Glossary

Every term used across the calculators, explained in plain English — starting with mortgage, more categories as they ship.

131 terms.

Actual cash value: Actual cash value (ACV) pays what an item was worth at the time it was damaged, after subtracting for age and wear. On an older roof, that can be far less than the cost to replace it.
Adjustable-Rate Mortgage (ARM): An ARM starts with a lower fixed rate for a set number of years, then adjusts periodically based on market rates — your payment can go up (or down) after the intro period ends.
Amortization: Amortization is the process of paying off your loan over time through fixed monthly payments — early payments go mostly toward interest, and later payments go mostly toward principal.
Amortization Schedule: An amortization schedule is a month-by-month table showing how much of each payment goes to interest versus principal, and what your remaining balance is after each one.
Appraisal: An appraisal is a licensed appraiser's independent opinion of a home's value, required by the lender to confirm the property is worth what you're borrowing against it.
Appraisal Gap: An appraisal gap happens when the home appraises for less than your agreed purchase price — you then have to cover the difference in cash, renegotiate the price, or find another way to bridge it.
APR: APR is the yearly cost of your loan including certain fees, not just the interest rate — it's usually a bit higher than the note rate and is meant to help you compare loan offers.
ARM Index: The index is the published market interest-rate benchmark an ARM's rate is tied to — when the index moves, your rate moves with it (plus a fixed markup called the margin).
ARM Margin: The margin is the fixed percentage a lender adds to the index rate to set your ARM's new rate at each adjustment — unlike the index, the margin never changes for the life of the loan.
Assessed Value: Assessed value is the dollar figure your local tax assessor's office assigns to your property for property-tax purposes — it's not the same as market value or an appraisal.
Automated Underwriting System (AUS): An AUS is software (like Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor) that runs your loan file against the rules automatically and returns a preliminary decision in minutes.
Back-End DTI: Back-end DTI compares ALL your monthly debts (mortgage plus car loans, credit cards, student loans, etc.) to your income — it's usually the number lenders care about most.
Balloon Payment: A balloon payment is a large lump sum due at the end of certain loans that don't fully amortize over their stated term — the remaining balance is due all at once, often requiring a refinance to cover it.
Bank Statement Loan: A bank statement loan lets self-employed borrowers qualify using deposits shown on 12-24 months of bank statements instead of tax returns, which can help when write-offs make tax-return income look artificially low.
Capital expenditure reserve: Money set aside for big, occasional replacements - roof, furnace, water heater. These are certain costs, not unlikely ones, and leaving them out is the most common way a rental looks profitable when it is not.
Capitalization rate: Cap rate is a property's yearly income after operating costs, divided by its price. It deliberately ignores your mortgage, so you can compare two properties regardless of how each is financed.
Cash-on-cash return: Your annual cash flow after the mortgage, divided by the cash you actually put in. It answers what your money is earning, not what the property is earning.
Cash-Out Refinance: A cash-out refinance replaces your mortgage with a bigger loan and gives you the difference in cash, using your home's equity — it usually comes with a higher rate than a rate-and-term refinance.
Clear to Close: Clear to close means the lender has signed off on everything and you're ready to schedule your closing — the last milestone before signing.
Closing Costs: Closing costs are the fees you pay to finalize a home purchase — things like lender fees, title insurance, appraisal, and recording fees — usually a few percent of the home price, paid on top of your down payment.
Closing Disclosure: The Closing Disclosure is the final 5-page paperwork showing your actual final loan terms and costs, which you must receive at least 3 business days before you sign at closing.
Coinsurance clause: A coinsurance clause requires you to insure your home for at least a set share of its full rebuild cost, usually 80%. Fall below it and the insurer pays only part of even a small claim.
Combined Loan-to-Value (CLTV): CLTV adds up ALL your mortgage balances (first mortgage plus any HELOC or second mortgage) against your home's value — lenders check this, not just LTV, when you're taking out a second loan.
Comparable Sales (Comps): Comps are recently sold homes similar to yours in size, condition, and location, used by an appraiser (or agent) to help estimate what a property is worth.
Compensating Factors: Compensating factors are strengths in your file — like large cash reserves or a long history in the same job — that can help an underwriter approve a loan even when one number (like DTI) is a little outside the usual guideline.
