Mortgage Glossary 2026: LTV, DSCR, PITIA & 80+ Terms Explained

Loan basics

7 terms

Amortization: The schedule that pays a loan down to zero over time. Early payments are mostly interest; later payments are mostly principal.
ARM — Adjustable-Rate Mortgage: A loan with a fixed rate for an initial period, then a rate that adjusts based on an index plus a margin, within caps. A 7/6 ARM is fixed for 7 years, then adjusts every 6 months.
Interest-Only: A payment that covers only interest for a set period, so the balance does not go down. It lowers the payment now but raises it when principal payments begin.
LTV — Loan-to-Value: The loan amount divided by the property's value. Put 20% down and your LTV is 80%. A lower LTV means less risk for the lender, which can mean better terms.
Non-QM: A mortgage outside the federal Qualified Mortgage category, often because income is documented differently (bank statements, assets or rent). The lender must still make a reasonable Ability-to-Repay (ATR) and QM determination for consumer loans.
PITI: Principal, Interest, Taxes and Insurance: the core monthly mortgage payment. Add association dues and it becomes PITIA.
PITIA: Principal, Interest, Taxes, Insurance and Association dues: the full monthly housing payment. DSCR lenders compare rent against PITIA.

Qualifying and credit

14 terms

1099 Income: Income reported on IRS Form 1099 by independent contractors and gig workers. Some programs qualify borrowers using 1099s instead of full tax returns.
Ability-to-Repay (ATR) and QM: A federal rule requiring lenders to make a reasonable, good-faith determination that a consumer can repay a home loan. A Qualified Mortgage (QM) is a category of loans that meets additional standards.
Asset Depletion: A way to qualify by converting eligible savings and investments into a monthly income figure, using a formula set by the lender. Useful for retirees and borrowers with assets but little income.
Bank Statement Loan: A non-QM loan that calculates income from 12 or 24 months of personal or business bank deposits instead of tax returns. Popular with self-employed borrowers.
Credit Event: A major negative credit item such as bankruptcy, foreclosure, short sale or deed-in-lieu. Lenders set waiting periods after each event before you can qualify.
DTI — Debt-to-Income: Your monthly debt payments, including the new housing payment, divided by your gross monthly income. Many programs set a maximum DTI; it varies by program and lender.
Expense Factor: The share of bank deposits a lender treats as business expenses when calculating income on a bank-statement loan. A 50% factor counts half of eligible deposits as income.
FICO Score: The most widely used credit score in mortgage lending, ranging from 300 to 850. Mortgage lenders typically pull scores from all three credit bureaus.
Gift Funds: Money given to you, usually by a relative, for a down payment or closing costs, documented with a signed gift letter. Investment-property loans often restrict gifts.
P&L — Profit and Loss Statement: A summary of a business's income and expenses for a period. Some programs qualify self-employed borrowers with a P&L prepared or reviewed by a CPA or tax preparer.
Reserves: Money you still have after closing, counted in months of the new payment. Six months of reserves means savings equal to six full payments. Requirements vary by program.
Seasoning: How long something must exist before a lender will count it: how long you have owned the property, had funds in your account or been past a credit event.
VantageScore: A credit score model created by the three national credit bureaus. FHFA has approved VantageScore 4.0 for loans sold to Fannie Mae and Freddie Mac, alongside FICO.
W-2: The annual wage statement employers give employees. Traditional loans use W-2s and pay stubs to verify salaried income.

Costs, fees and insurance

12 terms

APR — Annual Percentage Rate: The yearly cost of a loan including interest and certain fees, shown as a percentage. Use it to compare offers; it is usually higher than the note rate.
Cash to Close: The total money you bring to closing: down payment plus closing costs and prepaid items, minus deposits and credits already applied.
Closing Costs: Fees and prepaid items due at closing beyond the down payment: lender, appraisal, title and recording fees plus prepaid taxes, insurance and interest.
Discount Points: Upfront fees paid to lower the interest rate. One point equals 1% of the loan amount. Whether they pay off depends on how long you keep the loan.
Escrow Account: An account your servicer uses to pay property taxes and insurance. A portion is added to each monthly payment so those bills are paid on time.
HOA Dues: Regular fees charged by a homeowners or condo association for shared expenses. Lenders count them in your monthly payment and DTI.
MIP — FHA Mortgage Insurance Premium: FHA's mortgage insurance. Most FHA loans have an upfront premium of 1.75% of the loan (usually financed) plus an annual premium paid monthly.
PMI — Private Mortgage Insurance: Insurance that protects the lender on a conventional loan when you put down less than 20%. The cost depends on your credit and down payment, and it can usually be removed once you reach 20% equity.
Seller Credits (Concessions): Money the seller agrees to put toward the buyer's closing costs. Each program caps seller credits as a percentage of the price.
Title Insurance: Insurance against covered problems with ownership records, such as old liens or recording errors. The lender's policy is usually required; an owner's policy protects you.
USDA Guarantee Fee: The USDA Guaranteed loan's version of mortgage insurance: an upfront fee of 1% of the loan, which can be financed, plus an annual fee of 0.35% paid monthly.
VA Funding Fee: A one-time fee on most VA loans that varies with your down payment and whether you have used the benefit before. Veterans receiving VA disability compensation are generally exempt.

