Mortgage Glossary


1003 — Loan Application

Form 1003, also known as, the Uniform Residential Loan Application, provides all the information necessary to determine if an applicant can qualify for a loan.

1040 — Personal Income Tax Return

Form 1040 is the standard personal federal income tax return form. It outlines income, deductions and credits for calculating federal income tax purposes. It is used in income documentation loan files to ensure that the borrower can meet the loan obligations. This form, along with other income proving documents (W2, 1099's, etc) work together to paint the overall income related picture for an underwriter.

5/1 ARM — Adjustable Rate Mortgage

A 5/1 adjustable rate mortgage (ARM) or 5-year ARM is a mortgage loan where “5” is the number of years your initial interest rate will stay fixed. The “1” represents how often your interest rate will adjust after the initial five-year period ends. The most common fixed periods are 3, 5, 7, and 10 years and “1,” is the most common adjustment period. It’s important to carefully read the contract and ask questions if you’re considering an ARM.


AE — Account Executives

This is the person that is responsible for the relationship between two organizations, generally a lender and broker. He/she works as a liaison to ensure the relationship grows and flourishes. This person is the first point of contact for issues and concerns as the account executive knows the hierarchy of his/her organization and can escalate issues/concerns appropriately.

ALTA — American Land Title Association

A national trade association made up of members who search, review, and insure land titles to protect home buyers and mortgage lenders who invest in real estate. Alta members range from attorneys to lenders to builders and everything in between. Their mission is to facilitate the transfer of real estate by acting in an efficient and experienced manner.

AMC — Appraisal Management Company

An Appraisal Management Company (AMC) works with a pool of independent appraisers to facilitate appraisals in the mortgage industry. It is important to use an AMC in mortgage lending because it sets the appraiser away from the lender, broker and borrower. AMC organizations work using USPAP (Uniform Standards of Professional Appraisals Practices) guidelines so that appraisals are honest and true.

APP — 1003 — Application

The standard application form is the Uniform Residential Loan Application or Form 1003 (pronounced 'ten o three'). This form provides all the information necessary to determine if an individual can qualify for a loan. It includes information pertaining to the type of mortgage the borrower would like, the property, the borrower, such as, date of birth, social security number, employment history, monthly income and expenses, and assets and liabilities. Typically this form is filled out on the borrowers behalf by a loan officer using information provided by the borrowers. It is then reviewed by the borrowers and then signed by both the loan officer and borrowers.

APR — Annual Percentage Rate

The amount a loan will cost the borrower over one year expressed in a percentage. The APR takes into account not only the interest rate but points, and flat dollar charges by the lender as well. This does not include payments to third parties. APR's can vary dependent on current interest rates, the borrowers credit history, and the length of the term. It is important to understand that the APR is not the note rate.

ARES — American Real Estate Society

ARES is a global organization of real estate leaders. They aim to foster communication within the business and encourage research and education in real estate. Since their organization in 1985 they have developed several estate journals and a yearly summit that features hundreds of research presentations, panels sessions, doctoral seminar, and 'critical issues' seminar. ARES has also aided in the organization of seven real estate 'sister' societies.

ARM — Adjustable Rate Mortgage

A type of mortgage that starts with a fixed interest rate but after a designated amount of time, which can range from 1 month to more than 5 years, the interest rate is adjusted. Most ARMs are adjusted every 6 months to 1 year. The time frame between rate changes is call the adjustment period. Such mortgages often start out with lower interest rates than traditional, fixed rate, loans. Whether or not the rate changes and by how much is dependent on the index an the margin. The index is how much interest is being paid on the loan. If interest rates go up your rates will also go up. on the contrary, if interest rates go down it is possible that your rates could go down. However, not all ARMs adjust downward. Lenders most commonly base their rates on 1-year constant-maturity Treasury securities (CMT), Cost of Funds Index (COFI), or London Interbank offered Rate (LIBOR). The margin is the amount that the lender adds. Some lenders will use your credit report as a measure to influence the Margin percentage. The better your credit the less margin the lender tact's on.

There are typically interest rate caps put in place to prevent rates from getting too high. There are two types of interest rate caps, a periodic adjustment cap and a lifetime cap. The periodic adjustment cap limits the percentage that your rate can change per adjustment period. Most often this is a cap of 1-2%. The lifetime cap limits the amount that your interest rate changes over the length of the loan.

Like many things in life, not all ARMs are created equal. There are several types of ARM's. There are traditional ARMs that has a short fixed period before the first adjustment period. There are also hybrid arms that have a longer fixed period. Most commonly you will see 3/1 or 5/1 ARMs. This means that the fixed period is 3 or 5 years. The 1 signifies that the rate may be adjusted only once every year. There is also an interest-only ARM. This allows you to pay only the interest for a specified number of year. After which time payments will increase regardless of interest rates. A payment-option ARM allows you to chose one of several payment options. These options include; traditional principle and interest payments, interest only payments, and minimum payments.

ASA — American Society of Appraisers

What once was The American Society of Technical Appraisers (ASTA) and The Technical Valuation Society (TVS) merged in 1852 to become the American Society of Appraisers. ASA is an organization of accredited appraisers, from a large array of disciplines, who aim to promote trust of the appraisal process and its professionals among the public.

ASHI — American Society of Home Inspectors

ASHI was established in 1976 by a group of home inspectors in order to encourage awareness and professionalism within the field. ASHI works to set rigorous home inspection standards and to promote continued education among it's members.

ATR — Ability To Repay

Ability to Repay is a standard implemented in 2010 by the Consumer financial Protection Bureau as part of the Dodd-Frank Act. Before extending a loan, lenders must make a reasonable determination as to whether the borrower will have a reasonable ability to repay the debt within the terms of the loan. This determination is based off of eight factors; the borrowers current income and assets, employment status, Monthly payment of mortgage obligations, monthly payment on subsequent loans, current debt obligations, Debt-to-income ratio, and the expected payment of the covered transaction. This standard was put into place to help minimize the number of foreclosures. Lenders cannot loan to borrowers that do not have the financial capacity to repay. If a loan meets the afore mentioned standards it is considered a qualified mortgage.

AUS — Automated Underwriting System

Mortgage lenders often use a computer system to help immediately assess a borrower's suitability for a home loan. These automated underwriting systems evaluate a borrower's credit, finances and more. Getting approval from one of these systems can help veterans move through the loan process faster and with more flexible requirements. Unlike the USDA loan program, the VA loan program does not currently have its own automated underwriting system.

AVM — Automated Valuation Model

The use of mathematical modeling to value properties by comparing the values of similar properties in the same area at the same point in time. The AVM can be faulty in that it doesn't take into account the condition of the property and assumes it is comparable to others in the area. This can magnify the value of a sub-par property or undervalue a superior property. AVMs are sometimes used by lenders instead of traditional appraisals. AVMs can also be useful to consumers as it can give a rough estimate to what your home is worth when looking at purchasing a new property.


Amortization means paying off a loan with regular payments over time, so that the amount you owe decreases with each payment. Most home loans amortize, but some mortgage loans do not fully amortize, meaning that you would still owe money after making all of your payments.

Some home loans allow payments that cover only the amount of interest due, or an amount less than the interest due. If payments are less than the amount of interest due each month, the mortgage balance will grow rather than decrease. This is called negative amortization. Other loan programs that do not amortize fully during the loan may require a large, lump sum “balloon” payment at the end of the loan term. Be sure you know what type of loan you are getting.

Amount Financed

The amount of money you are borrowing from the lender, minus most of the upfront fees the lender is charging you

Annual Income

A factor in a mortgage loan application and generally refers to your total earned, pre-tax income over a year. Annual income may include income from full-time or part-time work, self-employment, tips, commissions, overtime, bonuses, or other sources. A lender will use information about your annual income and your existing monthly debts to determine if you have the ability to repay the loan.

Whether a lender will rely upon a specific income source or amount when considering you for a loan will often depend upon whether you can reasonably expect the income to continue.


Mortgage appraisals help determine the fair market value of a property by comparing it to nearby homes that have sold recently. An appraisal is a written document that shows an opinion of how much a property is worth. The appraisal gives you useful information about the property. It describes what makes it valuable and may show how it compares to other properties in the neighborhood. An appraisal is an independent assessment of the value of the property.

The VA appraisal also aims to help ensure veterans are purchasing homes that are safe, structurally sound and sanitary. To that end, VA appraisers also look at a broad range of property condition guidelines, known as the Minimum Property Requirements. Lenders can also have their own property condition guidelines.

