Glossary
Mortgage terms, explained plainly.
A-to-Z mortgage vocabulary for California borrowers. Every term includes a one-sentence definition, a plain-English expansion, and links to the loan programs it relates to. Written by a licensed California broker.
A
Amortization
Structure
The schedule by which a loan is repaid over time, gradually reducing principal while paying interest on the remaining balance.
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APR (Annual Percentage Rate)
Costs & Fees
The total cost of borrowing expressed as a yearly rate, including interest plus certain fees — not just the interest rate alone.
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ARM (Adjustable-Rate Mortgage)
Loan Programs
A mortgage with a rate that adjusts periodically after an initial fixed period (commonly 5, 7, or 10 years).
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C
Closing Costs
Costs & Fees
The fees paid at close that are separate from the down payment — typically 2–5% of the loan amount in California.
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Conforming Loan Limit
Loan Programs
The maximum loan amount Fannie Mae and Freddie Mac will purchase — $806,500 baseline, $1,209,750 in California high-cost counties in 2026.
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D
Discount Points
Costs & Fees
Upfront fees paid to the lender to reduce the interest rate — each point equals 1% of the loan amount.
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Down Payment
Costs & Fees
The portion of the purchase price you pay upfront, expressed as a percentage of the home's value.
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DSCR (Debt Service Coverage Ratio)
Investor
A rental property's monthly rent divided by its full monthly PITIA. Used to qualify investor loans without personal income documentation.
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DTI (Debt-to-Income Ratio)
Qualification
Your total monthly debt payments divided by gross monthly income. Conventional loans typically require DTI under 43–50%.
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P
PITIA
Structure
Principal + Interest + Tax + Insurance + (Association dues). The full monthly housing cost used for DSCR and qualification math.
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Pre-Approval vs. Pre-Qualification
Qualification
Pre-qualification is an informal estimate based on stated info. Pre-approval is a conditional loan commitment based on verified docs and a credit pull.
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R