Mortgage Glossary

A mortgage with an interest rate that changes periodically based on a benchmark index. ARMs can have an initial fixed period and later adjust according to the loan terms and index. The rate can go up or down, affecting your monthly payment.

The process of paying off a loan through regular scheduled payments over time. Each payment covers both principal and interest. Early payments are mostly interest; later payments are mostly principal. A 30-year mortgage is fully amortized over 360 monthly payments.

A complete table showing each loan payment broken down into principal and interest, along with the remaining balance after each payment. You can request this from your lender at any time.

The true yearly cost of borrowing, expressed as a percentage. Unlike the interest rate, APR includes fees and other costs (like origination fees and mortgage insurance), giving you a more complete picture of the loan's cost.

A professional assessment of a property's market value, conducted by a licensed appraiser. Lenders require an appraisal to ensure the property is worth at least as much as the loan amount. Typically costs $300–$600.

The dollar value assigned to a property by a licensed appraiser based on comparable sales, property condition, and market conditions. This value determines how much a lender will lend against the property.

A mortgage that can be transferred from the seller to the buyer, allowing the buyer to take over the existing loan terms, including the interest rate. FHA and VA loans are typically assumable; conventional loans usually are not.

A short-term mortgage where payments are calculated as if the loan were a 30-year mortgage, but the entire remaining balance is due in a lump sum (balloon payment) after a shorter period, typically 5–7 years.

A unit commonly used to describe small changes in interest rates or fees. Lender pricing and disclosures show the terms that apply to a particular scenario.

A short-term loan used to bridge the gap between buying a new home and selling your current one. Allows you to use your current home's equity as a down payment on the new home before the sale closes.

A financing arrangement in which upfront funds can affect the mortgage rate for a period or the loan term. Structure, costs, eligibility, and lender requirements vary by program and the complete scenario.

A limit on how much an adjustable-rate mortgage's interest rate or payment can change. Periodic caps limit each adjustment; lifetime caps limit the total change over the life of the loan.

A refinance in which you borrow more than you owe on your current mortgage and receive the difference in cash. Used to access home equity for home improvements, debt consolidation, or other expenses.

The final step in a real estate transaction where ownership is transferred from seller to buyer. At closing, all documents are signed, funds are distributed, and the buyer receives the keys. Also called 'settlement.'

Fees and expenses paid at the closing of a real estate transaction, typically 2–5% of the loan amount. Includes origination fees, appraisal, title insurance, attorney fees, prepaid taxes and insurance, and more.

A five-page form that provides final details about your mortgage loan, including loan terms, projected monthly payments, and closing costs. You must receive it at least 3 business days before closing.

A mortgage that meets the guidelines set by Fannie Mae and Freddie Mac, including loan limits (the 2026 baseline is $832,750 for a one-unit property in most areas), borrower credit requirements, and documentation standards. Terms and pricing depend on the selected lender and complete loan scenario.

A mortgage not backed by a government agency (unlike FHA, VA, or USDA loans). Can be conforming or jumbo. Typically requires a higher credit score and larger down payment than government-backed loans.

A numerical representation of your creditworthiness, typically ranging from 300 to 850. The most common scoring model is FICO. Higher scores indicate lower risk to lenders and typically result in better loan terms. Most conventional loans require a 620+ score.

The percentage of your gross monthly income that goes toward paying debts. It is calculated by dividing total monthly debt payments by gross monthly income. Qualification thresholds vary by loan program, automated underwriting findings, lender requirements, and the overall file; 43% is a commonly referenced benchmark, not a universal limit.

A legal document that transfers ownership of real property from one party to another. The deed must be signed by the seller (grantor) and delivered to the buyer (grantee). Different types include warranty deeds, quitclaim deeds, and grant deeds.

A legal document used in some states instead of a mortgage. It involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee) who holds the title until the loan is paid off.

Failure to fulfill the terms of a loan agreement, most commonly by missing mortgage payments. A mortgage is typically considered in default after 30 days of non-payment. Default can lead to foreclosure.

Fees paid directly to a lender at closing that can affect the interest rate and loan pricing. Costs, rate treatment, and total-cost considerations vary by lender and the complete scenario.

