Glossary of Common Mortgage Terms to Know

No matter if you're a first-time homebuyer or one with more experience, trying to make sense of the terminology used in mortgage agreements can be challenging. And that's a concern when it comes to buying a home because knowledge truly is power. Having a solid grasp of common terms used in mortgage lending can help you make smarter, better-informed borrowing decisions.

From amortization acceleration clause to third-party origination wrap-around mortgage, the glossary of mortgage terms includes definitions for more than 130 common terms used in mortgage lending and real estate transactions. Browse our alphabetized list of definitions for common mortgage terms below, or use your browser's search function to find a specific term.

A

Acceleration Clause

An acceleration clause is a mortgage provision allowing the lender to demand payment of the entire principal balance if a monthly payment is missed or some other default occurs.

Additional Principal Payment

An additional principal payment is an extra principal-only payment you make beyond the principal amount that's due. Extra payments reduce the remaining balance of your loan by exceeding the scheduled principal amount due, helping to pay down your mortgage at a faster rate.

Adjustable-Rate Mortgage (ARM)

Sometimes referred to as an adjustable mortgage loan (AML) or a variable-rate mortgage (VRM), an adjustable-rate mortgage, or ARM, is a mortgage with an interest rate that changes at predetermined times and may change during the life of the loan. Whether it goes up or down is based on the movements of a specified index. As a result, your monthly payment amounts will also fluctuate. Most ARMs have a rate cap that limits how much the interest rate can change.

See Adjustable-Rate Mortgages vs. Buydowns to learn more.

Adjusted Basis

Adjusted basis is the cost of a property plus the value of any capital expenditures for improvements to the property and any costs of sale minus any depreciation taken or losses.

Adjustment Date

An adjustment date is any date the interest rate is scheduled to change on an adjustable-rate mortgage.

Adjustment Period

An adjustment period, also known as an adjustment interval, is the period between two adjustment dates on an adjustable-rate mortgage.

Affordability Analysis

An affordability analysis helps lenders determine a buyer's ability to afford the purchase of a home. It includes a review of their income, liabilities and available funds. It also considers the type of mortgage they're applying for, the anticipated closing costs and other factors.

Amortization

Amortization is the gradual repayment of a mortgage loan, both principal and interest, by installments. When a mortgage is amortized, the monthly payments are large enough to pay the interest and reduce the principal simultaneously.

Amortization Term

An amortization term is the length of time required to pay off a mortgage loan. It is commonly expressed in terms of the number of months involved. For example, a 30-year fixed-rate mortgage has an amortization term of 360 months. (30 years x 12 months in a year = 360 months).

Annual Percentage Rate (APR)

Annual percentage rate, or APR, is the total cost of a loan, expressed as a yearly percentage rate. The APR will be higher than the actual interest rate because it includes other costs, such as mortgage insurance and loan origination fees. The APR provides a more accurate representation of the annual cost of a mortgage, making it easier to compare loan options.

Appraisal and Appraised Value

An appraisal is a written analysis prepared by a qualified appraiser. By relying on their experience and knowledge of the real estate market, an appraiser determines the home's appraised value based on an analysis of its condition and the property's fair market value.

Asset

An asset is a possession with monetary value. Examples include real property, (generally buildings and land), personal property and any legally binding claims to value (such as bank accounts, stocks, mutual funds and other financial resources).

Assignment

Assignment occurs when a lender transfers or sells a mortgage to a third party, who becomes the new mortgage holder.

Assumability

Assumability refers to whether an existing mortgage can be transferred from the home seller to a new buyer. It typically requires a credit review of the new borrower, and lenders may charge a fee for the assumption. A mortgage with a due-on-sale clause may not be eligible for assumption.

Assumption

An assumption occurs when a homebuyer assumes responsibility for the seller's existing mortgage loan. The buyer will take over the seller's mortgage, including its interest rate, terms, repayment period and principal balance.

Assumption Fee

An assumption fee is an amount paid to the lender—usually by the purchaser of real property—when a mortgage assumption or transfer occurs.

B

Balance Sheet

A balance sheet is a financial statement that shows an individual's assets, liabilities and net worth as of a specific date.