Investor and DSCR loans

10 terms

Blanket Loan: One loan secured by several properties at once, often used by investors to finance or refinance a rental portfolio.
Business-Purpose Loan: A loan made primarily for business or investment purposes, such as financing a rental. Many consumer-mortgage rules do not apply, so lenders set their own guidelines.
DSCR — Debt Service Coverage Ratio: A rental property's monthly rent divided by its full monthly payment (PITIA). At 1.25, the rent is 25% more than the payment. DSCR loans qualify investors on the property's rent instead of personal income.
Foreign National: A non-U.S. citizen who is not a permanent resident. Some DSCR and investor programs lend to foreign nationals using foreign credit references or alternative documentation.
LLC — Limited Liability Company: A business entity many investors use to hold rental property. Business-purpose lenders often lend to an LLC and usually require a Personal Guarantee from its owners.
No-Ratio: A loan approved without an income calculation or a minimum DSCR test. Lenders lean on the property, equity, credit and reserves instead, usually at lower leverage.
Personal Guarantee: A promise by an owner to repay the loan personally if the borrowing entity cannot. It is common on loans made to an LLC or corporation.
Prepayment Penalty: A fee for paying off a loan early, common on investor and commercial loans. It often steps down over time, such as 5%, 4%, 3%, 2%, 1% over five years.
Rent Schedule (Form 1007 / 1025): The appraiser's estimate of market rent using comparable rentals: Form 1007 for one unit, Form 1025 for two to four units. DSCR lenders often use it when there is no lease.
STR — Short-Term Rental: A property rented for stays under 30 days, usually through vacation-rental platforms. Lenders commonly count a 12-month average of bookings less an expense factor.

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Renovation and construction

9 terms

ARV — After-Repair Value: The estimated value of a property once planned renovations are finished, usually based on an appraisal. Rehab lenders cap the loan at a percentage of ARV.
Draw Schedule: Renovation or construction money released in stages as work is completed and inspected, instead of all at closing.
Entitlements: The government approvals that make land buildable, such as zoning, site plan, subdivision and utility approvals. Fully entitled land is usually easier to finance.
Exit Strategy: Your plan to repay a short-term loan, usually by selling the property or refinancing into long-term financing such as a DSCR loan.
FHA 203(k) Loan: An FHA loan that finances the purchase or refinance of a home plus the cost of repairs in one mortgage. The Limited version covers smaller, non-structural projects.
Fix-and-Flip Loan: Short-term financing for investors who buy a property, renovate it and sell it. Lenders size it from purchase price, rehab budget and ARV, with rehab money released through draws.
HomeStyle Renovation: Fannie Mae's conventional renovation loan, which rolls the cost of improvements into a purchase or refinance mortgage based on the as-completed value.
LTC — Loan-to-Cost: The loan divided by the total project cost: purchase price plus renovation or construction budget. Rehab and construction lenders often cap both LTC and ARV.
Rehab Holdback: Renovation funds the lender keeps at closing and releases through draws as work is completed and inspected.

Home equity and refinancing

6 terms

Cash-Out Refinance: Replacing your mortgage with a larger loan and receiving the difference in cash. Maximum LTV is usually lower than on a purchase or rate-and-term refinance.
CLTV — Combined Loan-to-Value: All loans on a property added together and divided by its value. A $300,000 first mortgage plus a $50,000 HELOC on a $500,000 home is a 70% CLTV.
HELOC — Home Equity Line of Credit: A revolving credit line secured by your home's equity. You draw what you need during a draw period, often paying interest only, then repay over a set term. Rates are usually variable.
Home Equity Loan (HELOAN): A second mortgage paid out as one lump sum with a fixed payment, letting you borrow against equity without replacing your first mortgage.
Lien Position: The order in which lenders are repaid if a property is sold or foreclosed. Your main mortgage is usually the first lien; a HELOC or home equity loan is usually second.
Rate-and-Term Refinance: A refinance that changes the rate, term or loan type with little or no cash back to you. Lenders usually allow higher LTV than on a cash-out refinance.

