Glossary

PHONEPS GLOSSARY

View PhoneOps Mortgage Glossary to understand the most important lending and mortgage terms & abbreviations. Mortgages can be confusing so let us help explain. Below, you’ll find explanations for most of the mortgage industry terms.

A

Abstract of Title A written history of all recorded documents affecting a property’s ownership.

 

Acceleration A lender’s right to demand full repayment if the borrower defaults.

 

Accrued Interest Interest that has accumulated but hasn’t been paid yet.

 

ACH (Automated Clearing House) Electronic transfer system used for automatic payments.

 

Acquisition Costs Expenses related to acquiring a property beyond the purchase price (title, attorney fees, etc.).

 

Addendum An additional document attached to a contract that modifies or clarifies terms.

 

Additional Principal Payment A payment applied directly to the loan balance to reduce interest over time.

 

Adjustable Rate Mortgage (ARM) A mortgage with an interest rate that changes based on a market index.

 

After Repair Value (ARV) The estimated value of a property after renovations.

 

After Repair Loan‑to‑Value (ARLTV / LTARV) Loan amount divided by ARV. Used in Fix & Flip, Construction, and value‑add programs.

 

Affordability Analysis A review of income, liabilities, and loan type to determine what a borrower can afford.

 

Amortization Paying off a loan through scheduled principal and interest payments.

 

Annual Percentage Rate (APR) The total cost of borrowing, including interest and fees, expressed as a yearly rate.

 

Appraisal A professional opinion of property value based on comparable sales and market data.

 

Appraised Value The value assigned by an appraiser.

 

ARV Budget / Rehab Budget A detailed breakdown of renovation costs used in Fix & Flip and Construction loans.

 

Assessed Value The value assigned by a taxing authority for property taxes.

 

Assignment Transfer of a mortgage from one party to another.

 

Assumable Mortgage A mortgage that can be taken over by a new buyer (rare in modern lending).

B

Balance Sheet A business document showing assets, liabilities, and equity.

 

Balloon Payment A large lump‑sum payment due at the end of certain loans.

 

Bank Statements Business or personal statements used to verify cash flow and balances.

 

Basis Point 1/100th of 1%. (Example: 50 bps = 0.50%)

 

Blanket Mortgage A mortgage covering multiple properties under one loan.

 

Borrower The person or entity receiving loan funds.

 

Bridge Loan Short‑term financing used to acquire or stabilize a property before refinancing or selling.

 

Broker Price Opinion (BPO) A value estimate prepared by a real estate agent instead of an appraiser.

 

Buydown A payment made upfront to temporarily or permanently reduce the interest rate.

C

Cap Rate (Capitalization Rate) NOI ÷ Property Value. Used to evaluate investment returns.

 

Cash Flow Income left after all expenses and debt payments.

 

Cash‑Out Refinance Refinancing for more than the current loan balance to access equity.

 

Cash to Close Total funds needed at closing.

 

Certificate of Occupancy (CO) Document confirming a property meets building and safety codes.

 

CLTV (Combined Loan‑to‑Value) Total of all loans secured by a property ÷ property value.

 

Closing The final step where documents are signed and funds are disbursed.

 

Closing Costs Fees and expenses paid at closing (title, lender fees, taxes, etc.).

 

Collateral Property or assets pledged to secure a loan.

 

Compensating Factors Strengths (experience, reserves, low LTV) that offset risk in underwriting.

 

Construction Loan Short‑term financing for building or major renovation, funded in draws.

 

Contractor Budget A detailed cost breakdown required for Construction and Fix & Flip loans.

 

Credit Report A report showing a borrower’s credit history and scores.

 

Credit Risk Score A numerical score (like FICO) used to assess creditworthiness.

D

Debt‑to‑Income Ratio (DTI) Monthly debt payments ÷ gross monthly income.

 

Debt Service Coverage Ratio (DSCR) NOI ÷ total debt payments. Used in DSCR loans.

