Mortgage glossary: plain-English definitions

A

Adjustable-rate mortgage (ARM)

A loan whose rate is fixed for a set period, then can change at set intervals based on an index.

Amortization

Paying a loan down over time with regular payments that cover interest and principal.

Annual percentage rate (APR)

The yearly cost of a loan including the interest rate and certain fees, shown so you can compare offers.

Appraisal

An independent estimate of the home’s value ordered by the lender.

Area median income (AMI)

The middle household income for an area. Many programs set income limits as a percentage of it, such as 80% AMI.

Assumable mortgage

A loan a buyer can take over from the seller, if the loan type and lender allow it.

B

Back-end ratio

Your total monthly debts, including the new housing payment, divided by gross monthly income. Also called the total DTI.

Bank statement loan

A non-agency loan that documents self-employed income with bank statements instead of tax returns.

C

Cash to close

The total you bring to closing: down payment plus closing costs, minus deposits and credits.

Cash-out refinance

A refinance for more than you owe, paying you the difference.

Certificate of Eligibility (COE)

The VA document showing you qualify for a VA-backed loan.

Clear to close (CTC)

The underwriter has signed off on all conditions and the loan can close.

Closing costs

Fees and prepaid items paid at closing, such as lender, title, recording and escrow amounts.

Closing Disclosure

A five-page form with your final loan terms and costs. You must receive it at least three business days before closing.

Co-borrower

A second borrower on the loan who shares responsibility for repaying it.

Combined loan-to-value (CLTV)

All loans on the home (first mortgage plus any seconds) divided by its value.

Community Second

Fannie Mae’s name for an eligible second mortgage from a government agency, employer or nonprofit used for down payment or closing costs.

Conditional approval

An approval that lists items you still need to provide before the loan can close.

Condo questionnaire

A form the association completes for the lender about the building’s budget, insurance, litigation and ownership.

Conforming loan limit

The maximum loan size Fannie Mae and Freddie Mac buy. For a one-unit home in Broward, Palm Beach and Miami-Dade it’s $832,750 in 2026.

Conventional loan

A loan not insured by a government agency, usually following Fannie Mae or Freddie Mac rules.

Credit score

A number summarizing your credit history. Lenders use it for eligibility and pricing.

D

Debt-service coverage ratio (DSCR)

For rentals, the property’s rent divided by its monthly payment.

Debt-to-income ratio (DTI)

Your monthly debt payments divided by your gross monthly income.

Deferred second mortgage

A second loan with no monthly payment that’s repaid later, such as when you sell or refinance.

Discount points

Upfront fees paid to lower the interest rate.

Down payment

The part of the price you pay upfront rather than borrow.

Down payment assistance (DPA)

Grants or second loans from government agencies or nonprofits to help with down payment and closing costs.

E

Earnest money

The good-faith deposit you make with your offer, held in escrow.

Equity

Your home’s value minus what you owe on it.

Escrow account

An account your servicer uses to pay property taxes and insurance from your monthly payment. “Escrow” also refers to the neutral party holding funds during a purchase.

F

FHA loan

A loan insured by the Federal Housing Administration (HUD).

FHA single-unit approval

A way to approve one condo unit for FHA when the building isn’t on HUD’s approved list, where FHA allows it.

First-time homebuyer

For most assistance programs, someone who hasn’t owned a principal residence in the last three years.

Flood insurance

Insurance for flood damage, often required for homes in high-risk FEMA flood zones.

Forgivable loan

A loan that’s reduced or cancelled over time if you meet the program’s rules, such as living in the home.

Front-end ratio

Your monthly housing payment divided by gross monthly income.

Funding fee

A one-time fee on most VA loans that helps fund the program. Some borrowers are exempt.

G

Gift letter

A signed letter confirming money from a relative or other donor is a gift, not a loan.

Gross monthly income

Your income before taxes and deductions.

