Mortgage glossary

A–C

Ability-to-Repay (ATR)

A federal rule (12 CFR 1026.43) requiring lenders to make a reasonable, good-faith determination that you can repay most home loans. Lenders must consider eight factors, including income or assets, employment, the payment, other debts, debt-to-income ratio or residual income, and credit history.

Adjustable-rate mortgage (ARM)

A loan whose rate is fixed for an initial period and then adjusts from time to time based on a published benchmark rate (the index) plus a set amount the lender adds (the margin), within limits called caps. Your payment can rise or fall after the fixed period ends.

Amortization

Paying off a loan over time with scheduled payments. Early payments go mostly to interest; later payments go mostly to principal.

Annual percentage rate (APR)

The yearly cost of a loan expressed as a percentage, including the interest rate plus certain fees. It's a tool for comparing loans and is usually higher than the note rate (the interest rate written in your loan papers).

Appraisal

An independent professional's estimate of a property's market value, ordered by the lender. For a first mortgage on a home, you're entitled to a copy promptly upon completion or three business days before closing, whichever is earlier, unless you waive that timing.

Asset depletion

A way of calculating qualifying income from your savings, investments or retirement accounts instead of job income. See asset depletion loans.

Assumption

When a buyer takes over a seller's existing mortgage, including its rate and balance, usually with approval from the company that collects the payments (the servicer) and after the buyer qualifies. FHA, VA and USDA loans can generally be assumed by a qualified buyer; many conventional loans contain a due-on-sale clause (a rule requiring payoff when the home is sold) that prevents it.

Automated underwriting system (AUS)

Software, such as Fannie Mae's Desktop Underwriter (DU) or Freddie Mac's Loan Product Advisor (LPA), that evaluates a loan application against guidelines and lists the documentation required.

Average prime offer rate (APOR)

A benchmark rate, shown as an APR, based on average rates, fees and terms offered to borrowers with very strong credit. Regulators compare a loan's APR (its yearly cost including fees) with the APOR to decide whether it is a higher-priced mortgage loan.

Balloon payment

A large lump-sum payment due at the end of a loan's term. Qualified mortgages generally can't have balloon payments, with limited exceptions for certain small lenders.

Bank statement loan

A Non-QM loan (one outside the standard qualified mortgage rules) that figures income from 12 or 24 months of bank deposits instead of tax returns. See bank statement loans.

Buydown (temporary)

Money paid up front, often by a seller or builder, to lower your payment for the first year or two, such as a 2-1 or 1-0 buydown. Fannie Mae requires borrowers to qualify at the full note rate (the rate in your loan papers). See how rate buydowns work.

Cash to close

The total amount you bring to closing, including your down payment and closing costs, minus deposits and credits. It appears on both the Loan Estimate and the Closing Disclosure.

Cash-out refinance

Replacing your mortgage with a larger one and receiving the difference in cash. See refinancing.

Clear to close

The point when the underwriter has signed off on all conditions and the loan is approved to close.

Closing attorney

In Georgia, the attorney who conducts the real estate closing. The closing attorney's firm handles the title work and the entire closing, including disbursing funds and recording documents.

Closing costs

Fees and charges paid at closing, separate from the down payment, such as lender fees, appraisal, title, attorney or settlement fees, and government recording fees and taxes.

Closing Disclosure (CD)

A five-page form showing your final loan terms and costs. You must receive it at least three business days before closing.

Combined loan-to-value (CLTV)

The total of all loans secured by a property divided by its value. For a HELOC, lenders often use the full credit line. See HELOCs.

Conforming loan limit

The maximum loan size Fannie Mae and Freddie Mac can buy, set each year by FHFA. For 2026, the baseline limit for a one-unit home is $832,750, with higher limits in designated high-cost areas.

Consummation

The moment you become contractually obligated on the loan, usually when you sign at closing. Federal disclosure deadlines are measured from it.

Contingency

A condition in a purchase contract, such as a satisfactory inspection, financing or appraisal, that must be met or waived for the sale to proceed.

Conventional loan

A mortgage not insured or guaranteed by a government agency. Most follow Fannie Mae or Freddie Mac guidelines. See conventional loans.

Credit report

A record from a credit bureau of your accounts, balances and payment history. Lenders review reports from the bureaus when you apply.

Credit score

A number that summarizes credit risk based on your credit report. It affects which loans you qualify for and how they're priced.