Balloon Mortgage and Balloon Payment

A balloon mortgage is a mortgage that doesn't fully amortize over the life of the loan. It starts with fixed monthly payments for a stated term, then requires a larger lump-sum payment—referred to as a balloon payment—to be paid at the end of the term.

Before-Tax Income

Before-tax income refers to your total income before taxes are deducted. This may also be referred to as pre-tax income or gross income. In comparison, an individual's net income is the amount they take home after taxes and other deductions.

Biweekly Payment Mortgage

A biweekly payment mortgage requires a payment every two weeks instead of the standard monthly payment schedule. The 26, or possibly 27, biweekly payments made in a year are each equal to one-half of the monthly payment required if the loan was a standard 30-year fixed-rate mortgage. The result for the borrower is often a substantial savings in interest, although service charges may be higher.

Bridge Loan

A bridge loan is a second trust short-term loan that's collateralized by a borrower's present home, allowing the proceeds to be used to close on a new house before the current home is sold. It's also known as a swing loan.

Broker

A broker is an individual or company that brings borrowers and lenders together for the purpose of loan origination .

C

Cap

A cap limits how much the interest rate or the monthly payment for an adjustable-rate mortgage can increase, either at each adjustment date or over the life of the mortgage loan. Payment caps don't limit the amount of interest the lender is earning and may cause negative amortization.

Certificate of Eligibility (COE)

A Certificate of Eligibility, or COE, is a document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs, or VA, mortgage.

Certificate of Reasonable Value (CRV)

A Certificate of Reasonable Value, or CRV, is a document issued by the Department of Veterans Affairs that establishes the maximum value and loan amount for a VA mortgage.

Change Frequency

The change frequency refers to how often the monthly payment and interest rate may change in an adjustable-rate mortgage, typically stated as a number of months.

Closing

Closing, also called settlement, refers to a meeting held to finalize the sale of a property. It's when the buyer and seller sign the mortgage documents and pay closing costs. Buyers and sellers can also finalize a sale during independent meetings or virtually.

Closing Costs

Closing costs refer to expenses beyond the property price incurred by buyers and sellers when transferring property ownership. Closing costs normally include an origination fee, property taxes, charges for title insurance, escrow costs and appraisal fees. However, costs may vary depending on location, the lender and other factors.

Compound Interest

Compound interest refers to interest paid on the original principal balance plus interest paid on any accrued and unpaid interest.

Consumer Reporting Agency or Credit Bureau

A consumer reporting agency, or credit bureau, is an organization that handles the preparation of reports used by lenders to determine a potential borrower's credit history. The agency gets data for these reports from a credit repository and other sources. Equifax, Experian and TransUnion are the three largest consumer reporting agencies in the US.

Conversion Clause

A conversion clause is a provision in an adjustable-rate mortgage allowing the loan to be converted to a fixed-rate mortgage at some point during the term. Usually, conversion is allowed at the end of the first adjustment period, though a conversion clause may cost extra.

Credit Report

A credit report details an individual's credit history. It's prepared by a consumer reporting agency or credit bureau and used by lenders to determine a loan applicant's creditworthiness.

Credit Risk Score or Credit Score

Commonly referred to as a credit score, a credit risk score measures a consumer's credit risk relative to the rest of the US population based on the individual'syour credit usage history. The credit score most widely used by lenders is called the FICO®, developed by Fair, Isaac and Company. Ranging from 300 to 850, the score is calculated by a mathematical equation that evaluates many data points from your credit report. A higher FICO scores represent represents a lower credit risk, which typically equates to better loan terms. In general, your credit scores are critical in the mortgage loan underwriting process.

See Guide to Credit Scores for further reading.

D

Debt-to-Income Ratio (DTI)

Your debt-to-income ratio, or DTI, is your total monthly debt payments divided by your monthly income. You can determine your DTI with our debt-to-income ratio calculator.

See Guide to Debt-to-Income Ratio for further reading.

Deed of Trust

A deed of trust is a document used in some states instead of a mortgage. The title is conveyed to a trustee.

Default

Default refers to an ongoing failure to make mortgage payments on a timely basis or to comply with other mortgage requirements.

Delinquency

Delinquency refers to a failure to make a mortgage payment on time.

Deposit

A deposit is a sum of money given to bind the sale of real estate. It can also refer to money given to ensure payment or an advance of funds in the processing of a loan.

