--- title: Mortgage Glossary | GVC Mortgage, Inc. description: Are you unfamiliar with mortgage industry terms? Take a look at our mortgage glossary and find the definition of the term you are looking for. --- # **Mortgage glossary** ## **Want to understand common used mortgage terms?** Clicking on a term below will expand the term and show its definition --- ###### **Select a Letter: **[A](https://www.gvcmortgage.com/mortgage-glossary/#a) – [B](https://www.gvcmortgage.com/mortgage-glossary/#b) – [C](https://www.gvcmortgage.com/mortgage-glossary/#c) – [D](https://www.gvcmortgage.com/mortgage-glossary/#d) – [E](https://www.gvcmortgage.com/mortgage-glossary/#e) – [F](https://www.gvcmortgage.com/mortgage-glossary/#f) – [G](https://www.gvcmortgage.com/mortgage-glossary/#g) – [H](https://www.gvcmortgage.com/mortgage-glossary/#h) – [I](https://www.gvcmortgage.com/mortgage-glossary/#i) – J – K – [L](https://www.gvcmortgage.com/mortgage-glossary/#l) – [M](https://www.gvcmortgage.com/mortgage-glossary/#m) – [N](https://www.gvcmortgage.com/mortgage-glossary/#n) – O – [P](https://www.gvcmortgage.com/mortgage-glossary/#p) – Q – R – S – [T](https://www.gvcmortgage.com/mortgage-glossary/#t) – [U](https://www.gvcmortgage.com/mortgage-glossary/#u) – [V](https://www.gvcmortgage.com/mortgage-glossary/#v) – W – X – Y – Z ### A - [Adjustable Rate Mortgage (ARM)](https://www.gvcmortgage.com/mortgage-glossary/#) Unlike a fixed rate mortgage, an adjustable rate mortgage has an interest rate that changes throughout the length of the loan. The interest rate either increases or decreases, depending on market indexes. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Adjustment Date](https://www.gvcmortgage.com/mortgage-glossary/#) The date on which the interest rate changes for an adjustable rate mortgage (ARM). [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Amortization](https://www.gvcmortgage.com/mortgage-glossary/#) The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Annual Percentage Rate (APR)](https://www.gvcmortgage.com/mortgage-glossary/#) The annual cost of a loan, expressed as a yearly rate. APR takes into account interest, discount points, lender fees and mortgage insurance, so it will be slightly higher than the interest rate on the loan. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Assessment](https://www.gvcmortgage.com/mortgage-glossary/#) The total value of your property. This number is usually used for taxes. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### B - [Borrower](https://www.gvcmortgage.com/mortgage-glossary/#) The party that receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable. A borrower is also referred to as a mortgagor. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### C - [Cash-Out Refinance](https://www.gvcmortgage.com/mortgage-glossary/#) A mortgage loan whose proceeds are distributed for debt consolidation, cash-in-hand, payoff of non-seasoned closed-end subordinate mortgages and payoff of lines of credit with cash advances in the past 12 months. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Closing](https://www.gvcmortgage.com/mortgage-glossary/#) The official act of transferring homeownership (and all associated titles, deeds, and paperwork) from the seller to the buyer. Both buyer and seller normally have to pay closing costs at this time. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Co-Borrower](https://www.gvcmortgage.com/mortgage-glossary/#) Describes any borrower other than the primary borrower. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Collateral](https://www.gvcmortgage.com/mortgage-glossary/#) Assets that are pledged as security for the loan’s repayment—normally the house and the property that are listed on the mortgage. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Conventional Loan](https://www.gvcmortgage.com/mortgage-glossary/#) A mortgage that isn’t insured by the FHA or guaranteed by the VA. These loans are harder to get because qualification is based on the buyer’s credit history. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Credit Score](https://www.gvcmortgage.com/mortgage-glossary/#) Credit score evaluates and considers only the information in a borrower’s file at a credit reporting agency. As an index, the score reflects the relative risk of serious delinquency, default, foreclosure or bankruptcy associated with a borrower. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### D - [Debt-to-Income Ratio (DTI)](https://www.gvcmortgage.com/mortgage-glossary/#) The percentage of a consumer’s monthly gross income that goes toward paying debts, commonly referred to as DTI. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Default](https://www.gvcmortgage.com/mortgage-glossary/#) A term used to describe a borrower who doesn’t uphold the agreement with the lender, normally by failing to keep up with punctual payments. After 90 days of breaking the contract, the borrower is considered to be in default. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Delinquency](https://www.gvcmortgage.com/mortgage-glossary/#) When a borrower is more than 30 days late making a payment. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### E - [Equity](https://www.gvcmortgage.com/mortgage-glossary/#) The portion that the borrower owns of the home. Calculate this by subtracting the unpaid loan balance from the value of the home. