Mortgage & Real Estate Glossary

A mortgage loan where the interest rate can change periodically based on market conditions. Common types include 5/1, 7/1, and 10/1 ARMs.

The process of paying off a debt over time through regular payments. Each payment covers both principal and interest, with the principal portion increasing over time.

The yearly cost of a mortgage including interest rate, points, broker fees, and other costs. APR provides a more complete picture of loan costs than interest rate alone.

A professional estimate of a property's market value conducted by a licensed appraiser. Required by lenders to ensure the loan amount doesn't exceed property value.

The final step in the home buying process where ownership is officially transferred from seller to buyer and the mortgage loan is finalized.

Fees and expenses paid at closing, typically 2-5% of the loan amount. Includes appraisal fees, title insurance, attorney fees, and lender charges.

A mortgage that meets the criteria to be purchased by Fannie Mae or Freddie Mac. For 2025, the limit is $1,089,300 in Orange County.

A mortgage not insured by a government agency (FHA, VA, USDA). Typically requires higher credit scores but offers competitive rates and terms.

A numerical representation of creditworthiness, typically ranging from 300-850. Higher scores generally qualify for better mortgage rates and terms.

The percentage of gross monthly income that goes toward debt payments. Most lenders prefer DTI below 43% for conventional loans.

The upfront cash payment made when purchasing a home, typically expressed as a percentage of the purchase price. Can range from 0% to 20% or more.

A deposit made to demonstrate serious intent to purchase a home. Typically 1-3% of purchase price, held in escrow and applied toward down payment at closing.

A neutral third party that holds funds or documents until certain conditions are met. Also refers to the account for property taxes and insurance payments.

A mortgage insured by the Federal Housing Administration, allowing lower down payments (3.5%) and credit scores (580+) but requiring mortgage insurance.

A mortgage where the interest rate remains the same for the entire loan term, providing predictable monthly payments.

Home Equity Line of Credit - a revolving credit line secured by home equity, allowing borrowers to access funds as needed up to a credit limit.

The difference between a home's current market value and the outstanding mortgage balance. Equity builds through payments and property appreciation.

The percentage charged by a lender for borrowing money, typically expressed as an annual rate. Affects monthly payment amount.

A mortgage that exceeds conforming loan limits. In Orange County for 2025, any loan over $1,089,300 is considered jumbo.

The percentage of a property's value that is financed. Calculated by dividing loan amount by property value. Lower LTV typically means better rates.

Insurance that protects lenders if borrowers default. Required for conventional loans with less than 20% down (PMI) and all FHA loans (MIP).

Nationwide Multistate Licensing System - the system that licenses and tracks mortgage loan originators. All MLOs must have an NMLS number.

A fee charged by lenders for processing a mortgage application, typically 0.5% to 1% of the loan amount.

Principal, Interest, Taxes, and Insurance - the four components of a typical monthly mortgage payment.

Fees paid to lenders at closing to reduce the interest rate. One point equals 1% of the loan amount and typically reduces the rate by 0.25%.

A lender's conditional commitment to loan money based on preliminary review of finances. More reliable than pre-qualification.

The original amount of money borrowed or the remaining balance on a loan, not including interest.

Insurance required on conventional loans with less than 20% down payment. Can be removed once equity reaches 20%.

An agreement that guarantees a specific interest rate for a certain period, typically 30-60 days, protecting against rate increases during processing.

Replacing an existing mortgage with a new loan, typically to get a better interest rate, change loan terms, or access home equity.

Insurance that protects buyers and lenders against losses from defects in property title, such as liens or ownership disputes.

The process where lenders evaluate a borrower's creditworthiness and the property's value to determine loan approval and terms.

A mortgage guaranteed by the Department of Veterans Affairs for eligible veterans, active military, and surviving spouses. Offers 0% down payment.