Discount

A discount is a fee paid directly to a lender in exchange for a lower interest rate on the loan. In an adjustable-rate mortgage with an initial rate discount, the lender reduces the interest rate by a number of percentage points. This results in lower payments for part of the mortgage term, usually one year or less. After the discount period, the rate usually increases according to its index rate.

Down Payment

A down payment is athe part of the purchase price of a property that's paid in cash and not financed with a mortgage. Many traditional mortgage programs require the buyer to pay for a down payment of 20% of the cost of the property as a down payment. Some mortgage programs allow for lower down payments, but the buyer may be subjected to a higher interest rate or may be required to purchase private mortgage insurance, known as PMI.

See Understanding Down Payments to learn more.

E

Equity

Equity is the amount of financial interest in a property. For homeowners, equity is the difference between the fair market value of their property and any amount still owed on a mortgage and other home loans.

Escrow

Escrow is money, documents or another item of value deposited with a neutral third party—known as the escrow agent—for safekeeping until certain conditions are met or fulfilled. For example, parties may deposit money or documents into an escrow account to be disbursed upon closing a real estate sale.

Escrow Disbursement or Escrow Payment

An escrow disbursement or escrow payment is a portion of your monthly mortgage payment held by the servicer to pay for real estate taxes, mortgage insurance, lease payments, hazard insurance and other property expenses. When these items become due, an escrow disbursement is made using these funds.

F

Fannie Mae

Fannie Mae refers to the Federal National Mortgage Association, or FNMA. It's a congressionally chartered, shareholder-owned company that's the nation's largest leading source of home mortgage financing nationally.

FHA Mortgage

An FHA mortgage is a type of loan that the Federal Housing Administration, or FHA, insures. FHA loans help people with lower credit scores and smaller down payments become homeowners.

FICO® Score

Commonly referred to as a credit score, FICO® scores are the most widely used credit score in US mortgage loan underwriting.]

First Mortgage

The first mortgage refers to the primary lien against a property.

Fixed Installment

A fixed installment is the monthly payment due on a mortgage loan, including payment of both principal and interest.

Fixed-Rate Mortgage (FRM)

A fixed-rate mortgage, or FRM, is a mortgage where the interest rate is set or fixed throughout the entire term of the loan. With this kind of mortgage, the interest rate won't change.

Fully Amortized ARM

A fully amortized ARM is an adjustable-rate mortgage with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

G

Ginnie Mae

Ginnie Mae refers to the Government National Mortgage Association, or GNMA. It's a government-owned corporation within the Department of Housing and Urban Development, or HUD, that assumes responsibility for government-backed mortgage loans.

Graduated Payment Mortgage (GPM)

A graduated payment mortgage, or GPM, is a type of home loan with lower initial monthly payments that gradually increase over time.

Gross Income

Gross income is a borrower's normal annual income, including regular or guaranteed overtime, before taxes. Salary is usually the principal source, but other income may qualify if it's significant and stable.

Growing-Equity Mortgage (GEM)

A growing-equity mortgage, or GEM, is a fixed-rate mortgage that provides scheduled payment increases over an established period. The increased amount of the monthly payment is applied directly toward reducing the remaining balance of the mortgage.

Guaranteed Mortgage

A guaranteed mortgage is a mortgage that's guaranteed by a third party—often a government agency. Guaranteed mortgages enable individuals with lower credit scores or smaller down payments to qualify for a loan, while also reducing the level of risk for lenders.

H

Housing Expense Ratio or Housing Ratio

Sometimes referred to as the front-end ratio, the housing expense ratio is a percentage of gross monthly income needed to pay for housing expenses. While underwriting criteria will vary by lender, many experts recommend keeping your housing ratio below 28% of your pre-tax income.

HUD-1 Settlement Statement

The HUD-1 Settlement Statement is a document that provides an itemized listing of all fees and credits to the funds that are payable at closing.buyer and the seller in a real estate transaction. Items on the statement include real estate commissions, loan fees, points and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system represents each item on the statement. The totals at the bottom of the first page define the seller's net proceeds and the buyer's net payment at closing.

