🏡 Mortgage Glossary
A helpful reference for anyone going through the mortgage process—whether it’s your first home or your fifth. These are the terms you’ll hear during the loan journey, including a few surprises that mo
Essential Mortgage Terms
Amortization
The gradual repayment of a loan through monthly payments of principal and interest over time.
Annual Percentage Rate (APR)
The true yearly cost of borrowing, including interest and certain fees. More accurate than just the interest rate when comparing loans.
Appraisal
An independent estimate of a home’s value, used to confirm the property supports the loan amount.
Assets
Money or things of value you own—checking and savings accounts, investments, retirement funds—that help qualify you for a loan.
Automated Underwriting System (AUS)
A software system (like Fannie Mae’s DU or Freddie Mac’s LPA) that instantly analyzes your financial data to approve or deny your application.
Closing Costs
Upfront fees paid at settlement—covering things like lender fees, title insurance, and taxes—on top of your down payment.
Credit Report
A detailed history of your debts, payments, accounts, and inquiries, pulled from Equifax, Experian, and TransUnion.
Credit Score
A three-digit score that helps predict how likely you are to repay your loan on time. Most mortgage programs require minimum scores.
Debt-to-Income Ratio (DTI)
The percentage of your gross monthly income that goes toward debt payments (including your future mortgage).
Down Payment
The initial amount you pay toward your home’s purchase price, not financed by the mortgage.
Earnest Money
A deposit made with your offer to show good faith. Held in escrow and applied to your closing costs or down payment.
Escrow
An account used to pay your property taxes and homeowners insurance monthly, along with your mortgage payment.
Fixed-Rate Mortgage
A loan with an interest rate that doesn’t change for the entire term. Predictable and stable.
Homeowners Insurance
Coverage that protects your property against damage or loss. Required by lenders.
Loan Estimate
A standardized form that outlines your potential mortgage terms, monthly payments, and closing costs. Given within three days of applying.
Loan-to-Value Ratio (LTV)
The loan amount divided by the home’s value. A higher LTV can trigger mortgage insurance or limit loan options.
Mortgage Insurance (PMI or MIP)
Required when your down payment is under 20% (for most loans). Protects the lender if you default.
Pre-Approval
A lender’s preliminary approval based on credit, income, and assets. Stronger than pre-qualification and often required to make an offer.
Principal
The base amount of money you borrow—not including interest.
Rate Lock
A guarantee from the lender that your interest rate will stay the same for a set period, even if rates rise.
Reserves
Cash or liquid assets left over after closing. Often required as a safety net—usually expressed in months of payments.
Title Insurance
Protects against errors or issues in the property’s ownership history.
Underwriting
The behind-the-scenes process where a loan officer or underwriter reviews your full file to decide if you meet the guidelines.
Lesser-Known & Surprising Terms
CAIVRS (Credit Alert Verification Reporting System)
A federal system that flags applicants who’ve defaulted on government-backed loans (like FHA or student loans). Being listed can block your loan.
Cash Reserves
Beyond what you pay at closing, lenders may require that you have funds left over—typically 2–6 months of future mortgage payments.
Credit Supplement
Used by lenders to correct or clarify items on your credit report when documentation is missing or disputed.
Deed Restrictions
Limitations on how the property can be used—sometimes surprising. These are reviewed during underwriting, not just at title.
Disputed Accounts
Accounts labeled “in dispute” on your credit report can delay or prevent loan approval. Clearing them early can save time.
Gift Letter
A document signed by a family member or donor confirming that money gifted for your down payment is not a loan and does not need to be repaid.
Large Deposits
Big or out-of-the-ordinary deposits must be sourced—meaning you’ll need to show where the money came from (payroll, sale, gift, etc.).
Manual Underwrite
When a loan isn’t eligible for automated approval and must be reviewed manually. Guidelines are stricter and documentation more detailed.
NSF Activity (Non-Sufficient Funds)
Recent overdrafts or bounced checks in your bank statements can be seen as signs of financial instability—even if you have good credit.
Occupancy Misrepresentation
Claiming you’ll live in the home as a primary residence when you really intend to rent it out is mortgage fraud—and underwriters are trained to catch the signs.
Payday Loans / Cash Advances
Even if paid off, these can raise red flags for some lenders. They often suggest financial distress.
PITIA
The full monthly housing cost: Principal, Interest, Taxes, Insurance, and Association (HOA) dues. All included in your DTI calculation.
Rapid Rescore
A service that can update your credit score quickly after you pay off a debt or correct an error. Useful, but not always available.
Seasoned Funds
Money that’s been in your account for at least 60 days. New or undocumented funds can’t always be counted toward qualification.
Trailing Co-Borrower Income
Income from a co-borrower who won’t live in the home right away may not count unless future relocation is documented.
Bookmark this page as your personal glossary!
If you’re preparing to apply for a mortgage—or just want to understand what your lender is talking about—this guide has you covered.