A word you keep hearing. An acronym on a form. Start here for a short explanation and a useful question to take into the conversation.
General education. Definitions and documents can vary by loan type. A term appearing here does not mean a particular program is available.
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23 terms to explore
In alphabetical orderThe gradual repayment of a loan through scheduled payments. As principal is repaid, the balance falls. A fully amortizing loan is paid off at the end of its schedule.
Does the payment schedule repay the whole balance by the end?
A measure of borrowing cost that includes the interest rate and certain loan charges. It gives a broader view of cost than the interest rate alone.
Which charges are included in this annual percentage rate?
An independent assessment of a property’s value. It helps establish the value used in the loan review.
Which property value is being used to review the loan?
Software a lender uses to compare loan information with a set of guidelines and return findings. The findings guide the review, and the information behind them still has to be documented and checked.
What did the automated findings ask for, and what still needs a person to review?
Expenses connected with completing a mortgage transaction, such as loan, appraisal, and title charges. The details depend on the transaction.
Can you walk me through each cost and who receives it?
A standard form used for many consumer mortgages that shows the final loan terms, projected payments, and closing costs. It can be compared with the Loan Estimate to understand changes.
What changed from the Loan Estimate, and why?
A comparison of a property’s income with its debt payments over the same period. The income measure and debt payments included in the calculation matter.
Which income and payment figures are being used for DSCR?
Want the whole story? Read how DSCR financing works in the program guide
Fannie Mae · Property income definitions (PDF) — source for Debt service coverage ratioMonthly debt payments divided by gross monthly income. It describes how much of that income goes toward debt payments.
Which debts and income sources are included in this calculation?
The difference between a property’s current value and the mortgage debt secured by it. Equity can change as the property value or loan balance changes.
What value and outstanding balances are being used to estimate equity?
An account a mortgage servicer uses to collect and pay property expenses such as taxes and insurance. The escrow portion of a payment can change when those bills change.
Which expenses are included in escrow, and which do I pay separately?
A mortgage whose interest rate stays the same for the loan’s term.
Which parts of my housing payment could change?
Income before taxes and other deductions. Gross monthly income is different from the take-home amount in a paycheck.
How is my income being calculated for this loan review?
The rate charged for borrowing the loan principal. It does not include the other loan charges reflected in the annual percentage rate.
Is this the interest rate or the annual percentage rate?
A standard form used for many consumer mortgages that lays out estimated loan terms, payments, and closing costs. Receiving one does not mean the loan has been approved.
Which figures are estimates, and what could change?
The length of time set out for repaying the loan. The term and the payment schedule are details to read together.
Does the repayment schedule leave any balance due at the end of the term?
The loan amount divided by the property value used for the transaction. Which value is used can depend on the loan and whether it is a purchase or refinance.
Is this calculation using the purchase price, the appraised value, or another value?
A property’s effective income after operating expenses are subtracted. Mortgage debt payments and capital expenditures are accounted for separately from this operating measure.
Which expenses have been deducted from the property’s income?
Want the whole story? Read how DSCR financing works in the program guide
Fannie Mae · Property income definitions (PDF) — source for Net operating incomeA mortgage that does not meet the federal Qualified Mortgage criteria. Those criteria concern the loan’s features, costs, and underwriting.
Which features put this loan outside the Qualified Mortgage criteria?
The loan
The usual parts of a housing payment: loan principal, interest, property taxes, and homeowners insurance. Some payments also include mortgage insurance or association dues.
Which parts of this payment are paid through escrow, and which do I pay separately?
How you buy down the rate, or get a credit toward your closing costs. Paying points is an upfront charge at closing, priced as a share of the loan amount, in exchange for a lower interest rate. Lender credits work the other way: a credit toward closing costs in exchange for a higher rate.
What would paying points change, and how long would it take for that to matter?
The amount borrowed, or the amount still owed on the loan before interest. Paying down principal reduces the outstanding loan balance.
How much of this payment goes toward the loan balance?
Cash or other eligible financial assets available after closing. These are separate from the funds used to complete the transaction.
Which assets count as reserves for this loan?
The lender’s review of the borrower, the property, and the loan information to decide whether the loan meets its requirements.
What information is still needed for the review?
Each definition links to a public source from the CFPB, Freddie Mac, or Fannie Mae. Those sources explain the concepts; individual lender requirements may differ.
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