I

Index

The index is the benchmark measure a lender uses to determine how the interest rate on an adjustable-rate mortgage will change over time. The index is generally a published number or percentage, such as the average interest rate or yield on treasury bills. Some index rates are higher than others, and some are more volatile.

Initial Interest Rate

The initial interest rate is the original interest rate on the mortgage at the time of closing. It's also known as the start rate or teaser.

Installment

An installment is the regular, periodic payment a borrower agrees to make to a lender.

Insured Mortgage

An insured mortgage is a mortgage protected by the federal government or private mortgage insurance (PMI). It protects the lender, not the borrower, in case of default.

Interest

Interest is the fee charged for borrowing money, not to be confused withAPR.

Interest Accrual Rate

The interest accrual rate is the percentage rate at which interest accrues on the mortgage. In most cases, it's also the rate used to calculate the monthly payments.

Interest Rate Buydown

An interest rate buydown is an arrangement between a homebuilder or seller and a buyer that leads to reduced monthly payments in the early years of a mortgage. One party—often the seller, but sometimes the buyer—pays an amount of money to the lender upfront, which is typically deposited into an escrow account and released each month to subsidize the buyer's mortgage payments. The interest rate for a buydown mortgage starts below the market rate and increases over time based on the loan terms. For example, the interest rate for a 2-1 buydown mortgage will start at 2% below market rate, increase by 1% at the end of the first year and increase another 1% at the end of the second year. It then remains fixed for the remainder of the loan term.

Interest Rate Ceiling versus Interest Rate Floor

The interest rate ceiling for an adjustable-rate mortgage is the maximum interest rate specified in the mortgage note. Conversely, the interest rate floor is the minimum interest rate specified in the mortgage note.

L

Late Charge

A late charge is a penalty the borrower must pay when a payment is made after a stated number of days, often the due date. For many mortgages, there is a grace period of 15 days, which means a late charge will not be levied until 15 days after the due date.

Lease-Purchase Mortgage Loan

A lease-purchase mortgage loan is an alternative financing option that allows low- and moderate-income buyers to lease a home with the option to buy. Each month's rent payment consists of principal, interest, taxes and insurance, payments (also called PITI payments) on the first mortgage, plus an extra amount that accumulates in a savings account for a down payment.

Liabilities

Liabilities are a person's financial obligations, including long- and short-term debt.

Lien

A lien is a legal claim against a property until the debt secured by that property is paid.

Lifetime Payment Cap and Lifetime Rate Cap

The lifetime payment cap for an adjustable-rate mortgage is a limit on the amount that payments can increase or decrease over the life of the mortgage. Similarly, the lifetime rate cap limits how much an interest rate can increase or decrease over the life of the mortgage.

Line of Credit

A line of credit is an agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a specified time.

Liquid Asset

A liquid asset refers to cash or any asset that can be easily converted into cash, such as funds held in a savings account, checking account or money market fund.

Loan

A loan is a sum of borrowed money, called the principal, generally repaid with interest.

Loan Origination

Loan origination refers to a lender's processing of a mortgage application and the disbursal of funds.

Loan-to-Value (LTV) Ratio

The loan-to-value, or LTV, ratio measures the relationship between a mortgage's principal balance the amount of the mortgage and the property's appraised value (or the property's sale price if it's lower). For example, a $100,200,000 home with a $160,000 mortgage and a 20% down payment has an LTV ratio of 80%. Mortgage loans with an LTV ratio above 80% are considered higher risk, which is why borrowers who are unable to put 20% down may be required to purchase private mortgage insurance.

Lock-In Period

A lock-in period is when a lender guarantees an interest rate and other loan terms for a specified period. Thus protecting a borrower from potential interest rate fluctuations.

M

Margin

The margin is the number of percentage points the lender adds to the index rate to calculate the interest rate for an adjustable-rate mortgage's interest rate at each adjustment loan.

Maturity

Maturity is the date by which the principal balance of a loan must be paid in full.

Monthly Fixed Installment

A monthly fixed installment is the portion of a total monthly payment that's applied toward the principal and interest. When a mortgage is negatively amortized, the monthly fixed installment doesn't include any amount for principal reduction and doesn't cover all of the interest. The loan balance increases instead of decreases.