Commercial lending

7 terms

Balloon Payment: A large remaining balance due all at once at the end of a loan's term, common on commercial and short-term loans. It is usually repaid by selling or refinancing.
Bridge Loan: Short-term financing used to buy, reposition or stabilize a property until longer-term financing or a sale is possible. Terms are commonly 6 to 36 months.
Cap Rate: A property's net operating income divided by its value or price. It is a quick measure of return used to value commercial real estate.
NOI — Net Operating Income: A property's income minus its operating expenses (taxes, insurance, maintenance, management), before loan payments. Commercial lenders size loans from NOI.
Owner-Occupied: A property you live in as your primary home or, for commercial property, a building your own business occupies. Owner-occupied loans usually get better terms than investment loans.
Recourse: A loan where the lender can pursue the borrower or guarantor personally, beyond the property, if the loan is not repaid. Non-recourse loans limit the lender mostly to the property.
SBA Loans (7(a) and 504): Small business loans partly guaranteed by the U.S. Small Business Administration. 7(a) loans have broad uses; 504 loans finance owner-occupied real estate and major equipment.

Loan programs

11 terms

Condo-Hotel (Condotel): A condo unit in a building that operates like a hotel, often with a rental program and front desk. It requires specialty financing, usually at lower leverage.
Conforming Loan: A conventional loan within the yearly loan limit set by FHFA that meets Fannie Mae or Freddie Mac guidelines. Loans above the limit are Jumbo Loan loans.
FHA Loan: A mortgage insured by the Federal Housing Administration, part of HUD. It allows lower credit scores and down payments as low as 3.5% with a 580 score, with mortgage insurance (MIP).
HECM (Reverse Mortgage): The FHA-insured reverse mortgage for homeowners 62 and older. It turns home equity into cash or a credit line with no required monthly mortgage payment while you live in the home and meet loan terms.
ITIN: Individual Taxpayer Identification Number: an IRS number for people who file U.S. taxes but are not eligible for a Social Security number. Some lenders offer mortgages to ITIN borrowers.
Jumbo Loan: A mortgage larger than the conforming loan limit. Because Fannie Mae and Freddie Mac cannot buy it, each lender sets its own credit, reserve and down payment rules.
Loan Limit: The maximum loan amount a program allows. Conforming and FHA limits are set yearly and vary by county; VA has no limit for eligible borrowers with full entitlement.
Non-Warrantable Condo: A condo in a project that does not meet Fannie Mae or Freddie Mac project standards, for example because of high investor concentration, litigation or commercial space. Financing usually comes from non-QM or portfolio lenders.
Portfolio Loan: A loan a lender keeps on its own books instead of selling, so the lender can set its own guidelines for unusual borrowers or properties.
USDA Loan: A home loan for eligible rural and suburban areas backed by USDA Rural Development, with no down payment for qualified buyers under income limits.
VA Loan: A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible service members, veterans and some surviving spouses, often with no down payment and no monthly mortgage insurance.

Documents and the process

6 terms

Appraisal: A licensed appraiser's independent opinion of a property's value. On a purchase, lenders usually base LTV on the lower of the price or the appraised value.
Closing Disclosure: A five-page form with your final loan terms and closing costs, delivered at least three business days before closing on most consumer mortgages. Compare it with your Loan Estimate.
Loan Estimate: A standard three-page form a lender must give you within three business days of applying for most consumer mortgages. It shows the estimated rate, payment and closing costs so you can compare offers.
Preapproval: A lender's conditional review of your credit, income and assets that shows how much you may be able to borrow. It is stronger than a prequalification but is not a final approval.
Rate Lock: A lender's commitment to hold a specific rate and pricing for a set number of days while your loan is processed. If it expires, an extension may cost extra.
Underwriting: The lender's review of your credit, income, assets and the property to decide whether to approve the loan and on what conditions.

Glossary FAQs

What does LTV mean on a mortgage?

LTV, or loan-to-value, is the loan amount divided by the property's value. A $320,000 loan on a $400,000 home is 80% LTV. Lenders use it to set down payment, pricing and mortgage insurance.

What is the difference between PITI and PITIA?

PITI is principal, interest, property taxes and homeowners insurance. PITIA adds association dues such as HOA or condo fees. DSCR lenders compare a rental's rent against PITIA.

What is a DSCR loan?

A DSCR loan is an investor loan that qualifies on the rental property's income instead of your personal income. The lender divides monthly rent by the full payment; 1.00 or higher means the rent covers the payment.

Is a Loan Estimate the same as a loan approval?

No. A Loan Estimate is a standard disclosure of estimated terms and costs. Approval comes only after underwriting reviews your credit, income, assets and the property.

Sources

Definitions are educational and simplified. Program rules, limits and fees change and vary by lender; confirm current terms before relying on them. This is not a commitment to lend.

Mortgage Glossary: Loan Terms Explained in Plain English