Conditional Approval: A conditional approval means the underwriter has approved your loan pending a specific list of remaining items — like an updated pay stub or an explanation letter — before it's fully cleared.
Conforming Loan: A conforming loan is a mortgage that meets Fannie Mae and Freddie Mac's size and underwriting rules, which is what lets a lender sell it to them — this is what most standard conventional loans are.
Contingency: A contingency is a condition in your purchase contract that must be met for the deal to proceed — common ones are financing, appraisal, and inspection contingencies — and it lets you walk away with your earnest money back if the condition isn't satisfied.
Conventional Loan: A conventional loan is a mortgage not backed by a government agency (like FHA or VA) — it typically needs a somewhat higher credit score than government loans but has more flexible property and occupancy rules.
Coverage A: Coverage A is the dwelling limit on your homeowners policy - the most it will pay to rebuild the house itself. It is not the market value of your home, and it is not your mortgage balance.
Credit Score: Your credit score is a three-digit number summarizing your credit history, used by lenders to help decide whether to approve you and at what rate — mortgage lenders typically use a slightly different scoring model than what you see in a banking app.
Curtailment: A curtailment is any extra payment you make toward your loan's principal, beyond your regular scheduled payment — it shortens your payoff timeline and cuts the total interest you'll pay.
Debt service coverage ratio: DSCR compares a property's income to its loan payment. Below 1.0 means the property does not earn enough to cover its own mortgage, and the difference comes out of your pocket.
Debt Service Coverage Ratio (DSCR): DSCR compares a rental property's income to its mortgage payment, used instead of your personal income to qualify for some investment-property loans.
Deed: A deed is the legal document that actually transfers ownership of a property from seller to buyer — it's recorded at closing alongside your mortgage.
Discount Points: Discount points are an optional upfront fee you can pay at closing to lower your interest rate — one point typically costs 1% of your loan amount.
Down Payment: Your down payment is the money you pay upfront toward the home price — the rest is financed through your mortgage loan.
Down Payment Assistance (DPA): Down payment assistance is money — a grant, a low/no-interest loan, or both — from a state, local, or nonprofit program to help cover your down payment and/or closing costs, usually for buyers within certain income and purchase-price limits.
DTI: DTI (Debt-to-Income ratio) compares your monthly debt payments to your monthly income — lenders use it to judge how much you can comfortably borrow.
Earnest Money: Earnest money is a deposit you put down when making an offer, showing you're serious — it's held in escrow and applied toward your down payment or closing costs at closing, or refunded if a contingency lets you walk away.
Easement: An easement gives someone else a legal right to use part of your property for a specific purpose — like a utility company's right to access power lines running through your yard.
ECOA: ECOA is the federal law that makes it illegal for a lender to deny you credit based on race, sex, marital status, age, or several other protected characteristics — and it's what gives you the right to a written reason if you're denied.
Effective gross income: The rent you realistically collect over a year - scheduled rent minus what you lose to vacancy and non-payment.
Encroachment: An encroachment is when part of a structure — a fence, a shed, an overhanging roofline — crosses onto a neighboring property's boundary without permission.
Equity: Equity is the portion of your home you actually own outright — your home's current value minus what you still owe on your mortgage.
Escrow: An escrow account is where your lender holds part of your monthly payment to pay your property taxes and insurance for you when they're due.
Escrow Analysis: An escrow analysis is your servicer's annual review of your escrow account to make sure it's collecting enough (but not too much) for your actual tax and insurance bills — it's why your payment can change even on a fixed-rate loan.
Escrow Cushion: The escrow cushion is a small extra buffer your servicer is allowed to collect in your escrow account, on top of your actual bills, in case costs come in higher than expected.
Escrow Shortage: An escrow shortage means your escrow account didn't collect enough to cover the actual tax/insurance bills — usually because they went up — and your servicer will spread the make-up amount over the next year's payments (or let you pay it in one lump sum).
Exclusion: Something your policy specifically does not cover. Flood and earthquake are excluded from every standard homeowners policy in the country.
Extended replacement cost: An add-on that pays somewhat above your dwelling limit, often 20-50% more, if rebuild costs come in higher than expected. Useful after a disaster, when construction prices spike.
Fair Housing Act: The Fair Housing Act makes housing discrimination illegal — in sales, rentals, and lending — based on race, color, religion, sex, national origin, familial status, or disability.
