Mortgage Glossary

Plain-language definitions for terms used in U.S. residential, investor and commercial mortgage conversations.

Amortization: The scheduled reduction of a loan balance through payments of principal and interest over time.
Appraisal: An independent opinion of a property's value prepared for a specific assignment.
APR: Annual Percentage Rate; a standardized measure that reflects interest and certain finance charges, not simply the note rate.
Closing: The stage when required documents are signed, funds are settled and ownership or loan documents are finalized.
Closing Costs: Transaction expenses beyond the purchase price, which may include lender, title, recording, appraisal, tax and prepaid items.
Conventional Loan: A mortgage not insured or guaranteed by a government agency such as FHA or VA.
Debt-to-Income Ratio (DTI): A comparison of qualifying monthly debt obligations with qualifying gross monthly income.
DSCR: Debt Service Coverage Ratio; a comparison of eligible property income with the debt or housing expense defined by a program.
Escrow: Funds or documents held by a neutral party until stated conditions are met; it can also refer to an account used for taxes and insurance.
Foreign National: A borrower who is not a U.S. citizen and whose residency, income, credit or assets may be evaluated under a Foreign National program.
HOA: A homeowners association that may charge dues and govern common property or community rules.
Interest Rate: The percentage charged for borrowing principal, separate from fees reflected in APR.
LTV: Loan-to-Value ratio; the loan amount divided by the applicable property value.
Mortgage: A loan secured by real property and the legal instrument that creates that security interest.
NOI: Net Operating Income; qualifying property income less operating expenses, before debt service and certain non-operating items.
Prepayment Penalty: A charge that may apply when a loan is paid down or paid off under conditions specified in the loan documents.
Principal: The unpaid amount borrowed, excluding interest and most fees.
Refinance: Replacing an existing mortgage with a new loan, commonly to change terms or access eligible equity.
Title: The legal rights of ownership in real property and the record used to establish those rights.
Underwriting: The review of the borrower, documentation, property and transaction against a lender's program requirements.

Definitions are general and may be applied differently by a lender, loan program or transaction. Review your loan documents and ask your mortgage professional about terms specific to your financing.