Plain-English mortgage terms.

Pre-qualification

Also: Pre-qual · Prequalification

In short: A rough estimate of what you might be able to borrow, based on stated (not verified) income, debts, and credit range. No credit pull. Not a commitment to lend.

A pre-qualification letter is the lightest-weight mortgage document. The borrower self-reports income, monthly debt payments, down-payment available, and credit-score range; a lender or intake service runs simple debt-to-income (DTI) math and produces an estimated max-loan amount. It's not a commitment from any lender, but realtors generally accept it as evidence the borrower is serious. Typical turnaround: minutes to hours. Pre-qual is best when you're still browsing homes and need something to hand a realtor.

Pre-approval

Also: Preapproval · Loan pre-approval

In short: A formal letter from a lender stating you've been approved up to a specific loan amount, based on a hard credit pull and verified income/assets. Stronger than pre-qualification. Typically valid 60–90 days.

A pre-approval involves a hard credit pull, verified income (pay stubs, W-2s, or a bank connection like Plaid), and verified assets. The lender runs the file through their automated underwriting system (DU or LP). The resulting letter states a specific maximum loan amount and is what sellers and listing agents look for on competitive offers. Pre-approval letters typically expire after 60–90 days. Best for when you're actively shopping and need offers to land.

Loan application

Also: 1003 · URLA · Mortgage application

In short: The official mortgage application. Standardized by Fannie Mae as the Uniform Residential Loan Application (URLA), often called the '1003' for its old form number.

The Uniform Residential Loan Application (URLA, Form 1003) is the standardized mortgage application all conventional and most government-backed loans require. It captures borrower identity, employment, income, assets, liabilities, property details, declarations (BK / foreclosure / federal-debt history), military service, and demographic information. Once submitted with the property address, the lender's TRID 72-hour Loan Estimate clock begins. The 1003 was revised in 2021 and again in November 2024.

Loan officer

Also: LO · Mortgage broker · Loan originator

In short: A licensed person at a bank or mortgage company who walks you through your loan, gets you a rate, and shepherds your file to closing. The human you actually deal with.

A loan officer (LO) is a licensed mortgage-loan originator. State licensing requires NMLS registration and exams. The LO is your main point of contact during the loan process: they collect documents, quote rates, lock the rate, coordinate with the underwriter and the processor, and call you at closing. Some LOs work for a single bank ('captive'); others are at independent mortgage brokers who shop multiple lenders for you.

Underwriter

Also: Mortgage underwriter

In short: The person at the lender who decides whether to approve your loan. They look at income, debts, credit, and the property to make sure the loan makes sense.

Mortgage underwriters apply lender, investor, and federal rules to your file. They verify income via pay stubs, tax returns, and bank statements (or via Plaid in modern flows); confirm assets; check the appraisal on the property; look at title; and run the file against Fannie Mae's DU or Freddie Mac's LP system. They approve, suspend (with conditions), or deny the loan.

Loan-to-value (LTV)

Also: LTV · Loan to value ratio

In short: The percentage of the home's value that you're borrowing. $400,000 loan on a $500,000 home = 80% LTV. Lower is better.

LTV = loan amount / property value. It directly affects your rate, whether you need mortgage insurance, and which loan programs you qualify for. Conventional loans typically need ≤97% LTV (with PMI above 80%); FHA goes to 96.5%; VA can go to 100%; jumbo typically needs ≤80%. Above 80% LTV, expect PMI on conventional loans.

Debt-to-income (DTI)

Also: DTI · Debt to income ratio

In short: The percentage of your gross monthly income that goes toward debt payments. Most lenders want total DTI under 43–50%.

DTI is calculated two ways: front-end (housing payment / income — typically capped at 28–31% conventional, 31% FHA) and back-end (all minimum monthly debt payments + new housing / income — typically capped at 43–45% conventional, 43% FHA QM, up to 50% with strong compensating factors). DTI is the single biggest underwriting gate. Lowering DTI before applying (pay down a credit card, eliminate a car payment) often unlocks a meaningfully bigger loan.

Down payment

In short: The money you pay upfront. The rest of the home price is the loan. Larger down payment = lower rate, lower payment, no PMI on conventional loans above 20%.

Down payment is the portion of the home price you pay in cash at closing. Minimum down payments by loan program: conventional 3% (first-time buyer) or 5% (other), FHA 3.5%, VA 0%, USDA 0%, jumbo typically 10–20%. Gift funds are allowed from family on most loan types with proper documentation. Down-payment-assistance (DPA) programs exist in most states for first-time and lower-income buyers.

