APR (Annual Percentage Rate)
A yearly cost figure that includes the note rate plus certain prepaid finance charges. It is not the same as the interest rate used to calculate monthly principal and interest.
Mortgage definitions
Eighteen terms you will see on this site. Each card has a short spoken reading of the same text. Educational only — not a legal definition and not advice.
Prefer the official glossary language on CFPB Owning a Home and the disclosures you receive after an application. Confirm licenses on NMLS Consumer Access.
Note rate
The interest rate written on the promissory note. It calculates principal and interest. It can be lower than APR when prepaid finance charges apply.
DTI (debt-to-income)
Monthly debt payments divided by gross monthly income. Conventional files often use this number. Bank-statement files may still use DTI after deposits are converted to income.
DSCR (debt service coverage ratio)
For many investor loans: rental income divided by the property payment. Property cash flow is reviewed instead of the borrower’s personal DTI.
LTV (loan-to-value)
Loan amount divided by the property value or purchase price, whichever the program uses. A lower LTV means more equity or a larger down payment.
Qualified Mortgage (QM)
A CFPB category of mortgage with defined features and ability-to-repay rules. Many standard conventional loans are designed as QM loans.
Non-QM
A lawful mortgage that does not meet the QM definition. Documentation may use bank statements, DSCR, or assets. Non-QM is a documentation path, not a single product.
Bank-statement loan
A Non-QM method that uses 12 or 24 months of deposits to show income for self-employed borrowers, instead of relying only on tax returns.
PITI
Principal, interest, property taxes, and insurance. HOA dues may be added. This housing payment is what most underwriting ratios use.
Reserves
Liquid assets left after closing, often measured in months of the housing payment. Non-QM and investor files commonly ask for more months than a simple conventional purchase.
Prepayment penalty
A charge if the loan is paid off or refinanced during a set period. Common on some investor loans where state law allows it. Generally not a feature of standard owner-occupied QM loans.
Loan Estimate
A federal disclosure that shows estimated costs and APR after you apply. A website calculator is not a Loan Estimate.
Occupancy
How the property will be used: primary home, second home, or investment. Occupancy changes programs, pricing, and whether personal income or property cash flow is used.
Conforming
A loan that meets Fannie Mae or Freddie Mac rules and stays at or under the conforming loan limit for that unit count and county.
Jumbo
A loan amount above the conforming limit. Jumbo can still be full-documentation QM, or it can be Non-QM, depending on the file.
Points
One point is one percent of the loan amount, paid up front. Discount points can lower the note rate. They may also raise APR because they are often prepaid finance charges.
NMLS
The Nationwide Multistate Licensing System. Consumer Access is the public site where you look up a company or loan originator license.
Equal Housing Lender
Lending decisions cannot be based on race, color, religion, sex, disability, familial status, national origin, or other classes protected by the Fair Housing Act and ECOA.