale to Fannie Mae or Freddie Mac as a conforming loan.

A jumbo loan is one example. Non-conforming is not a synonym for government-backed.

Learn more: Conforming vs. Non-conforming Loans: Which Is Best for You?

The interest rate written in the promissory note. The principal-and-interest payment is calculated from this rate.

It is not the annual percentage rate. The APR includes certain fees and can be higher than the note rate.

Learn more: APR vs. Interest Rate: What's the Difference?

Also called: interest rate

A notice that the borrower is in default and that the foreclosure process is starting.

In many states the borrower can still cure the default before a sale. The steps and the timing depend on the state and the loan documents. This entry does not describe one state's calendar.

Also called: NOD

A notice of the date, time, and place of a foreclosure sale.

It comes after the notice of default in the states that use both. It is not the same document as the notice of default. Sale procedures differ by state.

Also called: NOS

The seller's agreement to the buyer's offer, which forms the purchase contract when it is signed and delivered as the contract requires.

A spoken “yes” is not enough to sell real estate. The signed written contract is the acceptance that starts the timelines.

A fee the lender charges to make the loan, often stated as a percentage of the loan amount.

It is a lender fee on the Loan Estimate. It is not a discount point, which is paid to lower the rate, though a quote can include both.

Learn more: How Much Do You Really Need to Buy a House?

A title insurance policy that protects the owner against covered defects in the title.

The lender's policy protects the lender and ends when the loan is paid off. The owner's policy protects the owner. One does not replace the other.

Learn more: Title Company Roles in the Homebuying Process

Also called: owner's title insurance

A listing status meaning the seller has an accepted offer and will still look at backup offers.

A backup offer does not cancel the first contract. It matters only if that contract ends.

A listing status meaning the seller has accepted an offer and the sale depends on the buyer's lender approving the loan.

If the financing contingency fails, the home can come back on the market. The status is not the same as clear to close.

Interest charged for each day from the closing date until the period the first monthly payment covers.

It is collected at closing as a prepaid item. It is not a penalty, and it is not the first regular payment.

Learn more: What’s Included in Closing Costs?

Also called: daily interest; odd days interest

The four main parts of a monthly housing payment: principal, interest, taxes, and insurance.

A quote that says PITI does not include association dues unless it says so. Mortgage insurance can be part of the payment and is sometimes listed separately.

Learn more: PITI: Understanding Your Mortgage Payments

Also called: principal, interest, taxes, and insurance

A community of individually owned homes that share common areas maintained by an association.

A PUD home can look like a detached house. The project can still have to be reviewed by the lender. It is not a condominium, where the owner holds the unit rather than the land.

Also called: PUD

A lender's conditional statement, after reviewing documented income, assets, and credit, of how much the borrower may be able to borrow.

It is not a guarantee of a loan. The home, the appraisal, and the final documents still have to meet the lender's conditions.

Learn more: Pre-Qualified vs. Pre-Approved: The Differences Explained

An early estimate of how much a borrower might borrow, based on information the borrower provides.

It is not a pre-approval. Income and assets may not have been documented yet.

Learn more: Pre-Qualified vs. Pre-Approved: The Differences Explained

A charge for paying off all or part of the mortgage early.

Many mortgages do not have one. If the loan has one, it is disclosed on the Loan Estimate and in the note. It is not the same as per diem interest.

The home the borrower lives in as their main home.

It is not a second home and it is not an investment property. Occupancy affects the rate and which programs are available.

Also called: owner-occupied; principal residence

A benchmark rate banks publish, generally tied to the federal funds rate, and used as a reference for some consumer loans.

It is not the index in every adjustable-rate mortgage, and it is not a mortgage rate by itself.

Also called: prime lending rate

The amount borrowed that is still unpaid. In a monthly payment, it is also the portion of the payment that reduces that balance.

Interest is the cost of borrowing. Principal is the balance itself. An extra payment to principal reduces the balance. It does not, by itself, change the required monthly payment unless the loan is recast.

Learn more: PITI: Understanding Your Mortgage Payments

Insurance on a conventional loan that protects the lender if the borrower defaults. The borrower pays the premium.

PMI is not FHA mortgage insurance, a VA funding fee, or a USDA guarantee fee. It is commonly required when the down payment is less than 20 percent. This entry does not state when it can be removed.

Learn more: The Facts About Mortgage Insurance

Also called: PMI

The written promise to repay the loan, including the amount, the rate, and the payment.

The mortgage or deed of trust secures that promise with the home. The note is not the security instrument.

Also called: note

Taxes a local government charges on real estate to pay for local services.

They are based on the assessed value. They are often collected with the mortgage payment through escrow. They are not association dues.

A split of a bill, such as property taxes or association dues, between the buyer and the seller based on the closing date.

Each side pays the share for the days they own the home. A proration is not a fee the lender charges.

