Every term in one sentence. The agency's own definition sits under ours, with a link, so you can check us.
The rate is fixed for the first 5 years, then can adjust once a year after that.
Also called: 5-year ARM
"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."
SourceLenders must make a good-faith check that you can actually afford to pay back the loan before they approve it.
Also called: ATR rule
"The ability-to-repay rule is the reasonable and good faith determination most mortgage lenders are required to make that you are able to pay back the loan."
SourceThis means paying off your loan in regular payments over time, so the amount you owe goes down with each payment.
"Amortization means paying off a loan with regular payments over time, so that the amount you owe decreases with each payment."
SourceThis is an independent expert's written opinion of what your home is actually worth.
Also called: home appraisal
"An appraisal is a written document that shows an opinion of how much a property is worth."
SourceThis number folds the interest rate together with points and certain fees, so it usually looks higher than the rate alone.
Also called: annual percentage rate
"An annual percentage rate (APR) is a broader measure of the cost of borrowing money than the interest rate."
SourceYour rate starts fixed for a set period, then can move up or down based on market conditions after that.
Also called: adjustable-rate mortgage
"An adjustable rate mortgage (ARM) is a type of loan for which the interest rate can change, usually in relation to an index interest rate."
SourceMost of your payments are small, but the loan ends with one large lump-sum payment due all at once.
Also called: balloon payment
"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."
SourceThis is the month when the money you saved from a lower rate finally equals what you paid upfront for points, so every month after that is real savings.
Also called: breakeven point, breakeven period
"Breakeven can be roughly estimated by dividing the cost of the discount points by the borrower's monthly savings."
SourceThis limits how much your ARM rate can jump at one time or over the life of the loan.
Also called: 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."
SourceThis is the total amount of money you need to bring to your closing, including your down payment and closing costs.
"Your Estimated Cash to Close is the estimated amount of money you will have to bring to closing."
SourceYou replace your mortgage with a bigger one and take the difference in cash, using the equity you have built up in your home.
"Cash-out refinances – where a homeowner borrows an amount substantially greater than what they owe on their existing mortgage."
SourceThese are all the fees you pay at closing, like origination charges, appraisal fees, and title fees.
Also called: settlement costs
Read more: Is your Loan Estimate normal for your county? Here is the real number
This is a five-page form with your final loan terms and costs, which the lender must give you at least three business days before closing.
Also called: CD
"A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected."
SourceThis is a loan that meets the size and rule limits set by Fannie Mae and Freddie Mac, which lets those companies buy it from your lender.
"A conforming mortgage loan is one that satisfies the terms and conditions set forth by Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA)."
SourceThis is any mortgage that is not insured or guaranteed by a government program like FHA, VA, or USDA.
"A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs)."
SourceThis is a number that predicts how likely you are to pay back a loan on time, calculated from your credit report.
Also called: FICO score
Read more: What your credit score actually costs you, in dollars
This is the money you pay upfront toward the home's price. You borrow the rest through your mortgage.
This is all your monthly debt payments added up and divided by your monthly income before taxes.
Also called: debt ratio, debt-to-income ratio
"Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income."
SourceThis is a deposit you pay when you sign a purchase contract to show the seller you are serious about buying.
Also called: good faith deposit
"Earnest money is a deposit a buyer pays to show good faith on a signed contract agreement to buy a home."
SourceThis is what your home is worth right now, minus what you still owe on it.
Also called: home equity
"Equity is the amount your property is currently worth minus the amount of any existing mortgage on your property."
SourceThis is an account your lender uses to collect and pay your property taxes and homeowner's insurance for you, a little each month.
Also called: impound account
"An escrow account is set up by your mortgage lender to pay certain property-related expenses, like property taxes and homeowner's insurance."
SourceThis is a government-sponsored company that buys mortgages from lenders, which frees up lenders to make more loans.
Also called: Federal National Mortgage Association
"The Federal National Mortgage Association (Fannie Mae) purchases and guarantees mortgages from lending institutions in an effort to increase affordable lending."
SourceThis is a loan insured by the Federal Housing Administration, which allows lower credit scores and down payments as low as 3.5 percent.
"FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA)."
SourceYour interest rate is set when you close and it never changes for the life of the loan.
"A fixed-rate mortgage is a type of home loan for which the interest rate is set when you take out the loan and it will not change during the term of the loan."
SourceIndustry term, no CFPB definition. Some lenders let you swap into a lower rate once if rates drop before you close, usually for an extra fee.
Also called: rate float, one-time float
Your servicer temporarily lets you pay less, or nothing, on your mortgage. You still owe the missed amount later.
"Forbearance is when your servicer allows you temporarily to pay your mortgage at a lower rate or temporarily to stop paying your mortgage."
