Every term you'll hear from a lender, loan officer, or title officer — defined, explained, and put in context. Search below or jump to a letter.
A loan where the interest rate changes periodically after an initial fixed period. A 5/1 ARM is fixed for 5 years then adjusts yearly. See our 5/1 ARM page for rate and structure detail.
The gradual payoff of a loan through scheduled payments. Each payment has a principal portion and an interest portion; in early years most of the payment goes to interest, and by late years most goes to principal. A 30-year mortgage fully amortizes over 360 payments.
The interest rate plus amortized closing costs, expressed as a single annual percentage. APR is typically 0.10–0.25% higher than the note rate and is the best apples-to-apples comparison number between two lenders quoting the same rate.
An independent valuation of the property performed by a licensed appraiser. The lender orders it (through an AMC) and uses the lower of appraised value or purchase price to determine LTV. In San Diego, typical appraisal cost is $650–$900; waived on many streamline refinances.
A mortgage that the buyer can take over from the seller at the seller's existing rate. FHA and VA loans are generally assumable; conventional loans typically are not. Very valuable in a rising-rate environment — a 3% FHA assumption beats a fresh 7% loan.
Software (Desktop Underwriter or Loan Prospector) that evaluates a file against Fannie Mae or Freddie Mac guidelines and returns an "Approve/Eligible" or "Refer" decision. Most conventional loans rely on AUS approval.
A large lump-sum payment due at the end of a loan that wasn't fully amortized during the loan term. Rare in modern consumer mortgages; more common in commercial lending.
1/100th of 1%. "25 basis points" = 0.25%. Loan officers use basis points to describe small rate or fee changes.
The standard PMI structure: borrower pays a monthly premium that can be removed once LTV reaches 78–80%. Contrast with LPMI.
Short-term financing that bridges the gap between buying a new home and selling your current one. Typically 6–12 month terms at higher rates. Useful when equity in the old home is tied up.
Paying upfront to reduce the interest rate, either temporarily (e.g., a 2-1 buy-down that lowers the rate in years 1 and 2) or permanently (discount points).
On ARMs, a limit on how much the rate can change. Typically expressed as 5/2/5: 5% max at first adjustment, 2% per subsequent adjustment, 5% lifetime max over the start rate.
Refinancing into a larger loan than you currently owe and pocketing the difference. See our cash-out guide. Interest rates are slightly higher than rate-and-term refis.
The fees required to close a loan — lender charges, third-party services, government fees, and prepaids. Typically 2–3% of purchase price or 1.5–2.5% of refinance loan amount in San Diego. See our full breakdown.
The standardized 5-page document delivered at least 3 business days before closing that spells out the final loan terms and costs. Compare it against your Loan Estimate line-by-line.
A loan at or below the Fannie Mae/Freddie Mac limit — in San Diego County for 2026, $1,209,750. Above this limit, jumbo pricing and underwriting apply.
A loan not backed by a government agency (FHA/VA/USDA). Most commonly conforming, but can also be jumbo. Usually requires 620+ FICO, 3–20% down.
Score from 300–850 used to price loans. Mortgage lenders use the middle of three scores from Equifax, Experian, and TransUnion. Key thresholds: 620 (minimum for most conventional), 680, 720, 740, 780 (best pricing).
Monthly debts ÷ gross monthly income. Front-end DTI is housing only; back-end DTI includes all debts (housing + cars + student loans + credit cards + etc.). Most conventional loans cap at 43% back-end; up to 50% with strong compensating factors.
The document that pledges your property as collateral for the loan. In California, a deed of trust (not a mortgage) is used — it allows non-judicial foreclosure, which is faster than judicial.
Cash paid upfront to lower the interest rate. 1 point = 1% of loan amount, typically drops rate ~0.25%. Pays off if you keep the loan past the breakeven (usually 5–7 years).
The cash you bring to closing that reduces the loan amount. Expressed as a percentage of purchase price. Conventional: 3–20%. FHA: 3.5%. VA/USDA: 0%. Jumbo: 10–20%.
Good-faith deposit the buyer puts into escrow when the purchase contract is accepted. Typically 1–3% of purchase price in San Diego. Credited toward your down payment at closing; forfeit if you default on the contract without a valid contingency.
Property value minus outstanding loan balance. Equity grows from both loan paydown and appreciation.
An account held by the loan servicer that collects monthly installments toward property tax and homeowners insurance, then pays those bills on your behalf. Required on FHA/VA/USDA and on conventional loans with less than 20% down.
In California, the neutral third-party "escrow company" coordinates signing, funding, and recording. Distinct from the escrow/impound account used during the loan.
Loan insured by the Federal Housing Administration. Allows 3.5% down with 580+ FICO. Requires MIP for the life of the loan if put down less than 10%. See FHA loans.
A loan where the interest rate (and therefore P&I payment) stays the same for the entire term. 30-year and 15-year fixed are the most common.
One-time fee on VA loans that funds the program. 2.15% for first use on a purchase with 0% down, lower for subsequent uses and streamline refis. Usually rolled into the loan. Waived for veterans with service-connected disabilities.
Organization that collects monthly dues from condo/PUD owners for shared maintenance. In San Diego, typical condo HOAs run $250–$800/month. HOA dues count toward your DTI.
