Glossary of Terms

Familiarize yourself with common terms you’ll hear throughout the loan process.

Adjustable Rate Mortgage

A mortgage loan or deed of trust with a rate of interest that is subject to change based on disclosed terms and conditions. 


Repaying of a mortgage debt with equal periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.

Annual Percentage Rate (APR)

The annual cost of a loan, expressed as a yearly rate. APR takes into account interest, discount points, lender fees and mortgage insurance, so it will be slightly higher than the interest rate on the loan.


Often referred to as a 1003, an initial statement of personal and financial information required to approve your loan.


A written estimate by a licensed residential appraiser of a property’s current market value, based on recent sales information for similar properties, the current condition of the property and other neighborhood characteristics.


A professional with knowledge of real estate markets and skilled in the practice of assessing the fair market value of real property. When a property is appraised in connection with a loan, the appraiser is selected by the lender, but the appraisal fee is usually paid by the borrower.


Approval means that the borrower meets the lender’s qualification requirements and also its underwriting requirements for the loan requested.

Backend Ratio

A ratio that indicates what portion of a person’s gross monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI, or principal, interest, taxes and insurance), credit card payments, child support and other loan payments. Also known as debt-to-income ratio.


Limits on changes in ARM interest rates or monthly payments, either in an adjustment period or over the life of the loan.

Cash Available for Closing

Borrower funds that are available to cover down payment and closing costs. If lending guidelines require the borrower to have cash reserves at the time the loan closes, or that the down payment come from specified sources, the borrower’s cash available for closing does not include cash reserves or money from other sources.

Cash Out

A refinance for more than the balance of the original mortgage, with the extra money taken out of the equity in the property.


Meeting between the buyer, seller and lender (or their agents) at which property and funds legally change hands.

Closing Costs

Fees incurred in a real estate or mortgage transaction and paid by borrower and/or seller during a mortgage loan closing. These typically include a loan origination fee, discount points, attorney’s fees, title insurance, appraisal fees, survey fees and any items that must be prepaid, such as taxes and insurance escrow payments. The cost of closing is usually about 2 to 5 percent of the mortgage amount.

Closing Disclosure

A disclosure that lenders are required to provide to consumers at least three days prior to loan settlement. The Closing Disclosure outlines loan terms, projected payments, closing costs, cash to close, loan calculations and other information specific to the loan transaction.


A condition that must be satisfied before a contract is legally binding before a sale can close.

Conventional Loan

A mortgage not insured by the FHA or guaranteed by the VA.

Credit Report

A report detailing the credit history of a prospective borrower, used when determining creditworthiness.

Credit Score

A single numerical score, based on an individual’s credit history, that measures that individual’s credit worthiness. Credit scores are as good as the algorithm used to derive them. The most widely used credit score is called FICO for Fair Issac Co. (which developed it).

Debt Consolidation

Rolling short-term debt into a home mortgage loan, either at the time of home purchase or later

Debt to Income Ratio

The ratio, expressed as a percentage, that results when a borrower’s monthly payment obligation on long-term debts is divided by monthly income.


A legal document that transfers a property from one owner to another. The deed contains a description of the property, and is signed, witnessed and delivered to the buyer at closing.

Deed of Trust

Agreement to pledge property as security for a loan, used in many states in place of a mortgage. In this arrangement, the borrower transfers legal title to a trustee who holds the property in trust as security for the repayment of the debt. The deed of trust becomes void if the debt is repaid, but if the borrower defaults on the loan, the trustee may sell the property to pay the debt.

Discount Point(s)

Money paid to a lender at closing in exchange for lower interest rates. Each point is equal to 1 percent of the loan amount. 

Down Payment

Money paid for a house from one’s own funds at closing. The down payment will be the difference between the purchase price and the mortgage amount.

Earnest Money

Deposit made by a buyer in evidence of good faith when the purchase agreement is signed.

Equal Credit Opportunity Act

Federal law requiring creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.


The percentage of property value held by the owner; the difference between the current market value of a property and the outstanding mortgage balance.

Escrow Account

Account held by a lender containing funds collected as part of mortgage payments for annual expenses such as taxes and insurance, so that the homeowner does not have to pay a large sum when these fall due.

Fair Housing Act

Prohibits discrimination in real estate transactions because of race, color, religion, sex, handicap, familial status (families with children), or national origin. It applies to mortgage lending as well as other aspects of real estate transactions, including sales and rentals, real estate brokerage, and appraisals.

Federal Housing Administration (FHA)

A government agency, division of the Department of Housing and Urban Development, that insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

Finance Charge

The finance charge is the cost of consumer credit expressed as a dollar amount. It includes the amount of interest you will pay during the term of the loan, origination points, and certain other items. Some closing costs are not treated as finance charges.

Fixed Rate

 An interest rate that is fixed for the term of the loan.


Allowing the interest rate and points to vary with changes in market conditions.

