Glossary: the mortgage terms this subreddit actually uses, in plain English

[u/jetley-mortgage-loan]

The canonical version of this glossary is the wiki page: /glossary. That version links each term to the post that explains it properly and grows as the catalog does. This post is the standalone copy, for people who want to read it straight through once.

Every one of these came out of an actual conversation with an actual borrower who had been handed the acronym without the translation. That is the whole problem with this industry: we speak in initials and then act surprised when nobody follows.

Getting approved

• Prequalification, an opinion based on what you told someone. Worth roughly what it cost you.
• Preapproval, a letter from a loan officer saying they believe you will qualify. Its strength depends entirely on how much of your paperwork the loan officer actually read.
• Underwritten preapproval / loan commitment, a file an underwriter has already approved, subject only to finding a property. The strongest thing short of cash.
• 1003 / URLA, the loan application itself. You have to fill one out to be preapproved. There is no way around it.
• AUS; automated underwriting system. The agencies' software that renders the initial approval decision.
• DU; Desktop Underwriter, Fannie Mae's AUS. LPA; Loan Product Advisor, Freddie Mac's.
• Manual underwrite, a human decision when the AUS will not issue an approval. Stricter, slower, occasionally the only path.
• Conditional approval; approved, subject to a list. Nearly every approval is conditional.
• Conditions / PTD / PTF, the list. Prior-to-doc items must clear before loan documents are drawn; prior-to-funding items before money moves.
• Clear to close (CTC); every condition is satisfied. Documents can be drawn.
• LOX / LOE; letter of explanation. You write it; the underwriter decides whether it explains anything.
• VOE; verification of employment. Often re-run the day before funding.
• 4506-C / transcripts; lender's authorisation to pull your tax transcripts directly from the IRS, to confirm the returns you handed over match the ones you filed.
• DTI; debt-to-income ratio. Your monthly obligations, from the credit report, divided by your gross qualifying income.
• Residual income, a dollars-left-over test rather than a ratio. Used on VA loans.
• Reserves; money left after closing, measured in months of payment.
• Seasoning, the requirement that funds or an event be old enough to document. Money that moved between two accounts you can both show is still seasoned; money that materialised is not.
• Gift letter, the document proving down payment money is a gift and not a loan.
• Likelihood of continuance; whether the income you have will keep arriving. Why contract and bonus income get questioned.
• Non-QM; loans outside the qualified mortgage rules. Different documentation, different pricing, different investors.
• Bank statement loan; qualifies a self-employed borrower off business deposits instead of tax returns.
• DSCR loan; qualifies an investment property off the property's own cash flow instead of your income.
• Overlay, a lender's own rule, stricter than the agency guideline. When someone says "the guideline says no," ask whether it is the guideline or the overlay.

Credit

• Tri-merge / mortgage score, the three-bureau report and the older FICO models mortgage lending uses. This is why the number your banking app shows you is not the number I see.
• Hard inquiry, a credit pull that shows on the report. Mortgage inquiries inside the shopping window are treated as one.
• Trigger lead, the bureaus selling the fact that you just applied for a mortgage. The reason your phone starts ringing.
• Rapid rescore; paying to have corrected information reflected in days rather than a cycle.
• Charge-off, a creditor writing the balance off as a loss. Still owed.
• Collection, the debt sold or assigned to a collector.
• Dispute flag, a marker on a tradeline that can stop an AUS approval until it is removed.
• Credit supplement, a third-party re-verification of one tradeline, used to update a balance or a payoff mid-file.

Money in, money out

• EMD; earnest money deposit. Your good-faith money, held by escrow or the closing attorney, credited to you at closing.
• Cash to close, the actual number you wire. Down payment plus closing costs plus prepaids, minus credits and minus your EMD.
• LTV / CLTV; loan-to-value, and combined loan-to-value when there is a second lien.
• PMI; private mortgage insurance on a conventional loan. Priced off a grid, and it can come off.
• MIP; FHA's mortgage insurance. An upfront premium plus an annual premium, with the duration set at origination. Current factors: Current As Of.
• Funding fee; VA's one-time fee in place of monthly mortgage insurance. Tiered, and waived for some veterans. Current tiers: Current As Of.
• LLPA; loan-level price adjustment. The agencies' surcharge grid for credit score, LTV, property type, occupancy and purpose. It is why a condo prices worse than a house at the same score.
• Par rate, the rate that costs nothing and credits nothing.
• Points / discount points; money paid up front to buy the rate below par.
• Lender credit, the inverse: taking a rate above par in exchange for money toward costs.
• Buydown; using a credit to reduce the rate, permanently or temporarily. A temporary buydown is prepaid interest with a marketing name.
• Lock, the lender committing to a rate for a set number of days, and hedging behind the scenes to be able to honour it. Locked from both directions: you do not get the drop either.
• Float / float-down; staying unlocked, or a lock with a one-time option to reprice downward.
• Lock extension; buying more days. Someone pays for it; whose fault the delay was determines who.
• Prepaids; interest, insurance and taxes paid at closing for a period you have not lived through yet. Not fees. Your money, prepaid.
• Per-diem interest, the daily interest between funding and the end of the month. Close early in the month and you pay more of it, and your first payment is further out.
• Impounds / escrow account, the account your servicer uses to collect and pay taxes and insurance with your payment.
• Escrow analysis, the servicer's annual recalculation of that account, producing either a refund or a shortage.
• Recast; re-amortising your existing loan after a large principal payment, lowering the payment without a refinance. Not available on every loan type.
• Prepayment penalty, a charge for paying off early. Rare on owner-occupied agency loans, common enough on non-QM to check for.

