Mortgage Glossary

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that may change periodically based on market conditions.

Closing Costs

Expenses associated with completing a real estate transaction, including lender fees, title fees, taxes, and insurance.

Conventional Loan

A mortgage not insured by a government agency such as FHA or VA.

Debt-to-Income Ratio (DTI)

A comparison of monthly debt obligations to monthly income, used during mortgage qualification.

Down Payment

The portion of the property purchase price paid upfront by the borrower.

DSCR (Debt Service Coverage Ratio)

A measure of whether a rental property generates enough income to cover its mortgage and housing expenses. Calculated by dividing gross rental income by total monthly debt obligations.

DSCR Loan

A financing solution for investment properties where qualification is based primarily on property cash flow rather than personal income.

Earnest Money

A deposit made to demonstrate serious intent to purchase a property.

Equity

The difference between a property’s market value and the remaining mortgage balance.

Escrow

An account used to collect and pay property taxes and insurance as part of a monthly mortgage payment.

FHA Loan

A government-backed mortgage program designed to make homeownership more accessible, typically with lower down payment requirements.

Fixed-Rate Mortgage

A mortgage with an interest rate that remains the same for the life of the loan.

Interest Rate

The percentage a lender charges for borrowing money, expressed annually.

Loan Estimate

A standardized document outlining estimated loan terms, monthly payments, and closing costs.

Non-QM Loan

A mortgage designed for borrowers who may not meet traditional qualification guidelines — such as self-employed individuals, investors, or those with non-traditional income.

Pre-Approval

A lender’s preliminary review of a borrower’s financial profile to estimate how much they may be eligible to borrow.

Refinancing

Replacing an existing mortgage with a new loan — often to obtain a lower interest rate, different term, or access home equity.

Reverse Mortgage

A financing option that allows eligible homeowners to convert home equity into available funds without monthly mortgage payments.

Underwriting

The lender’s process for evaluating a loan application, verifying financial information, and assessing risk before approving a mortgage.

VA Loan

A mortgage program available to eligible veterans, active-duty service members, and qualifying military families, often with no down payment required.