Fair Market Value: Fair market value is what a willing buyer would reasonably pay a willing seller for a home, with neither side under pressure to act — the concept an appraisal is trying to estimate.
FAIR plan: A FAIR plan is a state-backed insurer of last resort for homeowners who cannot get coverage from a regular carrier. Coverage is usually narrower and often more expensive.
FHA Loan: An FHA loan is a mortgage insured by the Federal Housing Administration, popular with first-time and lower-credit-score buyers because it allows a down payment as low as 3.5%.
Fixed-Rate Mortgage: A fixed-rate mortgage keeps the same interest rate for the entire loan term, so your principal-and-interest payment never changes.
Float-Down Option: A float-down option lets you lower your locked rate one time if market rates drop before closing, usually for an extra fee.
Flood insurance: Flood damage is never covered by a homeowners policy. Flood insurance is a separate policy, bought through the federal NFIP or a private insurer.
Flood Zone: A flood zone is a FEMA-designated area rating a property's flood risk — if you're in a high-risk zone, your lender will require you to carry flood insurance, separate from your regular homeowners policy.
Front-End DTI: Front-end DTI compares just your proposed housing payment to your income — it tells a lender how much of your paycheck the mortgage alone would eat up.
Fully Indexed Rate: The fully indexed rate is what an ARM's rate would be today if it adjusted right now — index plus margin, before any caps are applied.
Gift Funds: Gift funds are money a family member (or, on some programs, another eligible donor) gives you toward your down payment or closing costs — lenders require a signed gift letter confirming it's truly a gift, not a loan that has to be repaid.
HELOC: A HELOC (Home Equity Line of Credit) is a revolving credit line secured by your home's equity — you borrow, repay, and re-borrow against it as needed, similar to a credit card, usually at a variable rate.
HMDA: HMDA requires lenders to publicly report data on the mortgage loans they make — including applicant demographics and outcomes — which regulators and researchers use to spot lending disparities.
HOA: HOA fees are monthly or annual dues paid to a homeowners association for shared amenities and upkeep — common in condos and some planned communities.
Home Equity Loan: A home equity loan is a lump-sum second mortgage against your home's equity, with a fixed rate and fixed monthly payment — unlike a HELOC, you get all the money at once.

Home Inspection: A home inspection is a professional walkthrough of the property's condition — roof, systems, structure — separate from and in addition to the lender's appraisal, and it's for the buyer's benefit, not the lender's.
Homestead Exemption: A homestead exemption reduces the taxable value of the home you actually live in, lowering your property tax bill. Rules and dollar amounts vary a lot by state.
Hurricane deductible: A hurricane deductible is a separate, usually much larger deductible that applies only to hurricane damage. It is written as a percentage of your dwelling coverage rather than a flat dollar amount.
Insurer of last resort: Whoever will still write a policy when no regular company will. Depending on the state that is a FAIR plan, a windstorm pool, or a Citizens-style state corporation.
Jumbo Loan: A jumbo loan is a mortgage larger than the conforming loan limit for your county — because it's too big to be bought by Fannie Mae or Freddie Mac, it usually comes with stricter credit and reserve requirements.
Lien: A lien is a legal claim against a property that secures a debt — your mortgage itself is a lien, and unpaid contractor bills or taxes can create liens too, which must generally be cleared before you can sell or refinance.
Loan Estimate: A Loan Estimate is a standardized 3-page form every mortgage lender must give you within 3 business days of applying, showing your rate, monthly payment, and closing costs so you can compare offers apples-to-apples.
Loss of use: Loss of use (Coverage D) pays your extra living costs - hotels, meals, a rental - while your home is uninhabitable after a covered claim.
LTV: LTV (Loan-to-Value) is your loan amount compared to your home's value, shown as a percentage — a lower LTV usually means a smaller down payment requirement was met and often a better rate.
Manual Underwriting: Manual underwriting means a human underwriter reviews your file line by line instead of software — common for thin credit files or when an automated system can't approve the loan on its own.
Mortgage Credit Certificate (MCC): An MCC is a state or local program that lets qualifying first-time buyers convert part of their annual mortgage interest into a direct federal tax credit, not just a deduction.