D–F

Debt-to-income ratio (DTI)

Your total monthly debt payments, including the new housing payment, divided by your gross monthly income. Each loan program sets its own limits.

Debt service coverage ratio (DSCR)

A property's monthly rent divided by its full monthly payment (principal, interest, taxes, insurance and association dues, or PITIA). Used to qualify investors on DSCR loans. See DSCR loans and the DSCR calculator.

Deed

The legal document that transfers ownership of real estate from seller to buyer.

Delayed financing

A Fannie Mae exception allowing a cash-out refinance within six months of buying a property with cash, to recover those funds, if requirements are met. See the investor financing guide.

Desktop Underwriter (DU)

Fannie Mae's automated underwriting system. See automated underwriting system.

Discount points

An upfront charge paid to lower your interest rate. One point equals 1% of the loan amount.

Down payment

The part of the purchase price you pay from your own funds rather than borrowing. Required amounts vary by loan program, occupancy and credit.

Down payment assistance (DPA)

Help with your down payment or closing costs, often from a state housing finance agency, offered through participating lenders with eligibility rules. See the first-time homebuyer guide.

Due-on-sale clause

A loan provision that lets the lender require full repayment if the property is sold or transferred.

Earnest money

A good-faith deposit you make when your offer is accepted. It's held by a neutral party under the contract and usually credited toward your costs at closing.

Escrow account

An account your servicer (the company that collects your payments) uses to pay property taxes and insurance from your monthly payment. Sometimes called an impound account.

Escrow cushion

Extra money a servicer may keep in your escrow account to cover unexpected increases. Federal rules (12 CFR 1024.17) cap it at one-sixth of the estimated annual escrow payments.

Fannie Mae and Freddie Mac

Companies chartered by Congress (government-sponsored enterprises) that buy mortgages from lenders and set the guidelines most conventional loans follow.

FHA loan

A mortgage insured by the Federal Housing Administration, part of HUD. See FHA loans.

FHA loan limits

Maximum FHA loan amounts set by county. For 2026, one-unit limits range from a floor of $541,287 to a high-cost ceiling of $1,249,125.

FHA mortgage insurance premium (MIP)

FHA's mortgage insurance: an upfront premium, usually financed, plus an annual premium paid monthly. For case numbers assigned on or after June 3, 2013, annual MIP lasts 11 years if the original loan-to-value (LTV: loan amount compared to home value) was 90% or less, and for the loan term if it was higher; it can't be canceled early by request.

Fixed-rate mortgage

A loan whose interest rate stays the same for the entire term, so principal and interest payments don't change.

Flood insurance

Insurance covering flood damage, which standard homeowners policies typically exclude. It's required for federally backed loans on properties in designated special flood hazard areas.

Float-down

A rate lock feature that may let you get a lower rate if market rates drop before closing. Availability, cost and conditions vary by lender.

Funding fee (VA)

A one-time fee on most VA loans that can be paid at closing or financed. Veterans receiving VA disability compensation, and certain others, are exempt.

G–L

Gift funds

Money given by an acceptable donor, often a relative, toward your down payment or closing costs. The gift must be documented according to the loan program's rules.

Gift letter

A signed statement from the donor confirming the amount, the relationship and that the money is a gift with no repayment expected.

HELOC

A home equity line of credit: a credit line backed by your home that you can borrow from, repay and borrow again, usually with a variable rate and a draw period followed by a repayment period. See HELOCs and home equity.

Higher-priced mortgage loan (HPML)

A loan whose APR is at least 1.5 percentage points above the APOR (a benchmark rate) for a first mortgage, 2.5 points for a jumbo first mortgage, or 3.5 points for a second mortgage (subordinate lien). HPMLs come with extra consumer protections, such as escrow and appraisal requirements.

Home equity loan

A loan, usually a second mortgage, that gives you a lump sum against your home's equity, repaid on a set schedule and often at a fixed rate.

Home inspection

An examination of a home's condition by an inspector you hire. Unlike an appraisal, it's for your benefit, to help you decide and negotiate.

Homeowners association (HOA) dues

Fees paid to a community or condo association. Lenders include them in your monthly housing payment for qualifying.

Homeowners insurance

Insurance covering damage to the home and liability. Lenders require it, and it's part of your monthly payment if you escrow.

Homeowners Protection Act (HPA)

A federal law giving borrowers on many conventional loans the right to request cancellation of private mortgage insurance (PMI) at 80% of the home's original value and requiring automatic termination at 78%, or at the loan's midpoint, if you're current.