The VA appraisal is not as in-depth as a home inspection and should not be considered a substitute for one. A home inspection is also recommended, as it can provide a more thorough look at a property’s structural integrity and major systems.

Appraisal Fee

The cost of a home appraisal of a house you plan to buy or already own. Home appraisals provide an independent assessment of the value of the property. In most cases, the selection of the appraiser and any associated costs is up to your lender.

Automatic Payment

Automatic payments allow you to set up recurring mortgage payments through your bank. Automatic payments can be a convenient way to make sure that you make your payments on time.


BAH — Basic Allowance for Housing

A monthly allowance to help qualified active duty service members cover housing expenses. Mortgage lenders can count BAH as effective income toward qualifying for a mortgage. Housing allowances can help defray or entirely cover monthly mortgage payments.

BFP — Bona Fide Purchaser

A legal term used to refer to a innocent party who purchases property without knowledge of any other party's claim to the title of that property. If problems arise, the BFP will keep the property and the third party must look to the fraudulent seller for compensation.

Balloon Loan

For mortgages, a balloon loan means that the loan has a larger-than-usual, one-time payment, typically at the end of the loan term. This one-time payment is called a “balloon payment, and it is higher than your other payments, sometimes much higher. If you cannot pay the balloon amount, you might have to refinance, sell your home, or face foreclosure.

Bi-weekly Payment

In a bi-weekly payment plan, the mortgage servicer is collecting half of your monthly payment every two weeks, resulting in 26 payments over the course of the year (totaling one extra monthly payment per year). By making additional payments and applying your payments to the principal, you may be able to pay off your loan early. Before choosing a bi-weekly payment, be sure to review your loan terms to see if you will be subject to a prepayment penalty if you do so. Check if your servicer charges any fees for a bi-weekly payment plan. You may be able to accomplish the same goal without the fee by making an extra monthly mortgage payment each year.

Buyer's Agent

The real estate agent who represents the homebuyer


CAIVRS — Credit Alert Verification Reporting System

CAIVRS is a database, maintained by HUD, that provides information to approved financial institutions of federal default by potential borrowers. CAIVRS is one of the components of processing a loan application. It is used to further determine a borrowers creditworthiness.

CAM — Common Area Maintenance

The amount of additional rent charged to a tenant to maintain the common areas of a property which benefits all tenants. Common areas can be parking lots, lobbies, lawns, or any other area on the premise that is not owned by an individual owner. This is most often found in condominium and apartment complexes.

CBWR — Co-Borrower

A secondary applicant who shares the responsibility of the mortgage. A co-borrower can be used if one individual does not have a suitable debt-to-income ratio. The co-borrower's income as well as debts will be included when calculating the DTI. They will also need to have a satisfactory credit score and not have defaulted on any government loans.

CLTV — Combined Loan-To-Value

The total percentage of all of the loans on the property to the value of the property. This is calculated by dividing the sum of all loans on the property by the value of the property. CLTV is used by lenders to determine risk of default by the borrower.

CO — Certificate of Occupancy

A document issued by the local government certifying that a building is in compliance with all building codes and laws. This document indicates that the building is suitable to live in.

COE — Certificate of Eligibility

A certificate of eligibility is needed when applying for a VA loan. The COE signifies that one is eligibility to be backed by the VA. you can apply for a COE online, through a lender, or by mail. In order to receive a COE evidence must be provided to show proof of eligibility. Veterans and national Guard or Reserve members who have been activated, both current and former, are required to provide a copy of DD Form 214 showing the individual of service and reason for separation. Active Duty members and those National guard and Reserve members who have never been activated must have a statement of service signed by the personnel office or the commander of the unit complete with their full name, SSN, date of birth, date of active duty entry, duration of any lost time, and the name of the command providing the information. Discharged members of the National Guard must provide NGB Form 22 or NGB Form 23. Discharged Members if the Selected Reserve shall provide a copy of their last annual retirement points statement and evidence of honorable service.

A Surviving spouse of service members killed on duty or because of disability related to service are also eligible for a COE they must provide a copy of VA Form 21-534. If the spouse does not receive Dependency & Indemnity Compensation a copy of DD Form 214, Marriage License, and death certificate or DD Form 1300 must also be provided.

CPL — Closing Protection Letter

A Closing Protection Letter is a contract between the lender and the title company that protects the lender should the closing agent make and error or participate in fraudulent and/or negligent activities. The title insurance company will step in if circumstances arise and cover all necessary remedial funds to the lender.

CTC — Clear To Close

Clear to close is one of the final stages before your loan is funded. CTC means that the underwriter has reviewed and approved all necessary documents. Now it is time to schedule your closing, which can generally be as soon as three business days after you receive the CTC. During this time updates will be made with your insurance company and the final HUD-1 will be drafted. You will also be informed of the final amount of the closing costs.

Cash-Out Refinance

This refinance loan allows qualified veterans to refinance and take out cash from the equity in their home. Borrowers can typically look to refinance up to 90 percent of their home's value. Underwriting guidelines for a VA Cash-Out refinance can vary by lender and the borrower's individual circumstances.

Closing Costs

All of the costs you will pay at closing. This includes origination charges, appraisal fees, credit report costs, title insurance fees, and any other fees required by your lender or paid as part of a real estate mortgage transaction. Lenders are required to provide a summary of these costs to you in the Loan Estimate.

Closing costs typically range from 3 to 5 percent of the loan amount. The VA limits what lenders can charge veterans. Sellers can pay all of a VA buyers loan-related closing costs and up to 4 percent in concessions, which can cover things like prepaid property taxes and homeowners insurance; paying off collections and judgments at closing; and more.

Closing Disclosure

This five-page form shows buyers the final details of their home purchase, including costs and fees. Buyers should receive the Closing Disclosure at least three business days before their loan closing. You can compare it to the Loan Estimate you received earlier in the mortgage process to see how costs and fees might have changed. Talk with your loan officer if you have any questions about your Closing Disclosure.

Closing Docs

Signing the closing documents in front of a notary is one of the last steps before your loan is funded. These documents typically include the Loan Note, Mortgage or Deed of Trust, HUD-1, Title Insurance Policy, and Truth in Lending Disclosure. The Loan Note provides a detailed description of the terms of the loan including the total loan amount, interest rate, term of the loan, amount of the payments, and other information relevant to the repayment of the loan. The Mortgage or Deed of Trust is a contract offering your home as collateral for not repaying your loan. The HUD-1 details the total cost of obtaining the loan including closing fees and fees charged by the lender. The Title Insurance Policy protects you and the lender against financial loss if a problem were to arise in the future with the title. The Truth in Lending Disclosure is the final version of the same document previously provided. If purchasing a new home a Deed Transfer will also be included in the closing documents. The deed transfer is a document that is signed by both the buyer and the seller documenting that there has been a legal change of ownership.

Co-Signer or Co-Borrower

Someone who agrees to take full responsibility to pay back a mortgage loan with you. This person is obligated to pay any missed payments and even the full amount of the loan if you don’t pay. Some mortgage programs distinguish a co-signer as someone who is not on the title and does not have any ownership interest in the mortgaged home. Having a co-signer or co-borrower on your mortgage loan gives your lender additional assurance that the loan will be repaid. But your co-signer or co-borrower’s credit record and finances are at risk if you don’t repay the loan.

Comparable Sales

They're better known as 'comps.' These are recently sold properties that are similar in size, location and other key facets to a home being purchased. Appraisers will evaluate the fair market value of a property using recent comparable home sales. Unique properties that lack at least one good comp might not be workable for VA lenders.

Compensating Factors

These are strengths on a loan application that can help offset lender concerns about a borrower's credit or financial weaknesses. Low debt, great credit history and liquidity are all examples. Compensating factors must go above and beyond what would be considered a normal program requirement.

Conditional Approval

There are multiple stages of the underwriting process, and getting a conditional approval on your file is a common initial outcome. This typically means underwriters don't see immediate red flags, but they will need additional documents or information before being able to green light the loan file for closing. Those requests for additional information are known as conditions.

Conforming Loan Limit

Fannie Mae and Freddie Mac can only purchase or guarantee mortgages below what's known as the conforming loan limit. This limit can change every year and is higher in more expensive housing markets. Fannie and Freddie do not purchase or guarantee VA loans, but the VA loan program currently uses the one-unit conforming loan limit for VA's loan limits.

Construction Loan

Usually a short-term loan that provides funds to cover the cost of building or rehabilitating a home.

Construction-to-Permanent Refinance Loan

This allows qualified borrowers to refinance a construction loan into a VA loan. Guidelines and requirements for this type of loan can vary by lender and other factors.