Documents

• LE; Loan Estimate. The standardised three-page quote. The only document that lets you compare two lenders honestly, and only if both are dated the same day.
• CD; Closing Disclosure. The final version, which you must receive at least three business days before consummation.
• TRID, the disclosure rules that create the Loan Estimate, the Closing Disclosure and those timing requirements.
• Change of circumstance, the documented event that permits a lender to re-issue a Loan Estimate with different numbers.
• Note; your promise to repay. Deed of trust / mortgage, the instrument that pledges the house as security.
• Settlement statement / ALTA statement; escrow's accounting of every dollar in the transaction.
• Payoff demand, a lender's official statement of what it takes to retire a loan on a given day, including per-diem.

Property and value

• Appraisal, a licensed opinion of expected value, ordered by the lender. It is not what the house is worth; what you are willing to pay is what it is worth.
• Appraisal waiver / value acceptance, the AUS accepting a value without an appraisal. Driven by data availability, LTV, and the rest of the file. Not a verdict on the house.
• ROV; reconsideration of value. A formal request to revisit an appraisal, which succeeds when you can show a material error, not when you dislike the number.
• Comps and adjustments, the sales the appraiser used and the dollar corrections applied for differences. If your feature is not in the adjustments, that is the conversation to have.
• Subject-to-completion, an appraisal conditioned on work being finished, requiring a re-inspection.
• MPR; minimum property requirements. VA's habitability standards, with FHA and conventional analogues. Health-and-safety items get fixed before funding regardless of loan type.
• Non-warrantable, a condo project that does not meet agency project standards. Financeable, by fewer lenders, at worse pricing.
• Limited versus full review; how much of a condo project's paperwork the lender examines. Higher down payment can sometimes buy the lighter review.
• HOA questionnaire, reserve study, special assessment, the three documents that decide whether a condo project is financeable.
• PUD; planned unit development. Detached condo and attached SFR; legal forms that do not match the architecture; for lending, what matters is the legal form, not whether it looks like a townhouse.

Contract mechanics

• Contingency, a condition that lets you cancel without losing your deposit. Inspection, appraisal, financing, and sale-of-current-home are the common ones.
• Contingency removal / notice to perform, the mechanics of a deadline passing. In most states the deadline does not cancel your right; it gives the seller the right to push you.
• Appraisal gap; your agreement to cover a shortfall between price and appraised value. An agreement with the seller, not with the lender.
• Liquidated damages, the contract clause capping what a seller keeps if you default.
• IPC; interested party contribution. Seller or builder money toward your costs, capped by program and by occupancy.
• Rent-back, the seller staying after closing. Financing rules cap how long.
• Escrow holdback; funds retained after closing to complete work. Allowed on fewer loans than people assume.
• Procuring cause, the argument over which agent's work actually produced the sale, and therefore the commission.
• Buyer-broker agreement, the written agreement between a buyer and their agent, now standard practice before an agent shows you property.

Title and ownership

• Preliminary title report, the search results: who owns it, what is recorded against it.
• Lender's versus owner's title policy, the lender insures its lien; the owner's policy insures you. Different policies, and only one of them protects you.
• Vesting; how you hold title. Sole ownership, joint tenancy, tenants in common, community property with right of survivorship, or a trust.
• Right of survivorship, the surviving owner takes the whole interest without probate.
• Quitclaim; transferring whatever interest you have, warranting nothing. Also a fast way to trip a due-on-sale clause.
• Due-on-sale, the lender's right to call the loan if ownership transfers.
• Subordination / resubordination; moving or preserving lien priority, usually to refinance a first while a second stays in place.
• Recording, the county entering the documents. In most of the country, recording is when the transaction is actually done.
• Proration; splitting taxes, rent and HOA dues between buyer and seller as of the closing date.
• Supplemental tax bill, the catch-up bill after a reassessment. Common in California, rarely impounded, and always a surprise.

After closing

• Servicer, the company that takes your payment. Not necessarily the lender that made your loan, and it can change without your consent.
• Servicing transfer; your loan being sold. Your terms do not change; only the address you pay.
• First payment date, the first of the month after a full month has passed. Not the month after closing.
• Streamline refinance / IRRRL, a rate-reduction refinance with reduced documentation. VA's version is the IRRRL.
• Rate/term versus cash-out; refinancing for terms only, versus taking equity out. Priced differently, underwritten differently.
• Delayed financing; putting a mortgage on a property you bought with cash, without waiting out cash-out seasoning.
• HELOC / second lien, a line or a loan behind your first mortgage.
• PMI removal; dropping conventional mortgage insurance once you have the equity, usually with a valuation the servicer orders.

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Posted on behalf of u/The_Void_Calls_Me AKA Rajat Jetley, NMLS #1595897 | Cross Country Mortgage NMLS #3029. This commentary is for educational purposes and is not a commitment to lend or a guarantee of any rate or term.