Homestead exemption

A property tax exemption for your primary residence. In Georgia, the traditional filing deadline is April 1, and the Department of Revenue says you may apply through the end of your 45-day window to appeal your assessment notice; you must have owned the home as of January 1 for the current year.

Housing counselor

A HUD-approved counselor who can help with budgeting, homebuying and avoiding foreclosure, often at low or no cost.

Index

A published benchmark rate that an ARM or HELOC rate is tied to. Your rate equals the index plus a margin (a set amount the lender adds), subject to caps (limits on how much it can change).

Intangible recording tax

A Georgia tax collected when the security deed (the document pledging your home for a long-term loan) is recorded: $1.50 per $500 of the note amount, capped at $25,000 per note.

Interest-only

A loan feature where payments cover only interest for a set period, so the balance doesn't decrease. Interest-only loans aren't qualified mortgages.

Interested party contribution (IPC)

Money a seller, builder or other party with a financial interest in the sale pays toward your closing costs, prepaids or buydown. Each loan program caps these contributions.

ITIN

An Individual Taxpayer Identification Number, issued by the IRS for federal tax purposes to people not eligible for a Social Security number. See ITIN mortgage loans.

Jumbo loan

A loan larger than the conforming loan limit, so it can't be sold to Fannie Mae or Freddie Mac. See jumbo loans.

Lender credit

Money from the lender toward your closing costs in exchange for a higher interest rate. It's the opposite of paying discount points.

Lien

A legal claim against a property that secures a debt. Your mortgage is a lien on your home.

Lien position

The order in which liens are paid if a property is sold or foreclosed on. Your original mortgage is usually first; a HELOC is usually second.

Loan Estimate (LE)

A standardized three-page form showing your estimated loan terms and costs. Lenders must deliver it within three business days of receiving your application.

Loan-level price adjustment (LLPA)

A pricing adjustment Fannie Mae and Freddie Mac apply based on risk factors such as credit score, loan-to-value, occupancy and loan purpose.

Loan officer

A licensed mortgage professional who takes your application and helps you choose a loan. You can verify a loan officer's license on NMLS Consumer Access.

Loan-to-value (LTV)

Your loan amount divided by the property's value or purchase price, whichever the program uses. Lower LTV generally means better options.

Lock (rate lock)

A lender's commitment to hold a rate and price for a set period while your loan is processed. If it expires before closing, an extension may cost extra.

M–P

Margin

The fixed percentage a lender adds to the index (a published benchmark rate) to set an ARM's or HELOC's rate.

Mortgage insurance (MI)

Insurance that protects the lender if a borrower stops paying (defaults). Conventional loans use private mortgage insurance; FHA loans use MIP; VA loans have a funding fee instead; USDA loans have guarantee fees.

NMLS

The Nationwide Multistate Licensing System, where mortgage companies and loan officers are registered. NMLS Consumer Access lets you look up licenses.

Non-QM

A loan that doesn't meet the federal standards for a qualified mortgage (QM), often used for alternative income documentation like bank statements or DSCR. See Non-QM loans.

Note

Your written promise to repay the loan, stating the amount, rate and terms.

Note rate

The interest rate stated on your note. It's used to calculate your principal and interest payment, unlike the APR.

Origination charges

Fees the lender charges to make the loan, shown in section A of the Loan Estimate.

PITI and PITIA

Your full housing payment: principal, interest, taxes and insurance, plus association dues (the A) where applicable.

Prepaids

Costs paid at closing in advance of when they're due, such as the first year of homeowners insurance, prepaid interest and the first deposit into your escrow account.

Prepayment penalty

A fee for paying off a loan early. Federal rules restrict them on many home loans, but they're common on investor loans such as DSCR.

Preapproval

A lender's review of your credit and financial documents to estimate what you can borrow. The CFPB notes lenders use the term differently and that it isn't a loan offer or commitment to lend.

Prequalification

An early estimate of what you might borrow, often based on information you provide without full verification. Like a preapproval, it isn't a loan offer or commitment to lend.

Principal

The amount you borrowed, or the remaining unpaid balance.

Private mortgage insurance (PMI)

Mortgage insurance on a conventional loan, generally required when the loan is above 80% of the home's value. It can be canceled by request at 80% of original value and ends automatically at 78% under the Homeowners Protection Act, if conditions are met.