Conventional Loan

These loans feature no government guarantees but adhere to the standards and requirements of government-sponsored enterprises Fannie Mae and Freddie Mac. There's an array of conventional loan products out there, all requiring different down payments, credit scores, mortgage insurance and more.

Credit History

A record of your credit accounts and your history of paying on time as shown in your credit report. Consumer reporting companies, also known as credit reporting companies, collect and update information about your credit record and provide it to other businesses, which use it make decisions about you. Credit reports have information about your credit activity and current credit situation such as your loan paying history and the status of your credit accounts.

Credit Report

A record of an individuals past borrowing and repaying. This includes information about late payments, bankruptcy, and overall credit history. A credit report is used to establish a credit score. Often used by lenders to evaluate an individuals credit worthiness.

Credit Score

A number between 300-850 used to indicate an individuals creditworthiness. The high number the better credit. Lenders use this number in order to determine how likely an individual is to repay their debts. Most credit scores fall between 600 and 750. A score above 700 indicates good credit. Bad credit is represented by anything lower that 620. 30, 60, and, 90 day lates deduct points from your credit score while on time payments help to increase your credit score.



This Defense Department document is also known as the Certificate of Release or Discharge from Active Duty. The DD-214 typically allows Regular Military veterans to verify their service history for benefits and helps qualified borrowers obtain their Certificate of Eligibility. Reservists and National Guard members don't have a single discharge certificate like the DD-214. They'll often need to provide their latest annual retirement points summary along with evidence of their honorable service to establish eligibility for VA loan benefits.

DTI — Debt-to-Income Ratio

The ratio of the borrowers gross income to the debt owed. The expense amount is divided by the income amount. This results in a percentage. There are two types of DTI. the first is known as the front-end ratio. This indicates the percentage of income that is going towards housing expense's, such as PITI. The second type is known as the back-end ratio. This determines what percentage of income is used to pay debts. VA lending considers only the back-end ratio. The higher the percentage, regardless of the type of DTI used, the riskier the loan is for the lender. Caps on DTI ratio can vary by lender and other factors. VA buyers whose DTI ratio exceeds 41 percent need to meet a higher threshold for residual income.

Deed-in-Lieu of Foreclosure

An alternative to straightforward foreclosure. With a deed-in-lieu of foreclosure, the borrower basically returns the house to the bank without the need for court proceedings or a formal foreclosure process. A deed-in-lieu will negatively affect your credit score.


Another term for being late on your payments. Your loan can become delinquent when you miss a payment or don’t make a full payment by the due date. After you are delinquent for a certain period of time, a lender or servicer may begin the foreclosure process. The amount of time can vary by state. Federal rules may also apply to when the foreclosure may start.

Demand Feature

The Closing Disclosure has a statement that reads 'Your loan has a demand feature,' which is checked 'yes' or 'no.' A demand feature permits the lender to require early repayment of the loan.


A series of documents disclosing terms of the loan that will be provided to a borrower. Disclosures will be given a various points through out the process of taking out a mortgage. At the beginning of the application process you will receive a disclosure called the Truth in Lending disclosure, good faith estimate, and an initial escrow account disclosure.. At closing you will receive another disclosure, the HUD-1. These documents are required under RESPA.

Discount Points

Borrowers pay these to essentially buy a lower interest rate. A point is equal to 1 percent of the loan amount. Lenders might quote interest rates with and without points, so be sure to double check rates and points when comparing offers from multiple lenders. Paying points is relatively infrequent among most VA borrowers

Down Payment

The amount you pay toward the home upfront. You put a percentage of the home’s value down and borrow the rest through your mortgage loan. Generally, the larger the down payment you make, the lower the interest rate you will receive and the more likely you are to be approved for a loan.

Down Payment Programs of Grants

typically refers to assistance provided by an organization such as a government or non-profit agency, to a homebuyer to assist them with the down payment for a home purchase. The funds may be provided as an outright grant or may require repayment, such as when the home is sold.


EEM — Energy Efficient Mortgage

This specialized mortgage allows qualified veterans to borrow additional money to make energy-efficient improvements to a home they're purchasing or refinancing. With a VA Energy Efficient Mortgage, veterans can typically add up to $6,000 to the loan amount provided they can verify the cost of improvements or prove the efficiencies will result in savings.

These improvements typically need to be considered permanent to the property, and items like Energy Star appliances, air conditioning units and new roofs are not acceptable. Guidelines and policies regarding EEMs can vary by lender.

Earnest Money

This good-faith deposit is typically made as a buyer gets under contract and shows sellers they're serious about completing the purchase. There's no set amount for an earnest money deposit, and real estate agents are a good guide for what's common in a given market and price range. These funds are often held by a real estate brokerage or title company and can be put toward a down payment or closing costs.

The purchase contract will stipulate how the earnest money can be forfeited or refunded. VA buyers have an additional protection known as the VA Amendment to Contract, which allows buyers to keep their earnest money if they walk away from a deal because of a low appraisal.


The VA uses the word to mean the amount of money it will guarantee on a given loan. VA loan entitlement helps buyers determine how much of a down payment will be necessary, if any. There are two layers of entitlement: A basic level of $36,000, with a secondary or second tier that varies depending on the current VA loan limits.

Borrowers with their full VA loan entitlement can borrow as much as a lender will lend, all without needing to make a down payment.

Veterans with active VA loans and even those who've lost a VA loan to foreclosure can often look to purchase again using that second tier of entitlement. Entitlement isn't clearly reflected or explained on the Certificate of Eligibility, and a trusted lender can help you assess your entitlement situation and what might be possible.


The amount your property is currently worth minus the amount of any existing mortgage on your property.


An escrow account is set up by your mortgage lender to pay certain property-related expenses, like property taxes and homeowner’s insurance. A portion of your monthly payment goes into the account. If your mortgage doesn’t have an escrow account, you pay the property-related expenses directly.


FF — VA Funding Fee

A one time fee paid to the VA for the purchase of a loan. The amount of the fee is a percentage dependent on the type of loan, your military category, whether there is a down payment, and if you have uses your eligibility in the past. Those who collect disability from the VA are exempt from the funding fee. The larger the down-payment the smaller the funding fee. The funding fee is also larger after the first use on both new purchases and cash-out refinances. The funding fee for an Interest Rate Reduction Refinance Loan the funding fee is a constant regardless of whether it is the first use or any additional use. The funding fee is typically rolled into the loan. The funding fee is paid to the VA loan so that the benefits, like no down-payment, are available to veterans in the future.

FHA Funding Fee

The Federal Housing Administration (FHA) requires an FHA funding fee and a monthly insurance premium (MIP) for most of its single-family programs. This upfront mortgage insurance premium is sometimes called an upfront mortgage insurance premium (UFMIP).

FHA Loan

FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA). FHA loans differ from conventional loans because they allow for lower credit scores and down payments as low as 3.5 percent of the total loan amount. Maximum loan amounts vary by county.

FHA Mortgage Limits

The dollar amount limits for qualifying mortgages that the FHA will insure as part of its single-family home mortgage program. These limits are based upon location and they may be revised each year.

FHA — Federal Housing Administration

A government agency that is responsible for setting standards for construction and underwriting. The FHA guarantees mortgages that require only a small down payment of 3.5%. The requirements for FHA loans are less stringent and more flexible than conventional home loans. In exchange for a low down payment the borrower must pay a mortgage insurance premium each month. The minimum credit score to be approved for an FHA loan is 580. However, if you have a credit score between 500-579 you can still be approved but only for 90% Loan-to-Value.

FICO Score

The most widely used credit score. The credit score is based solely off consumer credit reports. Scores range from 300-850. It is calculated by a mathematical equation that evaluates different types of information taken from your credit report. By comparing your credit history to credit patterns it can estimate your future level of credit risk.

FMV — Fair Market Value

The amount that the property would sell for if put up for sale. This is based on the location, and existence of comparable property. This does not take into account preferences or circumstances.

FNMA — Federal National Mortgage Association — aka Fannie Mae

More commonly referred to as Fannie Mae. FNMA is a government-sponsored organization created in 1938 in order to enhance the liquidity of lender's money. FNMA guarantee and purchases FHA and VA mortgages from smaller lenders. This allows the lenders to have less money tied up in mortgages and allows them to loan to more borrowers. The Federal Home Loan Mortgage Corporation (FHLMC) or Freddie Mac shares the same objective. However, FHLMC buys conventional mortgages from lenders.