Learn more: What’s Included in Closing Costs?

The contract in which the buyer and seller state the price and the other terms of the sale.

It is the agreement the lender and the title company work from. It is not the loan application.

Also called: purchase contract; sales contract

A colorless, odorless radioactive gas that can enter a home from the ground.

A test is a buyer inspection item. A radon test is not the appraisal, and a lender does not require one on every loan.

An agreement that the lender will honor a stated interest rate for a stated number of days.

The lock has an expiration date. Extending it can cost money. Not every lock has an up-front fee. A lock is not a promise that the loan will close.

A new mortgage that replaces the current one to change the rate, the term, or both, without the borrower taking substantial cash out.

It is not a cash-out refinance. Closing costs may be paid in cash or added to the balance, within program limits.

Learn more: When Should You Refinance Your Home? Home Refinancing and Refi Mortgage Loan Options

Also called: no-cash-out refinance; limited cash-out refinance

A person licensed by a state to help clients buy, sell, or lease real estate.

An agent works under a broker. An agent is not a Realtor unless the agent is a member of the National Association of Realtors.

Learn more: The Real Estate Buyer’s Agent: Do I Need One?

A person licensed to operate a real estate business and to supervise agents.

The broker's license is a higher license than an agent's. A broker may also represent buyers or sellers directly.

A federal law that requires mortgage disclosures and sets rules for escrow accounts and servicing.

The Loan Estimate, the Closing Disclosure, and notices about who will service the loan come from this body of rules and from the Truth in Lending Act. RESPA is not a loan program.

Also called: RESPA

A property that went through foreclosure and is now owned by the lender or investor because it was not sold to a third party at the auction.

An REO sale is a sale by that owner. It is not a short sale, which happens before the foreclosure is finished.

Learn more: The REO Guide: 10 Steps to Buying a Bank-Owned Home

Also called: REO; bank-owned

A real estate agent or broker who is a member of the National Association of Realtors®.

Not every licensed agent is a Realtor®. The word is a membership name, not a license level.

Learn more: The Real Estate Buyer’s Agent: Do I Need One?

Also called: Realtor

A lender credit that lowers closing costs in exchange for a higher interest rate.

They are also called negative points. The borrower pays less at closing and more over time. They are the opposite of discount points.

Also called: negative points; lender credit from a higher rate

Paying off a mortgage with a new loan on the same property.

Borrowers refinance to change the rate, the term, or the loan amount. A refinance is not a second mortgage, which leaves the first loan in place.

Learn more: When Should You Refinance Your Home? Home Refinancing and Refi Mortgage Loan Options

An agreement to pay the past-due amount over time, along with the regular monthly payment.

It brings the loan current. It does not change the rate or the term. It is not a loan modification.

Money a lender wants the borrower to have left after closing, usually enough to cover a stated number of mortgage payments.

Reserves are not the down payment, and they are not a repair escrow. The number of months depends on the loan.

A borrower's right, on many refinances of a primary home, to cancel the loan within three business days after closing.

A purchase loan does not have this right. Some other transactions are exempt. Canceling under this right is not the same as a contract contingency.

Also called: right to cancel; three-day rescission

A home the borrower occupies for part of the year and that is not a primary residence or a rental investment.

Lenders limit how it can be rented and price it differently from a primary home. It is not an investment property.

Learn more: Buying a Second Home: What You Need to Know

Also called: vacation home

A mortgage recorded after the first mortgage, so it is paid after the first mortgage in a foreclosure.

Home equity loans and HELOCs are common second mortgages. A second mortgage is not a cash-out refinance, which replaces the first loan. Using one for a down payment is one use, not the definition.

Learn more: Subordinate Mortgages: Everything You Need to Know

Money the seller agrees to pay toward the buyer's costs.

It is a credit at closing, not a reduction that the borrower receives in cash. How much the seller may pay depends on the loan program and the down payment.

Also called: seller credit; seller contribution

The real estate agent who represents the seller.

The seller's agent is not the buyer's agent. Their duty runs to the seller.

A form, required by state law in many states, on which the seller lists known defects.

It covers what the seller knows. It does not replace an inspection, and the questions on the form differ by state.

The mortgage in first lien position.

If the home is sold in foreclosure, the senior loan is paid before junior loans. It is also called a first mortgage.

Also called: first mortgage; senior mortgage

A public auction of a property, most often a foreclosure sale.

A sale can also result from a judgment lien or a tax lien. The name and the official who conducts it differ by state.

Also called: foreclosure auction

A sale for less than the amount owed, which the lender agrees to accept.

It happens before foreclosure is completed. It is not a deed-in-lieu, and an agreement to a short sale does not, by itself, say whether a remaining balance is still owed.

Learn more: A Short Sale of Your Home: Is it the Right Choice?

A refinance program with less documentation than a full refinance, offered on some existing government loans.

