A mortgage with an interest rate that adjusts periodically based on a market index. The initial rate is usually fixed for a set period (e.g., 5/1 ARM is fixed for 5 years, then adjusts annually) and lower than fixed-rate equivalents.
Amortization
The process of paying off a loan over time through scheduled payments of principal and interest. Early payments go mostly to interest; later payments go mostly to principal.
Annual Percentage Rate (APR)
The yearly cost of a mortgage including the interest rate plus most fees and closing costs, expressed as a percentage. APR is higher than the note rate and is the better number for comparing loans across lenders.
Appraisal
A professional assessment of a property's market value, ordered by the lender. Lenders won't lend more than the appraised value. Costs typically $500-$700.
Automated Underwriting System (AUS)
Software (DU for Fannie Mae, LPA for Freddie Mac, TOTAL Scorecard for FHA) that runs initial loan approval decisions in seconds based on borrower data.
B
Balloon Mortgage
A loan with low monthly payments and a single large payment due at the end of the term. Rare in residential mortgages today.
Bridge Loan
Short-term financing that 'bridges' the gap between buying a new home and selling the old one, secured by equity in the current home.
C
Cash-Out Refinance
Refinancing into a new, larger mortgage and receiving the difference in cash at closing. Typically capped at 80% of home value.
Certificate of Eligibility (COE)
VA-issued document proving you qualify for a VA loan based on military service. Express Home Loans can request this for you at no charge.
Closing
The final step of a mortgage where ownership transfers, documents are signed, and funds disburse. Typically held at a title company office.
Closing Costs
Fees paid at closing including lender fees, title insurance, appraisal, recording fees, and prepaid items like property taxes and insurance. Typically 2-5% of the loan amount.
Closing Disclosure (CD)
Federally required document detailing exact loan terms and closing costs. Must be received at least 3 business days before closing.
Conforming Loan
A conventional loan that meets Fannie Mae / Freddie Mac size and credit guidelines. 2026 conforming limit for most Michigan counties is $806,500.
Conventional Loan
A mortgage not insured or guaranteed by a government agency (i.e., not FHA, VA, or USDA). Follows Fannie Mae / Freddie Mac guidelines if conforming.
D
Debt-to-Income Ratio (DTI)
Monthly debt payments divided by gross monthly income. Most conventional loans cap DTI at 45-50%; FHA allows up to 57% with compensating factors.
Down Payment
Initial cash payment toward the home purchase. Conventional loans require as little as 3%, FHA 3.5%, VA and USDA $0.
Down Payment Assistance (DPA)
Programs offering grants, second mortgages, or forgivable loans to help cover the down payment. Michigan's MSHDA offers up to $10,000 for qualifying buyers.
E
Earnest Money
Deposit paid by the buyer when an offer is accepted, held in escrow and credited toward closing costs or down payment. Typically 1-3% of purchase price.
Equity
The difference between your home's current market value and what you owe on your mortgage. Builds through payments and home appreciation.
Escrow
An account held by the lender to pay property taxes and homeowners insurance from monthly mortgage payments. Required on most government-backed loans.
F
FHA Loan
Government-backed mortgage insured by the Federal Housing Administration. Requires 3.5% down with 580+ credit, or 10% down with 500-579 credit.
Fixed-Rate Mortgage
A mortgage where the interest rate stays the same for the entire loan term. Most common in the U.S. for predictability.
Forbearance
Temporary pause or reduction of mortgage payments due to financial hardship. Must be repaid later.
Funding Fee
One-time fee on VA loans (2.15% first use, 3.30% subsequent use with less than 5% down) that funds the VA loan program. Waived for veterans with service-connected disabilities.
G
Good Faith Estimate (GFE)
Older term, now largely replaced by the Loan Estimate. Lenders' initial estimate of mortgage terms and closing costs.
H
Hazard Insurance
Homeowners insurance protecting against damage from fire, weather, and other hazards. Required by lenders.
Home Equity Line of Credit (HELOC)
A revolving credit line secured by home equity. Variable rate, interest-only payments during draw period (typically 10 years), then full amortization.
Home Equity Loan
A second mortgage taken as a lump sum with a fixed rate and fixed payments, secured by home equity.
Homeowners Association (HOA)
An organization that maintains shared community areas and enforces covenants. Many condos and planned developments have HOA dues, which lenders factor into DTI.
I
Interest Rate
The percentage charged on the loan principal. Distinct from APR, which includes fees.