FPM — Flexible-Payment Mortgage

A flexible-payment mortgage is a type of ARM that allows the borrower to choose from a variety of payment options. These Payment options are a traditional 30 or 15 year amortizing payment plan, interest only, or minimum payments. The interest only loan allows the borrower to pay the interest that is incurred each month for the first 5 or so years. After which the payments must be larger enough to pay off the principle within the term of the loan. the minimum payments plan allows borrowers to pay the same payment that they had during the fixed period of the ARM even after their rate has increased. This can often cause the mortgage to have a higher balance than before payments initialized.

FRM — Fixed Rate Mortgage

A type of mortgage where the interest rate stays the same for the life of the loan. This is the most common type of mortgage in the U.S. Fixed rate mortgages generally have 15 or 30 year terms.

FSBO — For Sale By Owner

A FSBO (pronounced fizz boe) is a property that is 'For Sale By Owner'. In other words, the home owner of the property that is for sale has listed the property for sale solely without any representation. This is commonly done because the home owner does not want to pay out a real estate commission with a listing agent whose commission ranges between 2% to 3% of the purchase price. Note that even if a house is a FSBO, that as a buyer you may have representation and make a real estate purchase contract where the seller is responsible for your real estate agent commission. This is common because a transaction traditionally goes smoother when there is a licensed real estate professional involved.

FTHB — First-Time Home Buyer

An individual that has not previously had ownership of a house. an individual who has not owned a home in the last three years can also be considered a first time home buyer.

Finance Charge

The total amount of interest and loan charges you would pay over the entire life of the mortgage loan

First-Time Home Buyer — FTHB — Loan Programs

First-time home buyers (FTHB) may use a number of different types of loan programs to purchase their first home. Popular FTHB loans include programs offered by FHA, VA, USDA, Fannie Mae, and Freddie Mac with low down payments. Some programs define a FTHB as someone who hasn’t purchased a home in three years or more.


Once VA buyers get under contract, they need to decide whether to lock their interest rate in place or float, meaning they will wait to see if VA mortgage rates go down as their loan closing nears. Prospective buyers can't typically lock their rate until they're under contract to purchase a home. Your loan officer can help you evaluate the pros and cons of locking. Every buyer's situation is different, and some have more tolerance for risk than others.


Forbearance is when your servicer allows you temporarily to pay your mortgage at a lower rate or temporarily to stop paying your mortgage. Your servicer may grant you forbearance if, for example, you recently lost your job, suffered from a disaster, or from an illness or injury that increased your health care costs. Forbearance is a type of loss mitigation.

Depending on the kind of loan you have, there may be different forbearance options. You must contact your loan servicer to request forbearance. Remember that you will have to make up these missed or reduced payments when your forbearance period is over.

Force-Placed Insurance

Your servicer may require force-placed insurance when you do not have your own insurance policy or if your own policy doesn’t meet your servicer’s requirements. Force-placed insurance usually protects only the lender, not you. The servicer will charge you for the insurance. Force-placed insurance is usually more expensive than finding an insurance policy yourself.


This basically means the lender takes back the home because you failed to keep up with mortgage payments. Some states require foreclosures to go through the court system, while others do not. There are multiple forms and offshoots of foreclosure, including a deed-in-lieu of foreclosure and a short sale. There are restrictions on foreclosures against active duty service members through the Servicemembers Civil Relief Act (SCRA).

Foreclosure can hurt your credit score, and you'll typically need to be two years removed from a foreclosure claim in order to secure a VA loan.

The Federal Home Loan Mortgage Corporation — aka Freddie Mac

The Federal Home Loan Mortgage Corporation (Freddie Mac) is a private corporation founded by Congress. Its mission is to promote stability and affordability in the housing market by purchasing mortgages from banks and other loan makers. The corporation is currently under conservatorship, under the direction of the Federal Housing Finance Agency (FHFA).


GFE — Good Faith Estimate

A document, that should be provided to a borrower within 3 business days of application, that details the estimated closing costs and terms of the mortgage. Once signed there are some fees that can still be changed up until the time of closing an others that cannot. Those fees that cannot be changed are origination fees, transfer taxes, and, after you lock in your interest rate, your credit or charge and adjusted origination fees.

GRM — Gross Rent Multiplier

A way to quickly compare the value of income producing properties, investment properties, in a similar location. The GRM is calculated by dividing the sales price by the gross monthly rent.

GSEs — Government-Sponsored Enterprises

These are federal financial services corporations, with Fannie Mae and Freddie Mac being the most familiar. Fannie Mae securitizes mortgages in the secondary market. Freddie Mac purchases, pools and sells mortgages to investors. Fannie and Freddie don't purchase VA mortgages.

But VA loan limits are currently tied to the conforming loan limit, which is a cap above which Fannie and Freddie cannot purchase mortgages. These limits can change annually, and they're higher in more expensive parts of the country.

Government Recording Charges

Fees assessed by state and local government agencies for legally recording your deed, mortgage and documents related to your home loan.


This is essentially a form of insurance that the VA provides to lenders. The VA loan program promises to repay lenders a portion of the loan if a borrower defaults. The VA guaranty helps give lenders the confidence to make these $0 down loans along with a host of other big-time benefits.


HEL — Home Equity Loan

A type of loan that allows borrowers to use the equity of their home as collateral. Home Equity loans, often referred to as a second mortgage are often used to pay off other debts or repair/remodel the home. A HEL is a lump sum loan most commonly with a fixed interest rate.

HELOC — Home Equity Line of Credit

A revolving line of credit with an adjustable interest rate. The borrowers home is used as collateral for HELOC. It is the up to the borrower to determine when and how often. However, there is usually an initial limit set by the lender. This may also be referred to as a second mortgage.

HOA dues

If you’re interested in buying a condo, co-op, or a home in a planned subdivision or other organized community with shared services, you usually have to pay condo fees or Homeowners’ Association (HOA) dues. These fees vary widely. Condo or HOA fees are usually paid separately from your monthly mortgage payment. If you do not pay these fees, you can face debt collection efforts by the homeowner’s association and even foreclosure.

HOA — Homeowner Association

A homeowner association is an corporation formed by a real estate developer. it allows the developer to still have a hand in the governing of the subdivision without any financial obligation. membership to the association is usually required when purchasing a home that has an HOA. The role of the HOA has the authority it implement rule and standards within the subdivision.

HOI — Homeowners Insurance

Homeowners insurance is a multiline property insurance policy for private residence. The HOI covers both liability insurance, if someone were to be injured on your property, and homeowners insurance to cover the home from damage. Flood damage is typically excluded in standard homeowners policies but can be purchased independently. The cost of homeowners insurance is often determined by how much it would cost to replace the residence.

HUD — Department of Housing and Urban Development

The Department of Housing an Urban Development was created in 1965 as a cabinet-level agency. HUD is responsible for enforcing all relative laws as passed by Congress. It is also under their jurisdiction to develop and implement various programs that aide in improving communities throughout the nation, and help to create suitable homes and living environments.

HUD1 Settlement Statement

The statement that you receive, at closing, detailing all the costs and expenses involved in the obtaining the loan. This includes all closing costs and fees charged by the lender. You receive a HUD-1 if you apply for a reverse mortgage or if you applied for a mortgage on or before October 3, 2015.

HVAC — Heating, Ventilation and Air Conditioning

This is a system used to control indoor air temperatures and conditions. HVAC is important in the construction of buildings in order to maintain a comfortable and sustainable working and living environment.

Higher-Priced Mortgage Loan

In general, a higher-priced mortgage loan is one with an annual percentage rate, or APR, higher than a benchmark rate called the Average Prime Offer Rate.

Hybrid ARM — Adjustable-Rate Mortgage

This combines elements of both fixed- and adjustable-rate mortgages, which is why it's called a 'hybrid.' A hybrid ARM will start with a fixed interest rate for a set number of years, often three or five, before reverting to an adjustable-rate loan for the remainder of the term. From there, the interest rate can increase up to 1 percentage point per year, with a lifetime cap of 5 percentage points.


IDTBS — Initial Disclosures To Be Signed

IDTBS stands for Initial Disclosures To Be Signed. The Initial Disclosures reflecting the loan application, GFE, TIL, federal and state disclosures which are required to be signed by the borrower before submitting to underwriting. Hence, the initial disclosures, to be signed, because at the IDTBS point, they are not yet signed.

IO — Interest Only

A type of ARM where the entire payment goes toward interest and none goes towards the principle of the loan for the first 5-10 years. After which time the payment increases to include both interest and principle. In the past this has led to many foreclosures as the increase is drastic. It is no longer an available mortgage product.