A revolving line of credit secured by your home equity. Typically variable rate tied to Prime, draw period 10 years, repayment 20. Use to tap equity without touching a low first-mortgage rate.
Hazard insurance protecting the dwelling. Lenders require it. San Diego premiums range from $1,200/yr for coastal urban to $6,000+ for fire-exposed inland areas.
On ARMs, your rate after the fixed period = index + margin. Index is a market rate (typically SOFR or CMT); margin is a fixed spread set in your note (usually 2–3%).
A loan where you pay only interest for an initial period, with principal held flat. Common in jumbo/private banking; rare in agency lending.
The VA streamline refinance. No appraisal, no income re-verification, minimal fees. See the IRRRL guide.
A loan above the conforming limit ($1,209,750 in San Diego for 2026). Underwritten to private investor guidelines rather than Fannie/Freddie. Typically requires higher credit, more reserves, lower DTI. See jumbo loans.
Alternative PMI structure where the lender pays the PMI premium in exchange for a higher interest rate (typically +0.25%). Can't be canceled later; only removable by refinancing.
Standardized 3-page document lenders must provide within 3 days of application. Shows rate, APR, closing costs, and cash-to-close. Use it to shop lenders apples-to-apples.
Loan amount ÷ property value. On a $800K home with a $640K loan, LTV = 80%. Lower LTV = better pricing. Key thresholds: 80% (no PMI conventional), 95%, 97%.
A commitment from the lender to hold a specific rate for a set number of days (typically 30–45). Protects against rate increases during processing.
California special assessment tax tied to a Community Facilities District. Common in newer San Diego communities (Chula Vista, 4S Ranch, Otay Mesa). Adds $1,500–$5,000+ per year on top of base property tax. Expires eventually — typically after 20–40 years.
FHA's version of mortgage insurance. Upfront MIP (1.75% of loan, financed) + annual MIP (0.55% currently, paid monthly). Cannot be removed on most FHA loans — only refinancing out eliminates it.
The interest rate on your loan. Driven by the 10-year Treasury plus a spread. See today's rates.
"Non-Qualified Mortgage" — a loan that doesn't meet the CFPB's QM safe-harbor rules. Used for self-employed borrowers (bank-statement loans), real estate investors (DSCR loans), and foreign nationals. Higher rates; more flexible qualifying.
The interest rate stated on your promissory note. Synonymous with "interest rate," distinct from APR.
A lender's charge to originate the loan. Can be flat or percentage-based. Disclosed in Section A of the Loan Estimate.
A borrower who will live in the property as their primary residence. Gets the best pricing vs. second home or investment property.
Principal + Interest + Taxes + Insurance — the four components of a typical monthly housing payment. The lender's DTI calculation uses PITI plus HOA and MI if applicable.
A lender's letter stating they've reviewed your file and are prepared to lend up to a specific amount. Not a commitment, but far stronger than pre-qualification. See the pre-approval walkthrough.
A charge for paying off a loan early. Rare on modern owner-occupied mortgages — prohibited on QM loans. Can appear on non-QM and investor loans.
The outstanding balance on a loan, separate from interest. Each monthly payment pays down a portion of principal.
Insurance required on conventional loans with less than 20% down. Protects the lender if you default. Typically 0.3%–1.2% of loan per year. Automatically removed at 78% LTV based on original amortization schedule.
A loan meeting CFPB ability-to-repay rules. Caps on points/fees, no toxic features (interest-only longer than 7 years, negative amortization, balloon). Most agency loans are QM.
Refinancing to change the rate, term, or both — without taking cash out. Cheapest type of refi. See refinance calculator.
Making a large principal payment and asking the lender to re-amortize the remaining balance over the original term. Lowers the monthly payment without refinancing. Typical fee: $250–$500. Not offered by all servicers.
Liquid assets remaining after closing, measured in months of PITI. Jumbo loans often require 6–12 months reserves; conforming typically 2 months.
Equity compensation common at San Diego tech employers. Lenders typically count vested RSUs as income if you have a 2-year track record and a letter from the employer showing continuance.
Credit from the seller toward the buyer's closing costs. Capped at 3% (conventional, low down) to 9% (conventional, 25%+ down). Also called "seller credit."
The company that collects your monthly payment — often not the original lender. Loans are commonly sold to servicers (or agencies) shortly after closing.
A simplified refinance program with reduced docs, no appraisal, and lower costs. VA IRRRL and FHA Streamline are the two main versions. See VA IRRRL and FHA Streamline.
Insurance protecting against defects in the chain of title (liens, forgeries, boundary disputes). Lender's policy is required; owner's policy is optional but strongly recommended on a purchase.
California state/county tax on property sales: $1.10 per $1,000 of purchase price. On a $950K San Diego home: $1,045. Typically paid by the seller in San Diego County. Doesn't apply to refinances.
The formal credit decision process. An underwriter reviews your file against loan program guidelines and either approves, denies, or requests conditions. Typical timeline: 3–7 business days after a complete submission.
FHA's one-time upfront MIP charge, 1.75% of loan amount. Almost always financed into the loan rather than paid in cash.
Loan guaranteed by the Department of Veterans Affairs, available to qualifying veterans and active duty. 0% down, no monthly mortgage insurance, competitive rates. See VA loans.
Lender's confirmation of your employment. Written VOE is requested early; verbal VOE is done within 10 days of closing.