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Escrow](https://www.gvcmortgage.com/mortgage-glossary/#) All funds collected by seller and/or designated servicer to cover expenses of the borrower required to be paid under the security instrument, including, but not limited to, taxes, special assessments, ground rents, water, sewer and other governmental impositions or charges that are or may become liens on the mortgaged property prior to that of the mortgage loan, as well as hazard, flood, and mortgage insurance premiums. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### F - [Fannie Mae](https://www.gvcmortgage.com/mortgage-glossary/#) The government sponsored enterprise formerly known as Federal National Mortgage Association, or any successor thereto. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Federal Deposit Insurance Corporation (FDIC)](https://www.gvcmortgage.com/mortgage-glossary/#) An independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Federal Housing Administration (FHA)](https://www.gvcmortgage.com/mortgage-glossary/#) The Federal Housing Administration (FHA) does not actually lend money, but it does insure loans that are made by private lenders. This insurance gives the lenders the opportunity to offer mortgages with more favorable terms and interest rates. Many people who can’t obtain conventional loans can get one through one of the FHA’s programs. [The FHA is part of HUD](http://portal.hud.gov/hudportal/HUD). [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [FHA Loan](https://www.gvcmortgage.com/mortgage-glossary/#) Any mortgage loan subject to an insurance policy granted by the FHA, and is eligible for reimbursement under the insurance policy. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Fixed Rate Mortgage](https://www.gvcmortgage.com/mortgage-glossary/#) Unlike an adjustable rate mortgage, a fixed rate mortgage has an interest rate that is agreed upon at initiation of the loan and never changes over the life of the loan.  This also means the principal and interest payment is fixed and will not change over the life of the loan. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Flood Insurance](https://www.gvcmortgage.com/mortgage-glossary/#) Insurance that compensates the property owner for physical property damage resulting from flooding. Flood insurance is required if the property improvements are located in federally designated Special Flood Hazard Areas. If the land is in the flood hazard area, but the improvements are not, flood insurance is not required. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Foreclosure](https://www.gvcmortgage.com/mortgage-glossary/#) If the borrower defaults, the lender can repossess the home. Foreclosing is a legal procedure where the borrower forfeits all rights to the home and property. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Freddie Mac](https://www.gvcmortgage.com/mortgage-glossary/#) The government sponsored enterprise formerly known as the Federal Home Loan Mortgage Corporation, or any successor thereto. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### G - [Grantee](https://www.gvcmortgage.com/mortgage-glossary/#) The grantee is the person buying the real estate. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Grantor](https://www.gvcmortgage.com/mortgage-glossary/#) The grantor is the person selling the real estate. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Gross Income](https://www.gvcmortgage.com/mortgage-glossary/#) An individual’s total earnings before any taxes or deductions are paid. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### H - [Hazard Insurance](https://www.gvcmortgage.com/mortgage-glossary/#) Insurance coverage that compensates for physical damage – by fire, wind, or other natural disasters – to the property. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Homeowners' Association (HOA)](https://www.gvcmortgage.com/mortgage-glossary/#) An owners group that manages common areas whether in a PUD, condominium, or single family subdivision that establishes general guidelines for the operation of the community, as well as its standards. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Homeowner’s Insurance Policy](https://www.gvcmortgage.com/mortgage-glossary/#) Also known as “hazard insurance,” homeowner’s insurance compensates the homeowner if their real estate is damaged due to theft, fire, or other dangers. It often covers the entire value of the home. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [HUD](https://www.gvcmortgage.com/mortgage-glossary/#) Housing and Urban Development (HUD) is a government agency that manages federal housing and several different programs dedicated to urban development. The FHA is a part of HUD. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### I - [Interest Rate Cap](https://www.gvcmortgage.com/mortgage-glossary/#) To protect both the lender and the borrower, many mortgages have an interest rate cap. The cap is a safeguard built into ARMs; it lists the highest and the lowest percentage of interest that can be charged. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### L - [Late Charge](https://www.gvcmortgage.com/mortgage-glossary/#) To encourage punctual payments, many lenders charge a late penalty if the borrower makes a tardy payment. