Ability-to-Repay (ATR)

Federal rule requiring mortgage lenders to verify a borrower's ability to repay before originating a consumer-purpose loan.

APR (Annual Percentage Rate)

Total cost of a mortgage expressed as a yearly rate, including interest plus most loan fees and mortgage insurance.

ARM (Adjustable-Rate Mortgage)

Mortgage with a rate that changes periodically after an initial fixed period. Common formats: 5/1, 7/1, 10/1.

Cash-Out Refinance

Refinancing your existing mortgage into a larger loan and taking the difference in cash. Used to access home equity.

Closing Costs

Fees and charges paid at closing in addition to the down payment. Typically 2-5% of loan amount.

CLTV (Combined Loan-to-Value)

All liens against the property combined, divided by property value. Used when you have a first mortgage plus a HELOC or second.

Conventional Loan

Mortgage not insured or guaranteed by the federal government. The standard mortgage product, sold to Fannie Mae or Freddie Mac.

Down Payment

Cash you put toward the home purchase, expressed as a percentage of price. The rest is financed via mortgage.

DPA (Down Payment Assistance)

Programs that provide grants, forgivable loans, or deferred-payment seconds to help with down payment and closing costs.

DTI (Debt-to-Income Ratio)

Your monthly debt payments divided by gross monthly income. The primary qualification metric for most mortgage programs.

Escrow

A separate account held by the lender to pay property taxes and homeowner's insurance from monthly mortgage payments.

FHA Loan

Government-insured mortgage with low down payment (3.5%) and flexible credit (580+ FICO). Insured by HUD.

Fixed-Rate Mortgage

Mortgage with the same interest rate for the entire loan term. Most common is 30-year fixed.

HELOC (Home Equity Line of Credit)

Revolving credit line secured by your home equity. Lets you borrow against equity without refinancing your first mortgage.

Jumbo Loan

Mortgage with loan amount above the county conforming loan limit. Held in lender portfolios or securitized privately.

LTV (Loan-to-Value)

Loan amount divided by property value, expressed as a percentage. Lower LTV usually means lower rate and easier qualification.

MIP (Mortgage Insurance Premium)

FHA's version of mortgage insurance. Includes both an upfront premium and an annual premium for the life of the loan if down < 10%.

Non-QM (Non-Qualified Mortgage)

Mortgages that fall outside Qualified Mortgage rules — typically used for self-employed, foreign-national, or investor borrowers.

Note Rate

The actual interest rate written on your mortgage promissory note — the rate used to calculate your monthly payment.

Origination Fee

Lender's fee for processing the loan, typically expressed as a percentage of loan amount (1 point = 1%).

PITIA

Principal + Interest + Taxes + Insurance + HOA dues. The full monthly housing payment used in DTI calculations.

PMI (Private Mortgage Insurance)

Insurance the borrower pays on conventional loans with less than 20% down, protecting the lender against default loss.

Points (Discount Points)

Optional upfront payment to the lender to reduce your interest rate. One point equals 1% of loan amount.

Pre-Approval

A conditional commitment from a lender stating you qualify for a specific loan amount based on your verified credit, income, and assets.

Qualified Mortgage (QM)

A category of mortgages meeting CFPB safety standards: limits on points/fees, no risky features, and a verified ability-to-repay analysis.

Rate-and-Term Refinance

Refinancing to lower the rate or change the term, without taking cash out. Lower closing costs than cash-out.

Reserves

Liquid assets you have remaining after closing, expressed in months of housing payments. Lenders verify reserves to confirm ability to weather hardship.

Underwriting

The lender's formal evaluation of your loan application — credit, income, assets, and the property — to decide whether to approve.

USDA Loan

Mortgage guaranteed by the USDA for low-to-moderate-income buyers in eligible rural and suburban areas. Zero down.

VA Loan

Mortgage guaranteed by the Department of Veterans Affairs for eligible veterans and active-duty service members. Zero down, no monthly mortgage insurance.