Processor

The person who organizes your loan file, orders checks of your job, income and assets, and gathers documents for the underwriter.

Property taxes

Taxes assessed by local governments on real estate, usually paid through your escrow account.

Purchase agreement

The contract between buyer and seller setting the price, deadlines, contingencies and closing date.

Q–S

Qualified mortgage (QM)

A loan that meets federal standards designed to make it more likely you can afford it, such as no interest-only periods, no negative amortization (where the balance grows), no terms over 30 years, generally no balloon payments, and limits on points and fees.

Rate-and-term refinance

Replacing your mortgage to change the rate, the term or both, without taking significant cash out.

Recording fees and taxes

Government charges to record your deed and security instrument in public records. Georgia, Alabama and Florida each have their own recording taxes and fees.

Rescission (right of)

Your right to cancel certain refinances and home equity loans on your primary residence until midnight of the third business day after the latest of closing, receiving the notice and receiving the required disclosures. It doesn't apply to purchase loans.

Reserves

Money left in your accounts after closing, often measured in months of housing payments. Some loans require it, especially for investment properties.

Residual income

The money left each month after your major obligations. VA uses residual income guidelines, and it's one of the factors under the Ability-to-Repay rule.

Reverse mortgage

A loan for older homeowners that converts home equity into cash without monthly principal and interest payments; the balance grows over time, and you must keep paying property taxes, insurance and upkeep. FHA's version is the Home Equity Conversion Mortgage (HECM), for borrowers 62 and older.

Seasoning

How long you've owned a property or had a loan, or how long funds have been in your account. Many refinance and asset rules have seasoning requirements.

Second home

A property you occupy part of the year, separate from your primary residence. It's treated differently than an investment property.

Security instrument

The document that pledges your home as security for your loan, so the lender can take it if the loan isn't repaid. Georgia uses a security deed; Alabama and Florida use a mortgage.

Self-employed borrower

Under Fannie Mae's guidelines, a borrower with a 25% or greater ownership interest in a business. See the self-employed borrower guide.

Seller concessions

Costs the seller agrees to pay on your behalf, such as closing costs or a buydown. They're a type of interested party contribution and are capped by the loan program.

Servicer

The company that collects your payments, manages your escrow account and handles questions after closing. It may be different from the lender that made your loan.

Settlement agent

The person or company that conducts the closing and disburses funds. In Georgia, that's the closing attorney.

Subordination

An agreement by a lender with a claim on your home, such as a HELOC lender, to keep its claim (lien) behind a new first mortgage when you refinance.

Survey

A drawing that shows the property's boundaries, buildings and other improvements, anything crossing the line (encroachments) and any rights others have to use part of the land (easements).

T–Z

Title

Legal ownership of a property.

Title insurance

Insurance that protects against covered problems with ownership, such as unknown claims against the property (liens) or errors in public records. A lender's policy protects the lender; an optional owner's policy protects you.

Title search

A review of public records to confirm the seller's ownership and identify liens or other issues before closing.

TRID

The TILA-RESPA Integrated Disclosure rule, which created the Loan Estimate and Closing Disclosure and their timing requirements. The CFPB calls it "Know Before You Owe."

Underwriter

The professional who decides whether your loan meets the program's guidelines and sets the conditions for approval.

Underwriting

The process of evaluating your credit, income, assets and the property to decide whether to approve the loan.

Underwriting conditions

Items the underwriter needs before final approval, such as an updated pay stub or an explanation for a deposit.

USDA guarantee fee

Fees charged on USDA guaranteed loans: an upfront fee that can usually be financed, plus an annual fee paid monthly.

USDA loan

A home loan guaranteed by the U.S. Department of Agriculture for eligible rural and suburban areas, with income limits. See USDA loans.

VA entitlement

The amount VA will guarantee on your loan. With full entitlement, VA doesn't set a loan limit, though your lender still decides how much you can borrow; with partial entitlement, county limits affect your remaining entitlement.

VA loan

A home loan guaranteed by the Department of Veterans Affairs for eligible veterans, service members and certain surviving spouses. See VA loans.

Verification of employment (VOE)

Confirmation of your job and income, written or verbal, often completed again shortly before closing.

Walk-through (final)

Your last look at the home before closing to confirm its condition and any agreed repairs.

Wire fraud

A scam where criminals send fake wiring instructions, often by email, to steal closing funds. Always confirm wiring instructions by calling a phone number you know is genuine.

Related loan programs