Mortgage Insurance Premium (MIP): MIP is FHA's version of mortgage insurance — an upfront charge plus an ongoing monthly cost, similar in purpose to conventional PMI but with its own separate rules for when (or if) it ever goes away.
Named storm deductible: A named storm deductible works like a hurricane deductible but is triggered by any storm the National Hurricane Center has given a name, including tropical storms that never reach hurricane strength.
Negative Amortization: Negative amortization happens when your payment is too small to cover even the interest due, so the unpaid interest gets added to your loan balance — your balance grows instead of shrinking.
Net operating income: NOI is the rent you actually collect, minus every cost of operating the property - taxes, insurance, repairs, management, vacancy. It does not subtract your mortgage payment.
Non-QM Loan: A non-QM loan is a mortgage that doesn't meet the Qualified Mortgage rules — often used for self-employed borrowers or unique income situations — typically with a higher rate to offset the added risk.
Note Rate: The note rate is the actual interest rate written into your loan document — the one used to calculate your principal-and-interest payment. It's different from APR.
One percent rule: A quick screening shortcut: monthly rent should be at least 1% of the purchase price. It ignores taxes, insurance, and condition entirely, so it is a first filter, never an answer.
Operating expense ratio: The share of collected rent eaten by operating costs. Most rentals land between about 35% and 55%; well below that usually means something has been left out.
Ordinance or law coverage: Pays the extra cost of rebuilding to current building codes, which can be much stricter than when your house was built. Standard policies limit or exclude this.
Origination Fee: The origination fee is what a lender charges for processing and underwriting your loan — it shows up as its own line on your Loan Estimate, separate from discount points.
Payoff Statement: A payoff statement is an official document from your lender stating exactly how much you'd need to pay, and by what date, to fully pay off your loan — needed for a sale or refinance.
Per Diem Interest: Per diem interest is the daily interest charge on your loan from your closing date to the end of that month, collected upfront at closing since your first regular payment isn't due until the following month.
Peril: A peril is a specific cause of damage - fire, wind, hail, theft. Policies either list the perils they cover or cover everything except what they exclude.
PITI: PITI stands for Principal, Interest, Taxes, and Insurance — the four core pieces that make up your monthly mortgage payment.
PMI: PMI (Private Mortgage Insurance) is an extra monthly cost that protects the lender, usually required if your down payment is less than 20%. It can be removed later once you have enough equity.
Portfolio Loan: A portfolio loan is a mortgage the lender keeps on its own books instead of selling to Fannie Mae, Freddie Mac, or another investor — this gives the lender more flexibility on its underwriting rules.
Pre-Approval: Pre-approval is a lender's conditional commitment to lend you a specific amount, based on a credit check and verified documents — this is the letter you actually need to make a competitive offer.
Pre-Qualification: Pre-qualification is an early, informal estimate of how much you might be able to borrow, based on numbers you report yourself — it's not verified and carries little weight with a seller.
Prepayment Penalty: A prepayment penalty is a fee some loans charge if you pay off or refinance too early — rare on standard owner-occupied mortgages today, but worth confirming isn't in your note.
Principal: Principal is the actual amount you borrowed (or still owe) — separate from the interest you pay on top of it.
Qualified Mortgage (QM): A Qualified Mortgage is a category of home loan with consumer-protection rules built in — including a cap on how much debt you can carry relative to income — that make it more likely a lender verified you can actually afford the loan.
Rate Cap: Rate caps limit how much an ARM's interest rate can jump at any one adjustment and over the life of the loan, protecting you from a runaway payment.
Rate Lock: A rate lock is a lender's written commitment to hold your interest rate for a set number of days while your loan is processed, protecting you from rate increases during that window.
Rate-and-Term Refinance: A rate-and-term refinance changes your interest rate and/or loan term without pulling out extra cash — the new loan amount is basically your current payoff balance plus costs.
Recast: A recast keeps your existing loan and rate but re-calculates a lower monthly payment after you make a large lump-sum principal payment — cheaper than refinancing, but not every lender or loan type offers it.
Reconsideration of Value: A reconsideration of value is a formal request to challenge a low appraisal, usually by submitting additional comparable sales the appraiser may have missed.
Refinance: Refinancing means replacing your current mortgage with a new one, usually to get a lower rate, change your term, or pull out cash — it involves closing costs and a new underwriting process, just like a purchase loan.