Flood Insurance

Protection against flood loss through the 1973 Flood disaster Protection Act. This insurance compensates for physical damage to a property by flood. Flood is typically excluded from the standard homeowner’s hazard insurance provisions.

Front End Ratio

A ratio that indicates what portion of an individual’s income is used to make mortgage payments. It is calculated as an individual’s monthly housing expenses divided by his or her monthly gross income and is expressed as a percentage.

Funding Fee

The VA funding fee is a percentage of the loan amount which varies based on the type of loan, your military category, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time.

Gift Funds

The funds a borrower receives that do not have to be paid back. The gift is often from a family member to be used towards a down payment on a home purchase.

Hazard Insurance

Also known as homeowner’s insurance. Protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer.

Home Inspection

An inspection of the condition of a property. A third party conducts the inspection, which includes all major appliances and structural elements. If an inspector finds something wrong, and your sales contract allows you to, you can request that the seller pay for the repairs. If the seller refuses, and your sales contract allows you to, you may not have to proceed with the purchase of the home.

Homeowner's Insurance

Insurance purchased by the borrower, and required by the lender, to protect the property against loss from fire and other hazards. Also known as Hazard Insurance.


Charge paid for borrowing money, calculated as a percentage of the amount borrowed.

Interest Rate

The rate charged to the borrower each period for the amount of the loan.

Investment Property

Real estate bought for investment purposes as opposed to private residential. Often the property will be used for rental purposes, such as a rental home, apartments or other spaces that give owners the opportunity to create profit and income over the long term.

Jumbo Loan

A mortgage larger than the limits set by Fannie Mae or Freddie Mac. This limit is changed periodically. A C&F Mortgage Loan Officer can tell you the current limit. This does not mean that you cannot borrow more than the limit it simply means that Fannie Mae and Freddie Mac agencies would not purchase the loan.

Late Charge

An additional charge that a borrower is required to pay as a penalty for failure to pay a regular installment when due.

Loan Amount

The amount the borrower promises to repay, as set forth in the mortgage contract. 

Loan Application

A document required by lenders prior to loan approval; containing detailed information about the borrower and property. Referred at as a 1003.

Loan Commitment

A formal notification from a lender stating that the borrower’s loan has been conditionally approved, and specifying the terms under which the lender agrees to make the loan.

Loan Estimate

A Loan Estimate is a three-page form that you receive after applying for a mortgage. The Loan Estimate tells you important details about the loan you have requested. The lender must provide you a Loan Estimate within three business days of receiving your application.

Loan Officer

Loan officers evaluate, authorize, or recommend approval of loan applications for people and businesses. They are also known as Loan Advisors, Loan Originators, and Mortgage Loan Professionals.

Loan Term

The period of time during which a loan must be repaid. For example, a 30-year fixed loan has a term of 30 years. Also called term.

Loan to Value (LTV)

The loan amount divided by the lesser of the selling price or the appraised value.

Lock-in Agreement

A lender’s guarantee of an interest rate for a set period of time, usually between loan application and loan closing. This protects borrowers against rate increases during that time.

Lock Period

The number of days for which any lock or float-down holds. Ordinarily, the longer the period, the higher the price to the borrower.


A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term ‘mortgage’ or ‘mortgage loan’ is used loosely to refer both to the lien and the loan. In most cases, they are defined in two separate documents: a mortgage and a note.

Mortgage Insurance / Private Mortgage Insurance

Insurance against loss provided to a mortgage lender in the event of borrower default. In most cases, the borrower pays the premiums.

Mortgage Insurance Premium (MIP)

Insurance purchased by borrower to insure against default on FHA loans.

Non-Conforming Loan

A mortgage that does not meet the purchase requirements of the two Federal agencies, Fannie Mae and Freddie Mac, because it is too large, or for other reasons such as poor credit, or inadequate documentation.


The act by a notary public who witnesses the signing of documents, authenticating the identity of the signer.


 Legal document stating the terms of a debt, and a promise to repay it.


The use of property as a full time residence.

Payment Shock

A significant rise in a homeowner’s monthly home payment, usually as the result of rising interest rates (in the case of an adjustable-rate loan) or the end of an interest-only introductory period. Also used to refer to a large difference between the rent being paid by a first-time home buyer, and the monthly housing expense on the purchased home.


Payment of the outstanding balance of a loan in full including principal, interest, and other possible unpaid fees (i.e. unpaid late payment fees).

Per Diem Interest

Interest calculated per day. Depending on the day of the month on which closing takes place, you’ll have to pay interest from the date of closing to the end of the month.


Also called ‘monthly housing expenses’, principal, interest, taxes, and insurance are the components of a monthly mortgage payment.

Power of Attorney

A legal document that authorizes one person to act on behalf of another. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time. You may use a power of attorney if you have a closing scheduled but due to an extenuating circumstance, are unable to attend. It names the person who is authorized to act on your behalf. The legal document must be notarized and should be prepared by an attorney so that it meets the requirements needed to close the transaction.