 

Deed A legal document transferring property ownership.

 

Default Failure to meet loan obligations.

 

Delinquency A late payment that has not yet become a default.

 

Depreciation Loss of property value due to wear, age, or market conditions.

 

Disclosure Required information provided to borrowers during the loan process.

 

Discount Points Upfront fees paid to reduce the interest rate.

 

Draw Schedule A timeline for releasing construction funds based on completed work.

E

EIN Letter IRS document assigning a business its tax ID number.

 

Encumbrance A claim or lien on a property.

 

Entity Documents Articles of Organization, Operating Agreement, Bylaws, etc.

 

Equity Property value minus outstanding debt.

 

Escrow Funds held by a third party for taxes, insurance, or closing.

 

Exit Strategy How the loan will be repaid (sale, refinance, etc.).

F

Fix & Flip Loan Short‑term financing for buying, renovating, and selling a property.

 

Foreclosure Legal process where a lender takes possession due to non‑payment.

 

Foreign National Loan Financing for non‑U.S. citizens using alternative documentation.

G

Gap Funding Capital that fills the difference between primary financing and total project cost.

 

Good Faith Estimate (GFE) A disclosure of estimated closing costs (now replaced by Loan Estimate).

 

Guarantor A person who guarantees repayment of a loan.

H

Hard Money Loan Asset‑based financing focused on collateral and exit strategy.

 

Hazard Insurance Insurance protecting against property damage.

 

Hyper Close A fast‑track closing structure with accelerated underwriting and title work.

I

Interest‑Only Loan A loan where payments cover only interest for a set period.

 

Investor Experience / Track Record A borrower’s history of completed real estate projects.

L

Land Loan Financing for purchasing raw or undeveloped land.

 

Lease Agreement A contract outlining rental terms between landlord and tenant.

 

Lien A legal claim against a property for unpaid debt.

 

Loan Estimate (LE) A disclosure showing loan terms and estimated costs.

 

Loan‑to‑Value (LTV) Loan amount ÷ property value.

M

Maturity Date The date the loan must be fully repaid.

 

Mobile Home Park Loan Financing for manufactured housing communities.

 

Mortgage Payoff A document showing the exact amount needed to pay off an existing loan.

N

Negative Amortization When payments don’t cover interest, causing the balance to increase.

 

Net Operating Income (NOI) Income minus operating expenses (before debt payments).

O

Operating Agreement A document outlining ownership and management of an LLC.

 

Origination Fee A lender fee for processing a loan.

P

Payoff Statement Exact amount required to pay off a loan, including per diem interest.

 

Personal Financial Statement (PFS) A detailed summary of an individual’s assets, liabilities, and income.

 

Piggyback Loan A second mortgage layered behind a first to reduce cash to close.

 

Purchase Contract Agreement between buyer and seller outlining terms of a sale.

R

Rehab Budget A detailed cost breakdown for renovation projects.

 

Rent Roll A list of tenants, rents, and occupancy details.

 

Reserves Funds left after closing to cover future payments or expenses.

S

Secondary Financing Addendum A contract add‑on disclosing a second mortgage.

 

Stand Alone 2nd A second‑position loan placed behind an existing first mortgage.

 

Settlement Statement (CD) A final document showing actual closing costs.

T

Title Legal ownership of a property.

 

Title Insurance Insurance protecting against defects in title.

 

Transactional Funding Short‑term funding for back‑to‑back closings.

U

Underwriting The process of evaluating risk, collateral, and borrower qualifications.

 

Use of Funds A breakdown of how loan proceeds will be used.

V

Vacancy Rate Percentage of unoccupied units in a rental property.

 

Verification of Funds (VOF) Proof of available cash for closing or reserves.

W

Working Capital Loan Short‑term business funding based on cash flow and bank statements.

 

Wire Instructions Bank details required to send funds securely.

Z

Zoning Local regulations governing how land can be used.

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