H

HELOC

A home equity line of credit: a revolving line secured by your home.

HO-6 insurance

A condo owner’s policy covering the interior of your unit and your belongings.

HOA dues

Monthly or quarterly fees paid to the homeowners or condo association.

Home Possible

Freddie Mac’s low down payment loan for borrowers at or below 80% of area median income.

Homebuyer education

A course many assistance programs require before closing.

HomeReady

Fannie Mae’s low down payment loan for borrowers at or below 80% of area median income.

Homestead exemption

A Florida property tax exemption for your permanent residence. File by March 1.

Hometown Heroes

Florida Housing’s down payment assistance for eligible first-time buyers in qualifying occupations.

I

Interest rate

The yearly percentage charged for borrowing, not including fees.

ITIN

An IRS tax ID for people who can’t get a Social Security number.

J

Jumbo loan

A loan above the conforming loan limit.

L

Loan Estimate

A three-page form with estimated rate, payment and closing costs. Lenders must send it within three business days of your application.

Loan-to-value (LTV)

Your loan amount divided by the home’s value (or price, if lower).

M

Manual underwriting

A human underwriter reviews the file instead of relying on an automated approval.

Master policy

The condo association’s insurance on the building and common areas.

Milestone inspection

Florida’s required structural inspection for condo buildings three or more habitable stories tall, starting around year 30 (25 locally in some areas), then every 10 years.

Mortgage Credit Certificate (MCC)

A federal tax credit for part of the mortgage interest you pay, for eligible first-time buyers.

Mortgage insurance premium (MIP)

FHA’s mortgage insurance: an upfront premium plus an annual premium paid monthly.

N

Non-QM loan

A loan outside the Qualified Mortgage rules, such as many DSCR or bank-statement loans. The lender must still verify you can repay.

Non-warrantable condo

A condo building that doesn’t meet Fannie Mae or Freddie Mac project standards.

P

PITI

Principal, interest, taxes and insurance (plus association dues: PITIA), your full housing payment.

Pre-approval

A lender’s review of your income, assets and credit that sets a price range before you shop.

Prepaids

Costs paid at closing in advance, such as interest to month-end and insurance and tax reserves.

Principal

The amount you borrowed, not counting interest.

Private mortgage insurance (PMI)

Insurance on many conventional loans with less than 20% down. It can come off later.

Processor

The person who collects documents and orders verifications for your loan.

Q

Qualified Mortgage (QM)

A loan with features and underwriting that meet federal ability-to-repay standards.

R

Rate lock

An agreement to hold an interest rate for a set period while your loan is processed.

Reserves

For a borrower: savings left after closing. For a condo: money the association sets aside for future repairs.

S

Seller concessions

Money the seller agrees to pay toward your closing costs.

SHIP

Florida’s State Housing Initiatives Partnership, which funds many city and county purchase assistance programs.

SIRS

A structural integrity reserve study: required in Florida for condo buildings three or more stories tall, at least every 10 years.

Special assessment

A one-time charge to owners for a project, repair or shortfall, beyond regular dues.

T

Title insurance

Insurance that protects the lender (and you, with an owner’s policy) against problems with ownership records.

U

Underwriting

The lender’s review of your file to decide whether the loan meets guidelines.

USDA loan

A no-down-payment loan guaranteed by USDA Rural Development for eligible rural areas.

V

VA loan

A loan partly guaranteed by the Department of Veterans Affairs for eligible veterans, servicemembers and surviving spouses.

W

Warrantable condo

A condo building that meets Fannie Mae or Freddie Mac project standards.

Wire fraud

Scams that send fake wiring instructions. Always confirm by phone using a number you trust.

Last checked October 17, 2026. Sources: CFPB, What is a Loan Estimate? · CFPB, When do I get a Closing Disclosure? · FHFA, Conforming Loan Limit Values for 2026 · HUD Handbook 4000.1, FHA Single Family Housing Policy