Prepaid Expenses

Prepaid expenses refer to an upfront cost associated with a loan agreement and must be paid in addition to standard loan payments.

Prepaid Interest

Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date the first payment date.


The process of determining how much money a prospective homebuyer may borrow, prior to application for a loan.

Principal and Interest

The principal is the amount you borrowed and have to pay back, and interest is what the lender charges for lending you the money.

Primary Residence

The house in which the borrower will live most of the time, as distinct from a second home, or an investor property that will be rented.


Mortgage Principal is the amount borrowed from the lender, minus the amounts repaid to the lender, and which have been applied to the reduction of principal.


Compiling and maintaining the file of information about a mortgage transaction, including the credit report, appraisal, verification of employment and assets, and so on.

Property Inspection Waiver (PIW)

A property inspection waiver (PIW) mortgage, also known as an appraisal waiver mortgage, is a home loan that is underwritten without an appraisal of the property.

Property Tax

Property tax is a tax on property – usually real estate – as determined by an assessor.


The rate of interest on a loan, expressed as a percentage.

Rate Lock

A commitment issued by a lender to a borrower guaranteeing a specific interest rate for a specified period of time.

Rate Lock Expiration

Rate lock periods are a fixed number of days such as 45-day, etc. Rate lock expiration occurs when that period has passed, subjecting the interest rate on the loan to market fluctuations since the date of the initial rate lock. The interest rate and discount points may be higher than the interest rate and discount points that were originally locked. When a rate lock expires, you will need to contact your Mortgage Loan Officer to establish a new rate lock prior to closing your loan.

Recording Fee

Money paid to an agent for entering the sale of a property into the public records.


Paying off an old loan while simultaneously taking a new one. This may be done to reduce borrowing costs under conditions where the borrower can obtain a new loan at an interest rate below the rate on the existing loan. It may be done to raise cash, as an alternative to a home equity loan. Or it may be done to reduce the monthly payment.

Reverse Mortgage

A type of mortgage designed for homeowners over 62 years of age; gives them access to home’s equity in cash payments, frees up money they may use for other important costs or to make needed home repairs.

Right of Rescission

The right of refinancing borrowers, under the Truth in Lending Act, to cancel the deal at no cost to themselves within 3 days of closing.

Sales Contract

A real estate sales agreement is a formal written contract made between a homebuyer and seller. The document includes property address, condition, purchase price, inspections, date of closing, date of possession and more.

Seller Contribution

A contribution to a borrower’s down payment or settlement costs made by a home seller, as an alternative to a price reduction.


A meeting between the buyer, seller and lender (or their agents) where property and funds legally change hands.

Settlement Agent

A person or entity that conducts the settlement to transfer title of the property and to close on the mortgage loan. May be an attorney, a title insurer, a title agent, or an escrow agent.

Settlement Costs

Settlement costs, also known as closing costs, are the costs incurred when obtaining your loan. For new purchases, these costs also include ownership transfer of any collateral property from the seller to you. Costs may include and are not limited to: attorney’s fees, preparation and title search fees, discount points, appraisal fees, title insurance, and credit report charges. They are typically about 2 to 5 percent of your loan amount, and they are often paid at or just before your loan closes.


A measurement of land, prepared by a licensed surveyor, showing a property’s boundaries, elevations, improvements, and relationship to surrounding tracts.


A document that gives evidence of ownership of a property, as well as rights of ownership and possession.

Title Company

The agency that will investigate a property’s title (or deed) for discrepancies, or undiscovered liens, and that will issue title insurance to the lender after the title is deemed clear. (See ‘Title insurance.’)

Title Insurance

Insurance that protects the lender (lender’s policy) or buyer (owner’s policy) against loss due to disputes over property ownership.

Title Search

An examination of records used to determine the legal ownership of property, and all liens, and encumbrances on it. Usually performed by a title company, or attorney.

Transfer Tax

 Tax paid when title passes from one owner to another.

TRID: Truth in Lending RESPA Integrated Disclosures

TRID is a series of guidelines outlining what information mortgage lenders need to provide to borrowers, as well as the timeframe lenders must provide it. TRID also regulates fees that lenders can charge and how these fees can change.

Truth in Lending Act

Federal law requiring written disclosure of the terms of a mortgage (including the APR and other charges) by a lender to a borrower after application. Also requires the right of rescission period.


Mortgage underwriting is the process a lender uses to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable.

Veterans Administration (VA) Loan

An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

Variable Rate

An interest rate that may fluctuate or change periodically, often in relation to an index, such as the prime rate or other criteria. Payments may increase or decrease accordingly.

Verification of Deposit (VOD)

A document signed by the borrower’s bank, or other financial institution, that verifies the borrower’s account balance and history.

Verification of Employment (VOE)

 A document signed by the borrower’s employer that verifies the borrower’s position and salary.

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