IP — Investment Property

A property that is purchased with the intention of using it as a source of income. This can be a long-term investment like an apartment complex in which rent is collected each month. It can also be a property that is purchased and fixed up with the intention on increasing the home's value, and then selling the property.

IRRRL — Interest Rate Reduction Refinance Loan

An Interest Rate Reduction Refinance Loan is one of two options when refinancing a VA loan. An IRRRL is only available on a property in which there is already a VA loan. This involves refinancing the loan in order to get a lower interest rate and lower monthly payments. As with the Traditional VA loan there is a funding fee. The funding fee on IRRRLs is .5% unless the veteran collects disability from the VA, then this fee is waived. This may also be called a Streamline Refinance.


A benchmark interest rate that reflects general market conditions. The index changes based on the market. Changes in the index, along with your loan’s margin, determine the changes to the interest rate for an adjustable-rate mortgage loan.

Initial Adjustment Cap

An initial adjustment cap is typically associated with adjustable rate mortgages (ARMs). This cap determines how much the interest rate can increase the first time it adjusts after the fixed-rate period expires. It’s common for this cap to be either two or five percent—meaning that at the first rate change, the new rate can’t be more than two (or five) percentage points higher than the initial rate during the fixed-rate period.

Initial Disclosures

Initial disclosures are the preliminary disclosures that must be signed by the borrower. It outlines the initial terms of the mortgage application and includes federal and state required mortgage disclosures. The most important items to keep in mind in the initial disclosures are the 1003 loan application, GFE (good faith estimate), TIL (truth in lending) and program specific disclosures. Much of these same disclosures will be at the final closing using the final loan terms.

Initial Escrow Deposit

The amount that you will pay at closing to start your escrow account, if required by your lender


Buying a home can feature multiple types of inspections. Home inspections are the most common. You typically have the right to hire a home inspector to examine a property and point out its strengths and weaknesses. This is often especially helpful to test a home’s structural and mechanical systems including heating, ventilation, air conditioning, and electrical.

These aren't required for a VA loan, but they're your best chance to identify any issues with a home before you sign on the dotted line. The VA appraisal includes a broad look at a property conditions, but it is not a substitute for a home inspection. For homebuyers with an inspection contingency in their purchase contract, the home inspection acts as an important negotiating tool in the event a home needs repairs.

Some properties may need additional inspections, including ones for drinking water supplies, septic systems, pests and more.

Interest Rate

This is the cost of of borrowing money. The interest rate on your loan is expressed as a percentage, and rates can vary widely depending on market conditions, the size of the loan, credit score and more. The VA does not set an interest rate, which means lenders are free to set their own rates. You might also hear this referred to as the 'note rate,' which helps differentiate it from the loan's Annual Percentage Rate (APR).

VA loans continue to have the lowest average fixed interest rate on the market.

Interest Rate Cap

An interest rate cap, sometimes referred to as an annual cap, is the maximum interest rate increase that can occur annually for an adjustable rate mortgage (ARM) even if the rate would have increased more under market interest rates. For example, if this cap is two percent, the new rate can’t be more than two percentage points higher than the previous rate.


Jumbo Loan

Generally, these are loans above what's known as the conforming loan limit. Jumbo VA loans typically feature tighter requirements than a traditional VA loan, but they still offer some tremendous benefits compared to conventional jumbo loans.

Some jumbo VA loans can be had without a down payment, while others will require one—every buyer's situation is different. But even buyers who need to put money down often need smaller down payments for jumbo VA loans compared to their conventional counterparts.


LAPP — Lender Appraisal Processing Program

This computer system allows authorized lenders to directly order and process VA appraisals, which are conducted by independent VA-approved appraisers.

LIBOR — London Interbank Offered Rate

The average interest rate as estimated by leading banks in London. This rate is used as a benchmark for short-term interest rates.

LO — Loan Officer

Employees of lenders or brokers who find borrowers, take applications, sell, and advise them. They must pass a license test in each state they intent to conduct business in.

LTV — Loan To Value

The percentage of the mortgage to the purchase price or the appraised value. This is figured by dividing the amount of the mortgage by the value of the home. This is used to establish the risk of the borrower defaulting on the loan.

Leave and Earnings Statement

This is basically the Verification of Employment document for active duty service members. Prospective borrowers can obtain their LES online by using the MyPay portal at

Lenders Title Insurance

Lender’s title insurance protects your lender against problems with the title to your property-such as someone with a legal claim against the home. Lender’s title insurance only protects the lender against problems with the title. To protect yourself, you may want to purchase owner’s title insurance.

Lifetime Adjustment Cap

A lifetime adjustment cap is typically used with adjustable rate mortgages (ARMs). This cap determines how much the interest rate can increase in total, over the life of the loan. For example, if this cap is five percent, that means the rate can never be five percentage points higher than the initial rate. Some lenders may have a different or higher cap.

Listing Agent

The real estate agent representing a home seller.

Loan Estimate

Within three business days of receiving a complete loan application, lenders are required to send you this three-page form that contains key initial information about your new loan, including the interest rate, your monthly mortgage payment, and costs and fees to close. Borrowers can compare this to the Closing Disclosure they receive as they near their loan closing. Unlike the Closing Disclosure, the Loan Estimate features estimated costs.

Loan Modification

A mortgage loan modification is a change in your loan terms. The modification is a type of loss mitigation. A modification can reduce your monthly payment to an amount you can afford. Modifications may involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing or reducing your principal balance. If you are offered a loan modification, be sure you know how it will change your monthly payments and the total amount that you will owe in the short-term and the long-term.

Loan Processor

This person pulls together outstanding documents and information once a borrower has signed a purchase contact. Their job is to piece together loan applications for an underwriter.

Lock Fee

Some lenders charge borrowers to lock their interest rate, depending on the time period, the rate and other factors. Veterans should ask lenders about lock fees when comparison shopping. Generally, you won't be able to lock in your interest rate until you're under contract on a home.

Loss Mitigation

the steps mortgage servicers take to work with a mortgage borrower to avoid foreclosure. Loss mitigation refers to a servicer’s responsibility to reduce or “mitigate” the loss to the investor that can come from a foreclosure. Certain loss-mitigation options may help you stay in your home. Other options may help you leave your home without going through foreclosure. Loss mitigation options may include deed-in-lieu of foreclosure, forbearance, repayment plan, short sale, or a loan modification.

If you are having trouble making your mortgage payments, or if you have been offered and are considering various loss mitigation options, reach out to a Department of Housing and Urban Development (HUD)-approved housing counselor.

You can use the CFPB's 'Find a Counselor' tool to get a list of housing counseling agencies in your area that are approved by HUD. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).


MBA — Mortgage Bankers Association of America

A national organization the represents the real estate finance industry in its entirety. MBA aims to create sustainable future for the industry and all it's participants.

MBS — Mortgage Backed Security

A collection of mortgages sold to by the lender to individuals that the lender later sells to a larger investment bank or government-sponsored enterprise such as Fannie Mae (FNMA) and Freddie Mac. This helps to increase the liquidity of funds available for mortgages.

MIP — Mortgage Insurance Premium

MIP is insurance paid for by the borrower of FHA loans. It is similar to PMI, in that it is a safety measure put into place to protect the lender if the borrower defaults. Borrowers are charged a 1% upfront MIP as well as an annual MIP of around 1.15%. 1/12 of the annual fee is paid each month and deposited into an escrow account for the lender to use when the payment is due.

MLO — Mortgage Loan Originator

A MLO is a mortgage loan originator (also known as a loan officer). The MLO assists a lender or broker in finding borrowers, taking applications, selling products and advising them on mortgage products. A MLO that is employed by a non depository institution is required to take licensing exams and continuing education to keep their license active.

MLS — Multiple Listing Service

An online database available to brokers and real estate agents that has many available for sale properties. This enables real estate agents to assist their clients in finding homes as it gives them accessibility to a large variety of home in different price ranges, neighborhoods, and features.

MPC — Master Planned Community

A large scale community that has is carefully planned far before its development begins. Typically MPCs are constructed in areas that have no previous development. These communities tend to offer a range of housing options in terms of price and style. Generally there is a mix of residential and non residential areas.

Manual Underwriting

Lenders will typically input a prospective borrower's information into an automated underwriting system that can generate an immediate green light, indicating there are no major red flags and the veteran can proceed to the next step. In some cases, loan files do not meet this initial underwriting approval, at which point they might be subject to what's known as manual underwriting.