The portion of a home's purchase price paid upfront by the buyer rather than financed by the mortgage. Down-payment requirements and mortgage-insurance treatment vary by lender, program, and the complete scenario.

A deposit made by a buyer to demonstrate serious intent to purchase a property. Contract treatment, escrow handling, and its application at settlement depend on the purchase agreement and transaction.

The difference between a home's current market value and the outstanding mortgage balance. As you pay down your mortgage and/or as the home appreciates, your equity grows. Equity can be accessed through a cash-out refinance or HELOC.

A neutral third-party account that holds funds during a real estate transaction. Also refers to the portion of your monthly mortgage payment held by the lender to pay property taxes and homeowner's insurance when they come due.

The Federal National Mortgage Association (FNMA), a government-sponsored enterprise that buys mortgages from lenders, packages them into mortgage-backed securities, and sells them to investors. This process provides lenders with capital to make more loans.

Turn Times is a licensed mortgage broker, not a lender, and is not affiliated with or endorsed by the VA, FHA, HUD, or any government agency. FHA loan requirements, mortgage insurance, property standards, lender overlays, and final eligibility vary by the complete borrower and property scenario.

The most widely used credit scoring model, developed by Fair Isaac Corporation. Scores range from 300–850 and are based on payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

A mortgage with an interest rate that remains constant for the entire loan term. The most common terms are 30 years and 15 years. Provides payment stability and predictability, making budgeting easier.

An agreement between a borrower and lender to temporarily reduce or pause mortgage payments during a period of financial hardship. Interest typically continues to accrue. The paused payments must be repaid later through a repayment plan, deferral, or loan modification.

The legal process by which a lender takes possession of a property after the borrower fails to make mortgage payments. The lender then sells the property to recover the outstanding loan balance.

The Federal Home Loan Mortgage Corporation (FHLMC), a government-sponsored enterprise similar to Fannie Mae. Buys mortgages from lenders and sells them as mortgage-backed securities to provide liquidity to the mortgage market.

A document previously required by RESPA that estimated closing costs for a mortgage. Replaced by the Loan Estimate form in 2015 under TRID regulations.

Total income before taxes and other deductions. Lenders use gross monthly income (not take-home pay) to calculate your debt-to-income ratio.

A Home Equity Line of Credit — a revolving line of credit secured by your home's equity. Works like a credit card: you can borrow, repay, and borrow again up to your credit limit during the draw period (typically 10 years), then repay the balance over the repayment period.

The portion of your home's value that you own outright, calculated as the market value minus any outstanding mortgage balances. Equity builds through mortgage payments and home appreciation.

Insurance that protects your home and personal property against damage or loss from events like fire, theft, and certain natural disasters. Required by lenders. Does not typically cover floods or earthquakes, which require separate policies.

A form previously used to itemize all charges imposed on borrowers and sellers in a real estate transaction. Replaced by the Closing Disclosure form in 2015 under TRID regulations.

A benchmark interest rate used to calculate the rate on an adjustable-rate mortgage. Common indexes include the Secured Overnight Financing Rate (SOFR), the 1-year Treasury, and LIBOR (being phased out). Your ARM rate = Index + Margin.

The percentage of the loan amount charged by the lender for borrowing money, expressed as an annual rate. Does not include fees. Compare to APR, which includes fees and gives a more complete picture of borrowing costs.

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac (the 2026 baseline is $832,750 for a one-unit property in most areas). Requires higher credit scores, larger down payments, and more cash reserves than conforming loans.

A legal claim against a property as security for a debt. A mortgage creates a lien on your property. Other liens can include tax liens, mechanic's liens, and judgment liens. All liens must be satisfied before a property can be sold with clear title.

A three-page form required by TRID that provides key details about a mortgage loan, including estimated interest rate, monthly payment, and closing costs. Must be provided within 3 business days of receiving a loan application.

A permanent change to one or more terms of your mortgage, such as the interest rate, loan term, or principal balance. Used to make payments more affordable for borrowers experiencing long-term hardship.

The ratio of a mortgage loan amount to a property's appraised value, expressed as a percentage. Mortgage-insurance treatment and lender requirements can vary with LTV and the complete scenario.