Escrow

In short: Two meanings: (1) a neutral third party holds money or documents during the home purchase; (2) an escrow account on your mortgage holds money each month to pay property taxes and insurance.

In a purchase, escrow refers to the closing process: a neutral escrow officer holds the buyer's earnest money and signed documents while title is searched and the loan funds, then disburses everything at closing. After closing, an 'escrow account' (sometimes called 'impounds') is part of your monthly mortgage payment — the lender holds a portion each month for property taxes and homeowners insurance and pays those bills on your behalf when due.

PMI

Also: Private mortgage insurance

In short: Insurance you pay (not the lender) on conventional loans when your down payment is under 20%. Drops off automatically when you reach 22% equity.

Private mortgage insurance protects the lender against default. It applies to conventional loans with LTV above 80%. Cost is typically 0.3–1.5% of the loan amount annually, paid monthly. PMI must be cancelled automatically by the lender when you reach 78% LTV (per HPA), and you can request cancellation at 80%. FHA has its own version (MIP) with different rules.

MIP

Also: Mortgage insurance premium

In short: The FHA equivalent of PMI. Both an upfront fee (1.75%) and a monthly fee. Doesn't drop off on most FHA loans — it's there for the life of the loan unless you refinance.

FHA Mortgage Insurance Premium has two parts: an upfront premium (UFMIP) of 1.75% of the loan amount, financed into the loan; and an annual premium paid monthly, currently 0.55% (as of 2023 reduction). For loans with LTV > 90%, MIP stays for the life of the loan; for LTV ≤ 90%, it stays 11 years. To remove MIP, most borrowers refinance out of FHA into a conventional loan once they have 20%+ equity.

Conventional loan

In short: A standard mortgage not backed by a government agency. Bought by Fannie Mae or Freddie Mac after origination. The default loan type for most buyers with 5%+ down and a 620+ credit score.

Conventional loans conform to Fannie Mae or Freddie Mac guidelines. They allow as little as 3% down (3% for first-time, 5% for others), credit scores down to 620, and loan amounts up to the annual conforming limit ($766,550 in most U.S. counties for 2024, higher in high-cost areas). PMI required below 20% down. Best fit for borrowers with stronger credit and at least 5% down.

FHA loan

In short: Federally insured mortgage with looser credit + down-payment requirements. 3.5% down with a 580+ credit score. Lifetime MIP unless you refinance out.

FHA loans are insured by the Federal Housing Administration (part of HUD). They're designed for borrowers with lower credit (down to 500 with 10% down, 580 with 3.5% down) and tight cash. Loan limits are county-specific (FHA limits are lower than conforming in expensive markets). MIP is required for the life of most FHA loans. Best for borrowers who can't qualify conventionally yet.

VA loan

In short: Mortgage for veterans, active-duty servicemembers, reservists, and surviving spouses. Zero down payment, no mortgage insurance, often the best rates. Requires a VA Certificate of Eligibility.

VA loans are guaranteed by the Department of Veterans Affairs. Eligibility: 90+ days active-duty wartime service, 181+ days peacetime, 6+ years in Reserves/Guard, or unmarried surviving spouse. Benefits: 0% down, no PMI (replaced by a one-time funding fee), competitive rates, no DTI cap (though lenders enforce residual-income guidelines), and the right to assume the loan to another VA-eligible buyer.

Jumbo loan

In short: A mortgage larger than the conforming limit ($766,550 in 2024 in most counties, higher in expensive markets). Stricter underwriting, often 10–20% down required, slightly higher rates.

Jumbo loans exceed the Fannie Mae/Freddie Mac conforming loan limit. Because they're not bought by Fannie or Freddie, lenders hold them on their own balance sheet or sell to private investors — which means stricter underwriting: typically 700+ credit, 10–20% down, 6+ months of reserves, and full income documentation. Rates run 0.25–0.50% higher than conforming, though competitive lenders sometimes price jumbo BELOW conforming.

TRID

Also: TILA-RESPA Integrated Disclosure · Know Before You Owe

In short: Federal rule that requires lenders to give borrowers a Loan Estimate within 3 business days of receiving an application, and a Closing Disclosure 3 business days before closing.

TRID (the TILA-RESPA Integrated Disclosure rule, effective 2015, also known as Know Before You Owe) governs the timing and content of mortgage disclosures. The 3-business-day clock to deliver a Loan Estimate starts the moment the lender has 6 specific pieces of information: borrower name, gross monthly income, SSN, property address, property estimated value, and loan amount. Capturing all 6 before consents are in place can prematurely trigger the clock — which is why responsible intake systems sequence consents BEFORE capturing the property address.