Manual underwrites usually mean tougher lending requirements and a closer look from underwriters earlier in the process. But they're also not uncommon, and plenty of borrowers who encounter manual underwriting go on to close on their loan.


The number of percentage points added to the index by the mortgage lender to set your interest rate on an adjustable-rate mortgage (ARM) after the initial rate period ends. The margin is set in your loan agreement and won't change after closing. The margin amount depends on the particular lender and loan.

Minimum Property Requirements

These are broad health and safety conditions that a property must meet to satisfy the VA. Independent VA appraisers will assess the property in light of the Minimum Property Requirements during their time at the home. Any repair issues noted by the appraiser will often need to be addressed before the loan can close. Home sellers and even VA buyers can pay for repairs to keep the loan moving forward.

Generally, the VA wants veterans purchasing homes that are move-in ready, but an appraisal that turns up MPR issues does not mean your purchase is automatically in jeopardy. Repairs are often negotiated with sellers, but every situation is different.

Monthly Expenses

Hw much you spend every month. It can include, but is not limited to, recurring obligations like rent or mortgage payment, utilities, car payments, child support payments, and insurance payments, as well as essentials like food. Most of these obligations will have a fixed due date.


An agreement between you and a lender that allows you to borrow money to purchase or refinance a home and gives the lender the right to take your property if you fail to repay the money you've borrowed.

Mortgage Insurance

Mortgage insurance protects the lender if you fall behind on your payments. Mortgage insurance is typically required if your down payment is less than 20 percent of the property value. Mortgage insurance also is typically required on FHA and USDA loans. However, if you have a conventional loan and your down payment is less than 20 percent, you will most likely have private mortgage insurance (PMI).

Mortgage Term

The term of your mortgage loan is how long you have to repay the loan. For most types of homes, mortgage terms are typically 15, 20 or 30 years.


NMLS — Nationwide Mortgage Licensing System

The NMLS is the nationwide mortgage licensing system. It is a single location for consumers, governments, employers and regulators find, update and research parties involved in the mortgage industry. Lenders and brokers use the NMLS to file company licensing and conduct reporting to government bodies. Loan officers use it to communicate with government bodies in keeping their licenses active. Consumers use the NMLS to see if there have been any actions taken against an organization or licensed individual. The consumer website for the NMLS is

NOO — Non Owner Occupied

An investment property that is not occupied by the mortgagor. Typically having a higher interest rate than owner occupied properties as they are more likely to default.

NOV — Notice of Value

This is the final determination of a property's fair market value based on the VA appraisal. The appraised value of the home comes from an independent appraiser's comparison of the home to recent comparable home sales. If the home's appraised value comes in below the purchase price, buyers will need to renegotiate with the seller or walk away from the deal. Renegotiation is common, but veterans who walk away will get their earnest money back because of what's known as the VA Amendment to Contract, which protects buyers in the event of a low appraisal.

Negative Compensating Factor

Compensating factors are strengths on a loan application that can help borrowers secure a loan. Negative compensating factors can do the opposite. Bankruptcies, foreclosures, late payments can all be considered negative compensating factors.

Note Rate

This is another term for your interest rate, and it's separate from your Annual Percentage Rate (APR), which includes additional costs related to your transaction. The note rate reflects the cost of borrowing money from the mortgage lender. The VA doesn't set these rates, and lenders are free to set their own.

Note — Mortgage Note

The mortgage note is a 2 to 5 page document that outlines the loan details. At the very top middle of the first page it will say NOTE in all capital letters, followed by the property address, date, mortgage loan amount, monthly payment and loan term (15 years, 30 years, etc). It will state when the first payment is, when the last payment will be as well as the payment due dates. This is considered a major piece of the collateral that secures repayment of the loan.


OBO — Or Best Offer

OBO is most commonly seen on advertisements of individuals selling goods such as cars, or anything else of value. If no one is willing to give the seller the asking price of the item being sold the seller will take the offer closest to what they are asking.

OIRO — Offers In the Region Of

When selling an item offers within a reasonable price range will be considered. However, the highest offer will supersede all others. This gives the seller a wider range of potential offers and does not give an exact amount that they would like to sell it for thus allowing them to potentially make more money.

Origination Fee

What the lender charges the borrower for making the mortgage loan. The origination fee may include processing the application, underwriting and funding the loan, and other administrative services. Origination fees generally can only increase under certain circumstances.

The VA allows lenders to charge borrowers a flat fee of up to 1 percent of the loan amount to cover in-house costs and services, such as originating, processing and underwriting the loan. A 1 percent fee on a $250,000 loan is $2,500. Lenders also have the option to skip the flat fee and charge an array of fees to cover overhead, so long as their total cost doesn't exceed 1 percent of the loan amount.

VA buyers can ask sellers to pay all of their loan-related closing costs (including the origination fee) and up to 4 percent in concessions, which can cover things like prepaid taxes and insurance and much more.

Owner's Title Insurance

Owner’s title insurance provides protection to the homeowner if someone sues and says they have a claim against the home from before the homeowner purchased it


PACE Financing

PACE financing provides a way to fund energy efficiency home improvements.

PCS Orders

Active duty servicemembers may be given permanent change of station (PCS) orders. PCS orders are an official relocation of a servicemember (and any family living with them) to a different duty location. If the servicemember owns a home, they may choose to sell it. If the servicemember owes more on the home than the home is worth, they may have trouble selling their home. Some servicers offer programs to allow servicemembers to sell their home and not have to pay back the rest of the loan balance. Visit servicemember resources for more information.

PI — Principal and Interest

Principal is the outstanding balance of the loan. Interest is the amount, expressed in an annual percentage, that is charged for financing a loan. These two components of PITI make up the majority of your mortgage payment.

PITI — Principal, Interest, Taxes and Insurance

The components of the total monthly housing expense. Principle is the amount of the loan that is yet to be paid. Interest is the cost of financing a loan, often expressed as an annual percentage. Taxes are 1/12 of your yearly tax payment each month that is put into an escrow account to be paid by the lender when due. Insurance is the your MIP or PMI that is also put into an escrow account to be paid at a later time.

PMI — Private Mortgage Insurance

Private Mortgage Insurance (PMI) is paid by the borrower to protect the lender if the borrower were to default on the loan. PMI is typically required for loans with a down-payment smaller than 20% except with VA and FHA loans. Insurance rates can range from .5%-6% each year. The percent of the premium is influenced by the LTV, credit score, and whether the loan has a fixed or variable rate. Your monthly PMI payment is put into an escrow account. Your lender then uses this account to pay the yearly insurance premium when due. The Homeowners Protection Act of 1998 requires lenders to automatically discontinue PMI once you have 22% equity in your home.

PR — Primary Residence

A primary residence is a property an individual calls home. I f an individual occupies multiple residences throughout the year the property in which the individual spends the most time is considered the primary residence.

PR — Principal Reduction

Principal reduction is a program offered by Fannie Mae and Freddie Mac in order to assist qualified borrower with debt relief. Principal reduction allows a portion, usually no larger than $500 be removed from the remaining principal of a loan. This is generally used in order to help prevent foreclosures. In order to qualify for principle reduction a borrower must be at least 61 days behind of mortgage payments, not currently be in bankruptcy of legal proceedings, not be engaged in loanmodification, home must be owner occupied, have an income verificationthat documents no more than 40% housing costs compared to gross income.

PTD — Prior To Doc

Prior to Doc (PTD) or sometimes referred to as Prior to Documents are documents the underwriter requires before the loan documents can be ordered. They will communicate this with your loan officer who will work with you to make sure the documents are all in order for underwriting. Some examples of documents that might be requested are additional income or employment verification, appraisals, etc. It is important to work closely with your loan officer to get these in before your rate lock expires.

PTF — Prior to Funding

Prior to Funding refers to conditions that come up after a underwriter reviews the loan. These conditions must be met before the loan will be funded by the lender.

Payoff Amount

How much you will actually have to pay to satisfy the terms of your mortgage loan and completely pay off your debt. Your payoff amount is different from your current balance. Your current balance might not reflect how much you actually have to pay to completely satisfy the loan. Your payoff amount also includes the payment of any interest you owe through the day you intend to pay off your loan. The payoff amount may also include other fees you have incurred and have not yet paid.

Permanent Buydown

Veterans can pay money upfront to essentially purchase a lower interest rate for the life of the loan. You'll pay in the form of what are called points, where 1 point is equal to 1 percent of the loan amount. The VA allows veterans to pay reasonable points to buy down their rate, typically not to exceed 2 points.