SourceThis is another government-sponsored company that buys mortgages from banks and lenders to help keep the housing market stable and affordable.
Also called: Federal Home Loan Mortgage Corporation
"The Federal Home Loan Mortgage Corporation (Freddie Mac) is a private corporation founded by Congress."
SourceThis is a credit line, secured by your home, that you can borrow from and pay back during a set draw period.
Also called: home equity line of credit
"A home equity line of credit (HELOC) is a line of credit that allows you to borrow against your home equity."
SourceThis is a federal law that makes many lenders publicly report data on the mortgages they make.
"The Home Mortgage Disclosure Act (HMDA) requires many financial institutions to maintain, report, and publicly disclose loan-level information about mortgages."
SourceThese are fees paid to a homeowners' association for shared costs like landscaping or building upkeep in a condo or planned community.
Also called: condo fees, HOA fees
"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."
SourceThis insurance pays for losses to your property, like fire or theft damage. Lenders usually require it. It is not the same as mortgage insurance.
Also called: hazard insurance
"Homeowner's insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary."
SourceThis is an older closing-cost form, still used for reverse mortgages, that lists all the charges to the buyer and seller. Most other loans now use the Closing Disclosure instead.
Also called: HUD-1, settlement statement
"The HUD-1 Settlement Statement lists all charges and credits to the buyer and to the seller in a real estate settlement, or all the charges in a mortgage refinance."
SourceThis is the market benchmark rate that your ARM's interest rate is built on. When the index moves, your rate can move with it.
"The index is a benchmark interest rate that reflects general market conditions."
SourceThis is the price the lender charges you, each year, for the use of the money you borrowed, based on your rate.
"An interest rate on a mortgage loan is the cost you will pay each year to borrow the money, expressed as a percentage rate."
SourceThis is the yearly cost of borrowing the money, shown as a percentage. It does not include fees.
Also called: rate
"An interest rate on a mortgage loan is the cost you will pay each year to borrow the money, expressed as a percentage rate."
SourceRead more: What a mortgage rate really is (and why the number in the news is not yours)
This is a loan bigger than the yearly limit Fannie Mae and Freddie Mac will buy, so it usually needs stronger credit and a bigger down payment.
Also called: non-conforming loan
"Each year Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA), set a maximum amount for loans that they will buy from lenders."
SourceThe lender gives you money toward your closing costs in exchange for you accepting a higher interest rate.
Also called: negative points
"Lender credits lower your closing costs up front, in exchange for a higher interest rate."
SourceFederal rules ban paying a broker or loan officer more for putting you in a higher rate, so the older yield spread premium practice is now restricted. Lender-paid compensation is what the lender pays the person who arranged your loan.
Also called: yield spread premium (YSP, mostly historical term)
"While federal law prohibits commissions from varying based on the terms of the mortgage, lenders can pay mortgage loan officers and brokers in many ways."
SourceThis is a fee, based on your credit score and other loan features, that Freddie Mac and Fannie Mae charge on top of the base rate. It ends up baked into the rate you're offered.
Also called: credit fee, price hit, LLPA grid
"This Credit Fee Matrix sets forth the Credit Fee amounts and/or Credit Fee rates and credits applicable to certain Mortgages that... are subject to a Credit Fee."
SourceRead more: What your credit score actually costs you, in dollars
This is a three-page form your lender must send within three business days of your application, showing your estimated rate, payment, and closing costs.
Also called: LE
"A Loan Estimate is a three-page form that you receive after applying for a mortgage."
SourceThis is the person, usually working for one lender, who works with you directly to take your application and guide you through getting a mortgage.
Also called: loan originator, MLO
"A mortgage loan officer or broker is the person who works with you to get a mortgage."
SourceThis compares your loan amount to the home's appraised value. A bigger down payment means a lower LTV.
Also called: loan-to-value ratio
"The loan-to-value (LTV) ratio is a measure comparing the amount of your mortgage with the appraised value of the property."
SourceThis is the extra percentage your lender adds on top of the index to set your ARM rate. It is fixed in your loan agreement and does not change.
"The margin is 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."
SourceThis is the insurance charge on FHA loans, made up of an upfront fee and a monthly premium.
Also called: upfront mortgage insurance premium, UFMIP
"The Federal Housing Administration (FHA) requires an FHA funding fee and a monthly insurance premium (MIP) for most of its single-family programs."
SourceA broker does not lend you money directly. Instead they shop your loan across multiple lenders and connect you to one.
"A broker does not lend money. You can use a broker to find different lenders or mortgage loans."
SourceThis is the national registry where loan officers and mortgage companies must be licensed and registered, and where you can look up someone's license history.