IRRRL (Interest Rate Reduction Refinance Loan)
VA-streamline refinance allowing existing VA loan holders to refinance to a lower rate with minimal paperwork. No appraisal or income verification typically required.
J
Jumbo Loan
A mortgage exceeding the conforming loan limit. Typically requires stronger credit, larger down payment, and higher reserves.
L
Loan Estimate (LE)
Standardized document lenders must provide within 3 business days of application, detailing estimated rate, monthly payment, and closing costs.
Loan-to-Value Ratio (LTV)
The loan amount divided by the home's appraised value. 80% LTV (20% equity) is the threshold where private mortgage insurance typically drops off.
Lock-In / Rate Lock
Lender's commitment to honor a specific interest rate for a set period (usually 30-60 days) while your loan closes.
M
Mortgage Broker
A licensed professional who shops your loan across multiple wholesale lenders to find the best rate and program. Different from a bank, which only offers its own products.
Mortgage Insurance Premium (MIP)
Insurance required on FHA loans. Includes 1.75% upfront (UFMIP) and 0.55% annual. Lasts the life of the loan unless you put 10%+ down.
MSHDA (Michigan State Housing Development Authority)
Michigan's housing finance agency. Offers down payment assistance programs including MI Home Loan, MI Home Loan Flex, and MI 10K DPA.
N
NMLS Number
Unique identifier assigned to mortgage brokers, loan officers, and companies by the Nationwide Multistate Licensing System. Express Home Loans, LLC is NMLS #2485075.
Note
The legal document you sign at closing that contains the promise to repay the mortgage. The 'mortgage' itself is technically the security instrument; the note is the IOU.
O
Origination Fee
Fee charged by the lender for processing the loan, typically 0.5-1% of the loan amount.
P
Points (Discount Points)
Optional fee paid at closing (1 point = 1% of loan amount) to lower the interest rate. Makes sense if you'll keep the loan long enough to recover the cost.
Pre-Approval
A fully underwritten lender commitment to loan you a specific amount based on verified income, assets, and credit. Stronger than pre-qualification.
Pre-Qualification
An informal estimate of how much you might be able to borrow based on self-reported information. Not a commitment.
Principal
The amount you borrow, separate from interest. Each mortgage payment includes both principal and interest.
Private Mortgage Insurance (PMI)
Insurance required on conventional loans with less than 20% down. Protects the lender if you default. Drops off automatically at 78% LTV.
Property Taxes
Taxes levied by local government on real estate. Usually escrowed in the monthly mortgage payment.
R
Rate Sheet
Daily document from a lender showing available rates, points, and lock periods. What brokers use to compare options.
Refinance
Replacing your existing mortgage with a new one to get a lower rate, change terms, or tap equity.
Reverse Mortgage
A loan available to homeowners 62+ that converts home equity into cash. The loan is repaid when the borrower sells, moves, or passes away.
S
Seller Concessions
Money the seller credits to the buyer at closing, typically used to cover closing costs. Conventional limits are 3-9% depending on down payment; FHA allows up to 6%.
Subordinate Lien
A second mortgage or HELOC that sits behind the primary mortgage in repayment priority during foreclosure.
T
Title Insurance
One-time premium protecting against ownership disputes or unknown liens. Two types: lender's policy (always required) and owner's policy (optional but recommended).
TRID (Truth in Lending / RESPA Integrated Disclosure)
Federal rules requiring standardized Loan Estimate and Closing Disclosure forms. Came into effect 2015.
U
Underwriting
The lender's review of your full file (income, assets, credit, property) to decide whether to approve the loan and on what terms.
USDA Loan
Government-backed mortgage for eligible rural-area properties. $0 down, income limits apply. Much of outer Michigan qualifies.
V
VA Loan
Government-backed mortgage for eligible veterans, active-duty service members, National Guard, Reservists, and surviving spouses. $0 down, no monthly mortgage insurance.
W
Warranty Deed
Document transferring property ownership from seller to buyer with a guarantee that the title is clear. Recorded at the county level after closing.
Wholesale Lender
A lender that doesn't work directly with consumers — instead funds loans through mortgage brokers. Brokers can offer wholesale rates that retail banks can't match.
Y
Yield Spread Premium (YSP)
Compensation paid to a broker by a lender for delivering a loan at an above-market rate. Largely regulated out of existence by Dodd-Frank but the term still surfaces.
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