Power of Attorney

A surrogate with power of attorney can sign contracts and other documents on behalf of an absent service member. Many lenders require a unique power of attorney document. Talk with lenders about their guidelines given your specific situation.


This is a more serious step than prequalification and involves a lender verifying key information about your debts and income. VA loan preapproval gives you a clear sense of your buying power, and it shows real estate agents and home sellers you're a strong and serious homebuying candidate. Getting preapproved doesn't obligate you to any particular lender or to purchasing a home, and it is not a guarantee of financing. But it is the first big milestone of the VA purchasing process.

Prepaid Interest Charges

Prepaid interest charges are charges due at closing for any daily interest that accrues on your loan between the date you close on your mortgage loan and the period covered by your first monthly mortgage payment.

Prepaid Penalty

A fee that some lenders charge if you pay off all or part of your mortgage early. If you have a prepayment penalty, you would have agreed to this when you closed on your home. Not all mortgages have a prepayment penalty.


This introductory step is often mostly just a conversation with a loan specialist about your service history, your employment and finances, and your homebuying goals that ends with a look at your mortgage credit scores. Benchmarks can vary by lender, loan type and other factors, but borrowers will usually need to meet a minimum credit score requirement to move on to getting preapproved for a loan, which is more involved and important milestone.

VA loan prequalification doesn't usually involve much verification of information beyond your credit score, and so it holds little weight with home sellers and real estate agents, who are looking for buyers with loan preapproval.


This essentially means borrowers or loans at or above an accepted credit standard, typically around 640. Some loans and borrowers beneath that are considered greater risks and classified as subprime.


the amount of a mortgage loan that you have to pay back. Your monthly payment includes a portion of that principal. When a payment on the principal is made, the borrower owes less, and will pay less interest based upon a lower loan size.


Processing takes place after a loan officer receives and Compiles your file of information, such as, the credit report, appraisal, verification of employment,etc. The loan processor will take this information and prepare it to be submitted to underwriting. During processing they check that they have all the required documentation and may request additional information required before it can be submitted to underwriting.

Property Taxes

Taxes charged by local jurisdictions, typically at the county level, based upon the value of the property being taxed. Often, property taxes are collected within the homeowner’s monthly mortgage payment, and then paid to the relevant jurisdiction one or more times each year. This is called an escrow account. If the loan does not have an escrow account, then the homeowner will pay the property taxes directly.

Purchase Price

The amount agreed to by the buyer and seller to be paid to the seller to purchase the home.


QM — Qualified Mortgage

A Qualified Mortgage is a Loan that meets the standards of the Ability to Repay. This is part of the Dodd-Frank Act that was passed by the Consumer Financial Protection Bureau in 2010. Qualified mortgages were created to limit the number of high risk mortgages and decrease the number of foreclosures throughout the nation.

QMR — Qualified Written Request

A Qualified Written Request, or QWR, is written correspondence that you or someone acting on your behalf can send to your mortgage servicer. Instead of a QWR, you can also send your servicer a Notice of Error or a Request for Information.


REC — Real Estate Commission

A department or agency that oversees real estate license of real estate agents an brokers. Each state has it's own commission. License qualifications and requirements vary from state to state.

REO — Real Estate Owned

Property that is owned by a bank or financial institution. Result of defaulted loans leading to foreclosure.

REPC — Real Estate Purchase Contract

A REPC (pronounced REP C) is the Real Estate Purchase Contract. This document outlines the terms and conditions of a purchase of real estate. It lists the buyer(s) and seller(s), agent(s), purchase price, concessions, what comes with the home, deadlines, contingencies and other legal contractual goodies. Some states have adopted template form for a REPC so that buyers, sellers and agents on both sides have an easier time going throughout the transaction without getting lawyers invovled.

RESPA — Real Estate Settlement Practices Act

A federal law passed in 1974 to protect the borrower and seller by requiring full disclosure of the terms of the transaction at closing. This law was passed because several lenders, title insurance companies, and real estate agents were providing 'kickbacks' to each-other with out disclosing them to borrowers. and example of a kick back is a lender advertising a very low interest rate but requiring borrowers to get title insurance from a specific company with an inflated cost. The title insurance company would the 'kickback' a portion of the fee to the lender.The RESPA prohibits kickbacks and now requires lenders to provide a Good Faith Estimate early on in the application process, with all approximate cost of the loan, and a HUD-1 at closing, disclosing the specifics of the loan and to whom all fees will be paid. RESPA restricted the amount the fees can increase to 10% between the GFE and the HUD-1. RESPA also prohibits any increase in the origination fees.

RM — Relationship Manager

A Relationship Manager is responsible for ensuring positive and professional communication between a company and its clients, as well as, a company and businesses that they cooperate with.

Rate Cap

Some lenders include a rate cap with their rate locks. These caps give lenders the ability to give borrowers a slightly higher interest rate if rates rise considerably before closing.

Rate caps also come into play with VA adjustable-rate mortgages (ARMs). These caps limit how often and how much the rate can change on an ARM over time.

Rate Lock

A binding commitment that locks a borrower to a specific interest rate. Borrowers can typically lock their interest rate as soon as they sign a purchase agreement and up to five days before the loan closing. Rate locks are good for specific blocks of time. The most common lock periods are for 15 days, 30 days, 45 days and 60 days.

Some lenders may charge a fee to lock a rate.


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


A loan that replaces an existing mortgage to finance at a lower interest rate and/or take out cash. The most common reason for refinancing is to take advantage of interest rates lower than when the loan was originally made. The VA has two primary refinance options.

One is the Interest Rate Reduction Refinance Loan (IRRRL), which is available only to current VA loan holders. Veterans can use this to refinance into a lower-rate mortgage or out of an adjustable-rate loan. The other is the VA Cash-Out Refinance. This allows qualified homeowners to refinance and extract cash from their equity, regardless of whether their current loan is backed by the VA.

Repayment Plan

A repayment plan is a structured way to make up your missed mortgage loan payments over a certain period of time. This is a type of loss mitigation. If you have trouble making your mortgage payments, your lender or servicer may allow you to enter into a repayment plan. Before entering into a repayment plan, make sure you understand the requirements of the plan and whether you will be able to make the new payments.


Some borrowers might need a set amount of cash reserves in the bank to close on their VA loan. Reserves are often expressed in terms of a certain number of months' worth of mortgage payments. Cash reserves aren't a common requirement for VA loans, but they can also be a compensating factor that strengthens your loan file.

Residual Income

This is a lending standard unique to VA loans. Residual income is the amount of money a borrower has left over each month after covering all their major monthly debts and obligations. The VA wants to see veterans have a minimum amount residual income, which can vary depending on the size of your family and where in the country you're buying.

Reverse Mortgage

A reverse mortgage allows homeowners age 62 or older to borrow against their home equity. It is called a “reverse” mortgage because, instead of making payments to the lender, you receive money from the lender. The money you receive, and the interest charged on the loan, increases the balance of your loan each month. Most reverse mortgages today are called HECMs, short for Home Equity Conversion Mortgage.

Right of Rescission

The right of rescission refers to the right of a consumer to cancel certain types of loans. If you are buying a home with a mortgage, you do not have a right to cancel the loan once the closing documents are signed. However, if you are refinancing a mortgage, you have until midnight of the third business day after the transaction to rescind (cancel) the mortgage contract. The three-day clock does not start until you sign the credit contract (usually called the promissory note), you receive a Truth in Lending disclosure form, and you receive two copies of a notice explaining your right to rescind.


SAH — Special Adapted Housing

The VA has a few specialized housing grant programs for veterans with disabilities. These grants help qualified veterans to purchase or build an adapted home or to make modifications to an existing home. The two primary programs are the Specially Adapted Housing (SAH) grant and the Special Housing Adaptation (SHA) grant, and maximum funding for these can change every year. Talk with your loan officer if this is something you're interested in exploring.

SAR — Staff Appraisal Reviewer

A lender's staff appraisal reviewer, or SAR, examines a property's independent VA appraisal and issues the final Notice of Value.

SFD — Single Family Detached

A free-standing residential building intended to be occupied by one family. however, homes with basement or mother-in-law suites may still fall under this distinction.

SP — Subject Property

A subject property is the property for which a borrower intends to get a loan. This can be either a new property or an existing property when refinancing.

SRP — Service Release Premium

The commission that is made by a bank or other financial institution when a mortgage is sold to a secondary mortgage market purchaser, such as, Fannie Mae, or an investment bank. The amount paid is dependent upon the market value of the mortgage note. it is also influenced by the interest rate, loan type, LTV, margin (for ARM loans), and credit score.