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Loan Submission](https://www.gvcmortgage.com/mortgage-glossary/#) When a borrower applies for a loan, it is submitted to the underwriters. The underwriters consider the potential borrower’s credit and financial history, and then they decide if lending to that borrower is a wise choice. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Loan to Value Ratio (LTV)](https://www.gvcmortgage.com/mortgage-glossary/#) In a mortgage loan, the amount borrowed relative to the value of the property. An LTV of 80% means that the mortgage loan is for 80% of the value of the property, with the borrower making a 20% downpayment. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### M - [Market Value](https://www.gvcmortgage.com/mortgage-glossary/#) Not to be confused with the assessment (the total value of the property), the property’s market value is the highest price a buyer would pay and the lowest price the seller would sell for. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Mortgagee](https://www.gvcmortgage.com/mortgage-glossary/#) The person lending the money for the mortgage. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Mortgage Insurance (MI)](https://www.gvcmortgage.com/mortgage-glossary/#) Mortgage insurance is insurance needed for mortgages with low down payments, usually less than 20% of the price of the home. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Mortgage Insurance Premium (MIP)](https://www.gvcmortgage.com/mortgage-glossary/#) A monthly payment, usually part of the mortgage payment, paid by a borrower for mortgage insurance. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Mortgagor](https://www.gvcmortgage.com/mortgage-glossary/#) The person borrowing the money for the mortgage. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### N - [Net Income](https://www.gvcmortgage.com/mortgage-glossary/#) Also called “take-home pay.” This part of income already has taxes, insurance, social security, and any other necessary payments subtracted. This is most commonly used when lenders are making an FHA or a VA loan. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [No Cash-Out Refinance](https://www.gvcmortgage.com/mortgage-glossary/#) A refinance transaction in which the amount of money from the new loan is used to repay the existing first mortgage, to pay closing costs, point, prepayment penalties, and any seasoned subordinate mortgage liens. Incidental cash back may not exceed the lesser of 2% of the principal amount of the new mortgage or $2,000. Also referred to as a rate and term refinance. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### P - [PITI](https://www.gvcmortgage.com/mortgage-glossary/#) Most monthly housing payments cover the costs for PITI (Principle, Interest, Taxes, and Insurance). [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Prepayment Penalty](https://www.gvcmortgage.com/mortgage-glossary/#) When paying for a mortgage, it’s important to stay on schedule. Just as you’re penalized for paying too late, you may also be fined for paying more than you’re supposed to or finishing the loan earlier than scheduled. This is not a common practice. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Primary Borrower](https://www.gvcmortgage.com/mortgage-glossary/#) If more than one person is obligated to repay the mortgage loan, the primary borrower is considered to be the individual whose credit score is selected for grading and qualification purposes. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Principal](https://www.gvcmortgage.com/mortgage-glossary/#) The amount of money borrowed for the mortgage. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [Private Mortgage Insurance (PMI)](https://www.gvcmortgage.com/mortgage-glossary/#) Many borrowers are required to pay for PMI. It is generally needed for mortgages with low down payments, usually less than 20%. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### T - [Titles](https://www.gvcmortgage.com/mortgage-glossary/#) Legal documents that state who has ownership of a property. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### U - [Underwriting](https://www.gvcmortgage.com/mortgage-glossary/#) Underwriters review a borrower’s credit and financial situation and any property appraisals, and then they assess the amount of risk. If they deem the borrower trustworthy and assess it as a good fit, they give the final approval. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) ### V - [VA](https://www.gvcmortgage.com/mortgage-glossary/#) The [Veteran’s Administration](http://www.benefits.va.gov/homeloans/) (VA) supports service members, veterans, and eligible spouses in purchasing, renovating, and building homes.  While the VA does not lend money, they do guarantee loans so that the private lender can offer more favorable terms. [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) - [VA Loan](https://www.gvcmortgage.com/mortgage-glossary/#) A mortgage guaranteed by the Department of Veterans Affairs (VA). [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [Return to Top](https://www.gvcmortgage.com/mortgage-glossary/#top) [top](https://www.gvcmortgage.com/mortgage-glossary/#top)