FHA, VA, and USDA each have their own version. A streamline refinance is not automatically a cash-out refinance, and it is not available on a conventional loan under those program names.

Learn more: What Is Streamline Refinancing?

A mortgage that stands behind an earlier mortgage in lien priority.

It is repaid after the senior mortgage if the home is foreclosed. “Second mortgage” and “junior mortgage” are the everyday names.

Learn more: Subordinate Mortgages: Everything You Need to Know

Also called: junior mortgage; second mortgage

A term, or a separate agreement, that keeps one lien behind another.

It is how a second mortgage can stay in junior position when the first mortgage is refinanced. Priority is not always the order in which the loans were made.

A measurement of a property's boundaries and the location of the improvements.

A lender or a title company may require one when a boundary, easement, or encroachment question comes up. It is not an appraisal.

An expense the tax law may allow a taxpayer to subtract, which can lower taxable income.

Mortgage interest is sometimes deductible, and the rules change. This glossary does not state a dollar amount or tell a reader whether to itemize. A tax advisor is the right source for that.

A buydown that lowers the interest rate for a set early period, after which the rate rises to the note rate.

A 2-1 buydown is one example: the rate is lower in year one and year two. The borrower is generally qualified at the note rate, not the reduced rate. It is not a permanent buydown.

Learn more: Reducing Your Mortgage Rate and Payment With a Buydown

Also called: 2-1 buydown

The number of years, or the number of payments, over which the mortgage is scheduled to be repaid.

A 30-year term and a 15-year term are different terms. The term is not the rate-lock period.

The legal right of ownership of a property.

A deed transfers title. Title insurance protects against covered defects in that ownership. Title is not the loan.

Learn more: Title Company Roles in the Homebuying Process

Insurance that covers certain ownership claims and title defects that already exist and were not found in the title search.

There is a lender's policy and an owner's policy. The lender's policy does not protect the owner. See Owner's title policy.

Learn more: Title Company Roles in the Homebuying Process

A review of the public records to see who owns the property and whether liens or other claims are recorded.

The search supports the title insurance commitment. It is not a survey, and it does not measure the land.

Learn more: Title Company Roles in the Homebuying Process

The total interest paid over the loan term, shown as a percentage of the loan amount.

TIP is not the interest rate and it is not the APR. A longer term raises the TIP even when the rate is lower.

Also called: TIP

A federal law that requires lenders to disclose the cost of credit, including the APR.

It is why the rate and the APR appear together in advertisements and on the Loan Estimate. TILA is not a loan program.

Also called: TILA

A mortgage guaranteed by USDA Rural Development for an eligible buyer purchasing an eligible home in an eligible rural area.

The program can allow a purchase with no down payment. The buyer still has to meet income limits and the property has to qualify. The USDA guarantee fee is not mortgage insurance.

Learn more: What Is a USDA Loan and Who Qualifies?

Also called: Rural Development loan; USDA guaranteed loan

The seller has an accepted purchase contract with a buyer.

The home is not sold yet. Contingencies can still cancel the contract.

Also called: pending

A mortgage on which the balance owed is greater than the value of the home.

The loan-to-value ratio is over 100 percent. The comparison is to the current balance and the current value, not automatically to the original loan amount.

Also called: negative equity

The lender's review of the borrower's credit, income, assets, and the property, ending in an approval, a denial, or a request for more information.

An automated finding is one input. It is not the whole underwriting decision.

Learn more: Explaining the Home Loan Process Part 4: Mortgage Underwriting

The money a buyer needs before and at closing, including the earnest money, the down payment, and closing costs.

It is a plain-language total. Cash to close, on the Closing Disclosure, is the figure due at the closing table after credits.

Learn more: How Much Do You Really Need to Buy a House?

The FHA mortgage-insurance charge due at closing, separate from the annual premium that is collected over time.

It can often be added to the loan amount. It is not private mortgage insurance, and it is not the monthly MIP by itself.

Also called: UFMIP; upfront MIP

The fee charged on a USDA guaranteed loan for the government guarantee.

There is an upfront fee and an annual fee. It is not FHA mortgage insurance and it is not private mortgage insurance.

Learn more: What Is a USDA Loan and Who Qualifies?

A fee charged on many VA loans to help fund the program.

Some veterans are exempt, including many with a service-connected disability. It is not monthly mortgage insurance. The amount depends on the loan and whether the borrower has used a VA loan before.

A mortgage guaranteed by the U.S. Department of Veterans Affairs for an eligible service member, veteran, or surviving spouse.

It can allow a purchase with little or no down payment, and it does not charge monthly mortgage insurance. A funding fee may apply. The rate is set by the lender, not promised to be below the market.

Learn more: VA Home Loans

Also called: Veterans Affairs loan

A listing the seller has taken off the market.

The home is not pending and it is not sold. The seller may later list it again.