Mortgage

A mortgage is a legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Banker versus Mortgage Broker

A mortgage banker works for an institution that originates mortgages. A mortgage broker, on the other hand, is an individual or company that brings borrowers and lenders together for the purpose of loan origination.

Mortgage Insurance (MI) and Mortgage Insurance Premium (MIP)

Mortgage insurance, or MI, is a contract that insures the lender against loss caused by a borrower's default on a mortgage loan. Mortgage insurance can be issued by a private company or government agency. A mortgage insurance premium, or MIP, is the amount paid for mortgage insurance.

Mortgage Life Insurance

Mortgage life insurance is a type of term life insurance. If the borrower passes away while the policy is in force, insurance proceeds automatically pay the mortgage debt. See How Much Life Insurance Do I Need? for additional reading.

Mortgagor versus Mortgagee

A mortgagor is the borrower in a mortgage agreement, whereas the mortgagee is the lender.

N

Negative Amortization

Negative amortization occurs when the monthly payments don't cover all the interest owed. The uncovered interest is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an adjustable-rate mortgage has a periodic payment cap that results in monthly payments not high enough to cover the interest due.

Net Worth

Net worth is the total value of all a person's assets, including cash minus any liabilities.

Non-Liquid Asset

A non-liquid asset is an asset that is not easy to convert into cash. Examples include real estate, art and collectibles, jewelry, vehicles, and equipment.

Note

A note, also called a mortgage note, is a legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period.

O

Origination Fee

An origination fee is money paid to a lender for processing a loan application. The origination fee is stated in points, where each point equals 1% of the mortgage amount.

Owner Financing

Owner financing refers to a property purchase transaction in which the seller provides all or part of the financing.

P

Payment Change Date

The payment change date is the date when a new monthly payment amount takes effect on an adjustable-rate mortgage or a graduated-payment mortgage. Generally, the payment change date occurs in the month immediately after the adjustment date.

Periodic Payment Cap

A periodic payment cap is a limit on the amount that payments for an adjustable-rate mortgage can increase or decrease during any single adjustment period.

Periodic Rate Cap

A periodic rate cap is a limit on the amount that the interest rate on an adjustable-rate mortgage can increase or decrease during any single adjustment period, regardless of how high or low the index might be.

Points

Points are paid to the lender in exchange for a lower interest rate. A point is equal to 1% of the principal amount of your mortgage. For example, on a $165,000 mortgage, 1 point translates into an upfront fee of $1,650 due to the lender in exchange for a lower interest rate. Points are usually collected at closing and may be paid by the borrower, the seller, or even split between them.

Pre-Approval versus Pre-Qualification

Pre-approval is the process of determining how much money you may be eligible to borrow. A mortgage pre-approval is based on an evaluation of your financial situation, including W-2s, a summary of your assets, and a review of your credit history. Mortgage pre-qualification, on the other hand, is a rough estimate of how much you'll be able to afford based on an informal evaluation of your finances. It's important to note that both pre-approval and pre-qualification are not guarantees of loan approval.

Prepayment Penalty

A prepayment penalty is a fee that may be charged to a borrower who pays off a loan before it's due.

Prime Rate

The prime rate is the interest rate that banks charge their preferred customers. Changes in the prime rate influence changes in other interest rates, including mortgage rates.

Principal and Principal Balance

For a loan, the principal can refer to the amount originally borrowed and the amount remaining unpaid. It's also the part of a monthly payment that goes toward the principal reduces the remaining balance of a mortgage. The principal balance is the outstanding balance of principal on a mortgage, not including interest or any other charges.

Principal, Interest, Taxes and Insurance (PITI)

Principal, interest, taxes and insurance, or PITI, are the four components of a monthly mortgage payment. The principal refers to the part of the monthly payment that reduces the mortgage's remaining balance. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly costs of property taxes and homeowners insurance, which may be paid into an escrow account.

PITI Reserves

PITI reserves refer to the cash amount a borrower must have on hand after making a down payment and paying all closing costs associated with purchasing a home. Reserves must equal the amount the borrower would have to pay for principal, interest, taxes and insurance for a predefined period, typically three months. Mortgage lenders often require this to determine whether a borrower can afford a monthly mortgage payment.

Private Mortgage Insurance (PMI)

Private mortgage insurance, or PMI, is mortgage insurance provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with an LTV ratio over 80%.