Closing costs

In short: The fees you pay at closing — title insurance, lender origination fees, appraisal, recording, prepaid taxes/insurance. Typically 2–5% of the loan amount.

Closing costs are everything the borrower owes at closing OTHER than the down payment. They split into lender fees (origination, processing, underwriting, points), third-party fees (appraisal, credit report, title insurance, escrow, recording, survey, pest), and prepaid items (first year of homeowners insurance, property tax reserves, daily interest). The Loan Estimate and Closing Disclosure document them. Sellers can pay some closing costs (a 'seller concession') if the contract is written that way — limits vary by loan type.

Points

Also: Discount points · Origination points

In short: Money you pay upfront to lower your interest rate (discount points) OR a fee the lender charges to originate the loan (origination points). Each point is 1% of the loan amount.

Discount points buy down your rate — one point (1% of the loan) typically reduces the rate by 0.25%. Worth it if you'll keep the loan long enough to recoup the cost (the 'break-even' calculation). Origination points are essentially the lender's fee for making the loan and don't reduce your rate. Both show up on the Loan Estimate. Negative points (a 'lender credit') means the lender gives you cash at closing in exchange for a slightly higher rate.

ARM

Also: Adjustable-rate mortgage

In short: A mortgage where the interest rate is fixed for a set number of years (typically 5, 7, or 10) and then adjusts annually based on a market index. Lower starting rate than a fixed loan, but the rate can rise.

ARMs are described as X/Y (or X/1) — X is the initial fixed period in years, Y is how often the rate adjusts after that. A 7/1 ARM has a fixed rate for 7 years then adjusts annually. Adjustments are tied to an index (SOFR is the modern standard) plus a margin, with annual + lifetime caps. ARMs make sense when you expect to sell or refinance before the fixed period ends. Risky if you plan to stay long-term in a rising-rate environment.

Rate lock

In short: An agreement from the lender to honor a specific interest rate for a specific period (30, 45, 60, sometimes 90 days). Protects you if rates rise before closing.

Once you have a property under contract, you can ask your lender to lock the rate. Locks typically run 30–60 days; longer locks cost more. If rates fall during the lock period, you'd be stuck at the higher locked rate unless your lender offers a 'float-down' option. If your lock expires before closing (usually due to closing delays), you may have to pay an extension fee.

Appraisal

In short: An independent licensed appraiser visits the property and gives the lender a written opinion of its market value. Required on every mortgage. Costs $500–$800 typically.

The appraisal is the lender's check that the property is worth what the borrower is paying. Appraisers compare the subject to recent comparable sales nearby. If the appraisal comes in below the contract price, the lender will only loan against the appraised value — meaning the borrower either renegotiates the price, pays more cash to cover the gap, or walks. Some refinance loans qualify for an appraisal waiver (Fannie's Appraisal Waiver / Freddie's ACE) when the loan is low-LTV and the AVM is confident.

Plaid

In short: The fintech connection layer most banks and apps use. When a mortgage application asks you to 'connect your bank', that's typically Plaid. Your password never touches the mortgage company.

Plaid is the financial-data network that powers connections between consumer financial accounts and apps like Venmo, Robinhood, Chime, and modern mortgage origination platforms. The borrower logs into their bank directly with Plaid (the mortgage company never sees the password); Plaid returns standardized data — balances, transaction history, payroll/income, identity — to the requesting app. For mortgages, Plaid is used for Asset Verification (replacing 2 months of bank statements) and Income Verification (replacing pay stubs). Used correctly, Plaid unlocks 'Day 1 Certainty' rep-and-warrant relief from Fannie Mae, meaning the lender doesn't bear the risk on income/asset misrepresentation.

Voice to Mortgage

Also: V2M

In short: A mortgage application-intake service (this site). Apply by talking — 5 minutes instead of 45+ minutes of forms. Not a lender; delivers your application to a real lender for funding.

Voice to Mortgage (V2M) is an application-intake service that uses voice AI to fill out the standard mortgage application (the URLA / 1003) by conversation. The borrower talks for ~5 minutes; the AI extracts answers, formats the application, and delivers it to a licensed mortgage lender for underwriting and funding. Voice to Mortgage is not itself a lender. Borrowers pay nothing — the lender pays a per-delivered-lead fee, but only after funding a loan. Supports three application stages: pre-qualification (~3 min), pre-approval (~8 min), and full loan application (~12 min). Available in 8 languages.