SS — Social Security

Social Security or SS refers to a tax that is paid by workers. This money is then used to pay retirement, disability, and toward the families of an individual who is disabled or deceased.

SSA — Social Security Administration

The Social Security Administration is a U.S. Federal Agency. Their responsibilities consist of issuing Social Security numbers to citizens and residents, retirement funds, disability, and survivor's benefits. These programs are paid for by Social Security taxes that are taken out of workers paychecks.

SSN — Social Security Number

A Social Security number is a 9 digit number given to U.S. citizens as a form of identification. permanent and temporary (working) residents are also given social security numbers. When issued a SSN you are given a card with your name and SSN on it. this card is needed for many things including getting a loan.

Second Mortgage

A second mortgage or junior lien is a loan you take out using your house as collateral while you still have another loan secured by your house.

Second-Tier Entitlement

Eligible veterans have two layers of VA loan entitlement, which reflects the government's guaranty on the loan. Veterans have a basic entitlement valued at $36,000, and a second-tier of entitlement that helps boost their zero-down buying power. The amount of this second layer of entitlement can vary depending on where in the country you're buying and your previous history with the VA loan program.

Second-tier entitlement is how veterans can have multiple VA loans at the same time or purchase again after losing one to default. Buyers using their second-tier entitlement will need to borrow at least $144,001 to make things work.

Secondary Mortgage Market

Lenders sell mortgages, often packaged into mortgage-backed securities, in this marketplace. Private investors and government-sponsored enterprises like Fannie Mae and Freddie Mac buy loans in the secondary market.

Security Interest

The security interest is what lets the lender foreclose if you don't pay back the money you borrowed.

Seller Concessions

The VA allows sellers to pay all of a buyer's loan-related closing costs and up to 4 percent in what are known as seller concessions. Concessions can cover a wide range of expenses and fees, including paying the portion of a buyer's property taxes and homeowners insurance due at closing; paying off a buyer's collections and judgments; and more. Home sellers are not required to anything on behalf of a VA buyer, but every purchase and negotiation is different.

Seller Financing

Seller financing is a loan that the seller of your home makes to you.


Your mortgage servicer is the company that sends you your mortgage statements. Your servicer also handles the day-to-day tasks of managing your loan.

Your loan servicer typically processes your loan payments, responds to borrower inquiries, keeps track of principal and interest paid, and manages your escrow account (if you have one). The loan servicer may initiate foreclosure under certain circumstances. Your servicer may or may not be the same company that originally gave you your loan.

Shared Appreciation Mortgage

Under a shared appreciation mortgage, you agree to give your lender a share of any increase in the value of your home.

Short Sale

A short sale is a sale of your home for less than what you owe on your mortgage. A short sale is an alternative to foreclosure, but because it is a sale, you will have to leave your home. If your lender or servicer agrees to a short sale, you may be able to sell your home to pay off your mortgage, even if the sale price or proceeds turn out to be less than the balance remaining on your mortgage. A short sale is a type of loss mitigation. If you live in a state in which you are responsible for any deficiency, which is the difference between the value of your property and the amount you still owe on your mortgage loan, you will want to ask your lender to waive the deficiency. If the lender waives the deficiency, get the waiver in writing and keep it for your records.

A short sale will negatively affect your credit score. Veterans who lose a home to short sale will lose whatever VA loan entitlement they utilized on the property, but they might have little trouble purchasing again using second-tier entitlement. Some lenders will have a waiting period before you can get a loan following a short sale.


A VA Streamline is another name for the Interest Rate Reduction Refinance Loan (IRRRL). The nickname comes because these are designed as a swift, low-paperwork way to get qualified veterans into lower-cost loans or out of adjustable-rate mortgages.


When lenders use the term, they generally mean a loan program for borrowers who do not qualify for a prime loan, often with a higher interest rate. This essentially means borrowers or loans below an accepted credit standard, typically around 620. Subprime borrowers carry greater risks and now have trouble securing financing.


A survey is a drawing of your property showing the location of the lot, the house and any other structures, as well as any improvements on the property.


TIL — Truth In Lending

A Federal law implemented in 1968 by the Federal Reserve. The law dictates that the APR, terms of the loan, and total cost to the borrower must be disclosed to the borrower before extending credit.TIL applies to all credit including mortgages, auto loans, and credit cards. TIL may also refer to the form used to disclose the required information.

TIP — Total Interest Percentage

The Total Interest Percentage (TIP) is a disclosure that tells you how much interest you will pay over the life of your mortgage loan.

TRID — TILA RESPA Integrated Disclosure rule

An acronym that some people use to refer to the TILA RESPA Integrated Disclosure rule.

Title Insurance

This form of insurance protects borrowers, sellers and lenders against previous ownership claims on a property and other possible issues related to the property's chain of ownership. There are two types of title insurance, one for lenders and the other for buyers. Lenders will require a lender's policy, and buyers typically obtain their own, too. Title insurance must be paid at closing. Buyers can shop around for the best price.

Title Service Fees

Title service fees are part of the closing costs you pay when getting a mortgage. When you purchase a home, you receive a document most often called a deed, which shows the seller transferred their legal ownership, or “title,” to the home to you. Title service fees are costs associated with issuing a title insurance policy for the lender.

Total of Payments

This number tells you the total amount of money you will have paid over the life of your mortgage.


URLA — Uniform Residential Loan Application

This is the five-page loan application for almost all home mortgages.


The Rural Housing Service, part of the U.S. Department of Agriculture (USDA) offers mortgage programs with no down payment and generally favorable interest rates to rural homebuyers who meet the USDA’s income eligibility requirements.

UW — Underwriter

The underwriter is the person who examines the borrowers file and makes the determination as to whether the borrower qualifies for the loan terms presented. UW is also commonly referred to simply underwriting which is the status in which the underwriter looks at the loan file.


The process in which all of the information collected in processing about the borrower and the property are examined to determine whether or not a loan should be issued to the borrower. Typically, if approved, there will be conditions that must be met before official approval is granted after the conditions are met.


VA Loan

A VA loan is a loan program offered by the Department of Veterans Affairs (VA) to help servicemembers, veterans, and eligible surviving spouses buy homes. The VA does not make the loans but sets the rules for who may qualify and the mortgage terms. The VA guarantees a portion of the loan to reduce the risk of loss to the lender. The loans generally are only available for a primary residence.

VA — Veteran Affairs

The VA is a cabinet-level agency that is dedicated to the well-being of U.S. Veterans. There are many benefits offered to veterans through the VA including disability compensation, life insurance, health care, and education opportunities. The VA operates 152 hospitals, 800 outpatient clinics, 126 nursing home care units, and 35 domiciliaries. The VA also guarantees mortgages for veterans. These mortgages do not require a down-payment.

VOD — Verification of Deposit

A document prepared by an individuals bank verifying the current balance of all account the individual has. This letter needs to be on official letterhead of the bank. The VOD is just one component of the potential borrowers application.

VOE — Verification of Employment

Form 1005 is to be filled out by the employer of the borrower to verify employment. Recently VOE is often conducted verbally by the lender prior to closing. VOE must include the applicants date of employment, job title, probability of continued employment, base pay, and total earnings.

VVOE — Verbal Verification of Employment

The process of confirming a potential borrowers employment via verbal channels. Verification of employment is a mandatory step in the loan application process. The conversation must be documented and include the name and title of the individual confirming the employment, date of call, as well as all other information required with a standard VOE.


W2 — Wage and Tax Statement

A tax form provided by an employer to an employee at the end of the tax year. The W2 shows the employee total yearly income, amount of federal and state taxes withheld, the amount of medicare and social security paid as well as other income and deductions that went through the employer's payroll system.


YSP — Yield Spread Premium

Yield spread premium is the pricing associated with an interest rate. In lender paid commission transactions the lender pays the broker out of the YSP for bringing the mortgage application to them. Any left over yield spread premium after the broker compensation will be given to the borrower as a credit. YSP is represented as a credit or fee (discount points) on both GFE and HUD1.


Zero Money Down

A type of loan where the borrower isn't required to pay a down payment. The VA Loan is one of the two remaining major loan programs that offer the advantage of no money down. Conventional loans typically require a 5 percent down payment, with FHA loans requiring a minimum 3.5 percent.

Despite the zero-down benefit, VA loans have had the lowest foreclosure rate on the market for most of the last decade. That's a testament to the program's sound underwriting guidelines and its commitment to helping veterans purchase and keep their homes.

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