The period during which a lender commits to a specific interest rate on a mortgage. The lender explains the applicable expiration, conditions, and any costs for a particular loan.

A fixed component added to an index to determine an adjustable-rate mortgage's interest rate. The margin, index, adjustment terms, and caps are identified in the loan documents.

A loan used to purchase or refinance real estate, where the property serves as collateral. If the borrower fails to repay, the lender can foreclose on the property. The two main components are principal (the amount borrowed) and interest (the cost of borrowing).

Insurance required on FHA loans to protect the lender if the borrower defaults. Includes an upfront premium (1.75% of the loan amount) and an annual premium (0.15%–0.75% depending on loan terms), paid monthly.

A fee charged by the lender or broker for processing a new loan application. At Turn Times, it is typically 1–1.5% of the loan amount and varies by loan amount and program. Included in the APR calculation and disclosed on the Loan Estimate.

An acronym for the four components of a monthly mortgage payment: Principal, Interest, Taxes, and Insurance. Lenders use PITI to calculate your housing expense ratio when qualifying you for a loan.

Private Mortgage Insurance may apply to some conventional loans. It protects the lender, not the borrower. Costs, duration, cancellation rules, and lender requirements vary by program and the complete scenario.

A lender's written commitment to loan you up to a specific amount based on a review of your credit, income, assets, and debts. Stronger than pre-qualification. Shows sellers you're a serious buyer and can close quickly.

An informal estimate of how much you might be able to borrow, based on self-reported financial information (no credit check). Less reliable than pre-approval. Useful for early planning but not sufficient for making offers.

The original amount of money borrowed in a loan, or the remaining balance owed (excluding interest). Each mortgage payment reduces the principal balance. The portion of each payment that goes to principal increases over time as the loan amortizes.

Annual taxes assessed by local governments based on the assessed value of real property. Typically paid through an escrow account as part of your monthly mortgage payment. Rates vary significantly by location.

An agreement between a borrower and lender that commits to a specific interest rate for a stated period, subject to the lender’s terms and conditions.

The process of replacing an existing mortgage with a new one, typically to get a lower interest rate, reduce the monthly payment, change the loan term, or access equity. Involves closing costs similar to the original mortgage.

The Real Estate Settlement Procedures Act — a federal law that requires lenders to provide borrowers with disclosures about the costs of the mortgage process and prohibits certain practices like kickbacks between settlement service providers.

A loan secured by a property that already has a first mortgage. Includes home equity loans and HELOCs. In foreclosure, the first mortgage is paid off before the second. Higher risk = higher interest rates.

A sale of a home for less than the outstanding mortgage balance, with the lender's approval. Used to avoid foreclosure. The lender may forgive the remaining balance or pursue a deficiency judgment depending on state law.

The process of ranking liens in order of priority. In a refinance, a second mortgage lender may need to agree to remain in second position (subordinate) to the new first mortgage.

Legal ownership of a property. A clear title means there are no liens, disputes, or other claims against the property. Title is transferred via deed at closing.

Insurance that protects against losses from defects in the title, such as undisclosed liens, errors in public records, or fraud. Lender's title insurance is required; owner's title insurance is optional but recommended.

An examination of public records to verify the seller's right to transfer ownership and to identify any liens, encumbrances, or other issues with the title.

TILA-RESPA Integrated Disclosure — a set of rules that combined the Truth in Lending Act (TILA) and RESPA disclosures into two forms: the Loan Estimate (given within 3 days of application) and the Closing Disclosure (given 3 days before closing).

The process by which a lender evaluates the risk of a loan application by reviewing the borrower's credit, income, assets, and the property's value. The underwriter issues an approval, conditional approval, or denial.

A mortgage program backed by the U.S. Department of Agriculture for eligible rural and suburban properties. Area, income, property, underwriting, costs, and down-payment requirements vary by program, lender, and the complete scenario.

Turn Times is a licensed mortgage broker, not a lender, and is not affiliated with or endorsed by the VA, FHA, HUD, or any government agency. VA eligibility, funding-fee treatment, costs, and lender requirements depend on the complete borrower and property scenario.

Local government regulations that dictate how land can be used in specific areas. Common designations include residential (R), commercial (C), and industrial (I). Zoning affects what you can build or do with a property.