Replacement cost value: Replacement cost value (RCV) pays what it costs to rebuild or replace something today, with no deduction for age or wear.
Reserves: Reserves are liquid savings left over after closing, measured in months of your housing payment — lenders want to see you could still make payments for a while if you lost your income.
RESPA: RESPA is the federal law that protects homebuyers around closing costs and the mortgage process — it's why lenders can't take kickbacks for referrals and why escrow accounts have specific rules.
Right of Rescission: The right of rescission lets you cancel certain refinance loans on your primary home within 3 business days after signing, with no penalty — it generally doesn't apply to a home purchase loan.
Seasoning: Seasoning is the minimum time you have to hold funds, own a property, or wait after a credit event before certain loan rules apply — like how long a large deposit needs to 'sit' before a lender will count it without extra documentation.
Second Mortgage: A second mortgage is any loan secured by your home that sits behind your primary mortgage in repayment priority — a HELOC and a home equity loan are both types of second mortgages.
Seller Concessions: Seller concessions are costs the seller agrees to pay on the buyer's behalf — usually toward closing costs — negotiated as part of the purchase offer, subject to loan-program limits.
Special Assessment: A special assessment is a one-time extra charge from an HOA or local government for a specific big-ticket cost, like a roof replacement or new road — separate from your regular dues or property taxes.
Surplus lines: Insurance from carriers not licensed in your state. It is where risks go when no standard carrier will write them, and it does not carry the state guaranty-fund protection a normal policy does.
Survey: A property survey shows the exact legal boundaries of your lot and where structures sit within them, catching any encroachments before you close.
Teaser Rate: A teaser rate is an artificially low introductory rate on an ARM, lower than the fully indexed rate would otherwise be, used to make the initial payment more attractive.
TILA: TILA is the federal law requiring lenders to clearly disclose the true cost of credit — including APR — so borrowers can compare loan offers on equal footing.
Title: Title is the legal right of ownership to a property — having 'clear title' means no one else has a competing claim against it.
Title Insurance: Title insurance is a one-time-premium policy that protects against a title problem discovered after closing — a lender's policy protects the lender, and an optional owner's policy protects you.
Title Search: A title search is a review of public records to confirm the seller actually has the legal right to sell the home, and to catch any liens or claims that need to be cleared before closing.
Transfer Tax: A transfer tax is a one-time fee some states and cities charge when a home changes owners, usually a percentage of the sale price. Depending on the state, the buyer, seller, or both can be responsible for it.
Tri-Merge Credit Report: A tri-merge credit report pulls your credit file from all three major bureaus at once — it's the specific type of report mortgage lenders use, different from the single-bureau report you might see from a free credit app.
TRID: TRID is the federal rule that created the Loan Estimate and Closing Disclosure forms and the timing rules around them, so mortgage costs are disclosed the same way by every lender.
Under Contract: 'Under contract' means the buyer and seller have signed a purchase agreement and are moving toward closing — the home isn't sold yet, but it's off the open market pending the deal completing.
Underwriting: Underwriting is the process where the lender verifies your income, assets, credit, and the property itself to decide whether to actually approve your loan.
USDA Guarantee Fee: The USDA guarantee fee is USDA's version of mortgage insurance on its 0%-down rural loans — an upfront fee plus a smaller annual fee, generally cheaper over time than FHA's MIP.
USDA Loan: A USDA loan is a 0%-down mortgage for homes in eligible rural and some suburban areas, for buyers within the program's income limits.
VA Funding Fee: The VA funding fee is a one-time charge on most VA loans that helps keep the program funded for future veterans — it can be paid in cash or rolled into the loan, and some borrowers are exempt.
VA Loan: A VA loan is a mortgage benefit for eligible veterans, active-duty service members, and some surviving spouses, often allowing 0% down and no ongoing mortgage insurance.
Vacancy rate: The share of the year a rental sits empty. Even a well-run property turns over, so an analysis assuming zero vacancy is not a real analysis.
Wind and hail deductible: A separate deductible that applies only to wind or hail damage, usually a percentage of your dwelling coverage. Common in hail-prone states far from any coast.
Wind mitigation credit: A discount on your premium for building features that help a house survive a storm - a newer roof, hurricane straps, impact-rated windows. In some states an inspection is worth hundreds a year.