Also called: NMLS, Nationwide Mortgage Licensing System and Registry, NMLSR
"This national registration system, known as the Nationwide Mortgage Licensing System and Registry ('NMLSR' or the 'Federal Registry'), allows MLOs employed by federal agency regulated institutions to register and submit required information about themselves and their backgrounds."
SourceThis is what the lender charges you for the work of setting up and processing your loan.
"An origination fee is what the lender charges the borrower for making the mortgage loan."
SourceThis stands for the four pieces of a typical monthly payment: principal, interest, taxes, and insurance.
Also called: principal, interest, taxes, insurance
"Principal, Interest, Taxes, and Insurance, known as PITI, are the four basic elements of a monthly mortgage payment."
SourceThis is insurance that protects the lender, not you, and it is usually required if your down payment is under 20 percent on a conventional loan.
Also called: private mortgage insurance
"Private Mortgage Insurance (PMI) is a type of mortgage insurance that benefits your lender."
SourceYou pay cash upfront to get a lower interest rate for the life of the loan.
Also called: discount points
"Points lower your interest rate, in exchange for paying more at closing."
SourceThe lender checks your actual documents and credit and tells you, in writing, roughly how much they are willing to lend you.
Also called: preapproved
"Prequalification and preapproval letters both specify how much the lender is willing to lend to you, up to a certain amount and based on certain assumptions."
SourceThis is a fee some loans charge if you pay off the mortgage early, in full or in part.
"A prepayment penalty is a fee that some lenders charge if you pay off all or part of your mortgage early."
SourceThe lender gives you a rough idea of how much you might be able to borrow, usually based on numbers you report yourself, not verified documents.
Also called: prequalified
"Some lenders offer a prequalification letter based on unverified information that you report and will only issue a preapproval letter based on verified information."
SourceThis is the amount of money you actually borrowed and still owe, not counting interest.
Also called: loan balance
"The principal is the amount of a mortgage loan that you have to pay back."
SourceThis is a category of loans built with safer features, which makes it more likely you can actually afford the payments.
Also called: QM
"A qualified mortgage is a category of loans that have certain, more stable features that help make it more likely that you'll be able to afford your loan."
SourceThe lender promises your rate will not change between now and closing, as long as you close in the agreed window and nothing about your application changes.
Also called: lock-in
"A lock-in or rate lock on a mortgage loan means that your interest rate won't change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application."
SourceYou replace your mortgage with a new one to get a better rate or different term, without pulling any cash out of your equity.
Also called: non-cash-out refinance
"Non-cash-out (also known as 'rate-and-term') refinances, where a homeowner does not borrow an amount substantially greater than what they owe on their existing mortgage."
SourceOn a refinance of your primary home, you have until midnight of the third business day after signing to cancel the deal. This right does not apply when you are buying a home.
Also called: right to cancel, three-day right of rescission
"If you are refinancing a mortgage, you have until midnight of the third business day after the transaction to rescind (cancel) the mortgage contract."
SourceThis is a loan you take out against your home while you still owe money on your first mortgage.
Also called: junior lien
"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."
SourceThis is the company that collects your monthly payment and manages your loan day to day. It might not be the company that originally lent you the money.
Also called: loan servicer
"Your mortgage servicer is the company that sends you your mortgage statements."
SourceThis is how many years you have to pay back the loan, usually 15, 20, or 30 years.
Also called: loan term
This protects against a claim that someone else has legal rights to the home. A lender's policy protects the lender, and an owner's policy protects you.
Also called: owner's title insurance, lender'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."
SourceThis disclosure shows how much total interest you will pay over the entire life of your loan, as a percentage of the amount you borrowed.
Also called: TIP
"The Total Interest Percentage (TIP) is a disclosure that tells you how much interest you will pay over the life of your mortgage loan."
SourceThis is the federal rule that created the standard Loan Estimate and Closing Disclosure forms every lender must use.
Also called: Know Before You Owe rule
"'TRID' is an acronym that some people use to refer to the TILA RESPA Integrated Disclosure rule."
SourceThis is the step where the lender checks and verifies your income, credit, and paperwork before deciding to approve your loan.
"Lenders have specialized staff that work on processing and underwriting (approving) your loan."
SourceThis is a loan for buyers in eligible rural areas who meet income limits, and it can come with no down payment.
Also called: Rural Housing Service loan
"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."
SourceThis is a loan program for servicemembers, veterans, and eligible surviving spouses, where the VA guarantees part of the loan to lower the lender's risk.
"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."
SourceThis is a lender that funds loans brought to it by outside mortgage brokers, rather than dealing with borrowers directly the way a retail lender does.
Also called: wholesale channel
"Mortgage lending generally occurs through retail, wholesale, or correspondent lending channels."
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Definitions are educational, not legal advice.