Q

Qualifying Ratios

Qualifying ratios are calculations used to determine if a borrower can qualify for a mortgage. They consist of two ratios—the housing expenses as a percentage of income expense ratio and total debt obligations as a percentage of debt-to-income ratio.

R

Rate Lock

A rate lock is a commitment issued by a lender to a borrower or other mortgage originator, guaranteeing a specific interest rate and lender costs for a specified period.

Real Estate Agent versus Realtor

A real estate agent is a person licensed to negotiate and transact the sale of real estate on behalf of a buyer or seller. In contrast, a realtor is a real estate professional who's an active National Association of Realtors (NAR) member.

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act, or RESPA, is a consumer protection law that, among other things, requires lenders to give borrowers advance notice of closing costs.

Recording

Recording refers to the noting of the details of a properly executed legal document such as a deed, a mortgage note, a satisfaction of mortgage or an extension of mortgage in a registrar's office, thereby making it a part of the public record.

Refinancing

Refinancing refers to paying off one mortgage loan with the proceeds from a new loan using the same property as security. Homeowners may choose to refinance for many reasons, including reducing their monthly payments, paying off the loan faster by shortening the term or borrowing more money in a "cash-out" refinance.

See Guide to Mortgage Refinancing.

Revolving Liability

Revolving liability refers to a credit arrangement, such as a credit card, which allows a customer to borrow against a pre-approved line of credit when purchasing goods and services.

S

Secondary Mortgage Market

The secondary mortgage market is where various banks and financial institutions buy and sell existing mortgages.

Security

Security refers to the property that will be pledged as collateral for a loan.

Seller Carry-Back

A seller carry-back is an agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

Seller's Disclosure

A seller's disclosure, also referred to as a seller disclosure statement or seller's property disclosure, is a document detailing known issues with a property, such as water damage, code violations, boundary line disputes, etc. It's important to know that each state has its own laws, and buyers in some states may be subject to the caveat emptor, or buyer beware rule, meaning that the onus is on them to ask questions about the home’s condition.

Servicer

A servicer is an organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. Servicers often service mortgages purchased by an investor in the secondary mortgage market.

Standard Payment Calculation

Standard payment calculation is a method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining mortgage term at the current interest rate.

Step-Rate Mortgage

A step-rate mortgage is a mortgage that allows the interest rate to increase according to a specified schedule, such as seven years, resulting in increased payments. At the end of the specified period, the rate and payments will remain fixed for the remainder of the loan.

T

Third-Party Origination

Third-party origination occurs when a lender uses another party to completely or partially originate, process, underwrite, close, fund or package the mortgages it plans to deliver to the secondary mortgage market.

Total Expense Ratio

The total expense ratio refers to a mortgagor's total obligations as a percentage of gross monthly income, including monthly housing expenses plus other monthly debts.

Treasury Index

The treasury index is used to determine interest rate changes for certain ARMs. It's based on the results of auctions that the US Treasury holds for its treasury bills and securities. It can also be derived from the US Treasury's daily yield curve, based on the closing market bid yields on actively traded treasury securities in the over-the-counter market.

Truth in Lending Act (TILA)

The Truth in Lending Act, or TILA, is a federal law that requires lenders to fully disclose, in writing, the terms and conditions of a loan, including the APR and other charges. These terms are often delivered in the form of a truth-in-lending disclosure, an initial loan estimate when you apply for a mortgage and a final disclosure before closing.

Two-Step Mortgage

A two-step mortgage is an adjustable-rate mortgage with one interest rate for the first five to seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

U

Underwriting

Underwriting is the process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.

USDA Mortgage

A USDA mortgage is a mortgage loan that's insured by the US Department of Agriculture (USDA).

V

VA Mortgage

A VA mortgage is a mortgage loan guaranteed by the US Department of Veterans Affairs (VA).

W

Wrap-Around Mortgage

A wrap-around mortgage is a type of mortgage used in owner financing. It includes the remaining balance on a homebuyer's existing mortgage plus an additional amount requested by the seller. The buyer sends payments to the seller, who then sends payments to the seller's lender. This type of mortgage may not be allowed by a seller's lender and, if discovered, could be subject to a demand for full payment.