This Colorado mortgage glossary explains common loan, credit, cost, underwriting, and closing terms in plain language. Mortgage terminology can make a straightforward decision feel complicated, and exact definitions or requirements can vary by loan program, contract, lender, and applicable law.
Use the definitions below as a reference while reviewing a preapproval, Loan Estimate, Closing Disclosure, or mortgage comparison. For the full purchase sequence, see the Colorado homebuyer guide. For the lender’s standardized early cost disclosure, the CFPB Loan Estimate explainer provides an independent page-by-page reference.
A mortgage with an interest rate that is fixed for an initial period and may adjust afterward according to the loan’s index, margin, adjustment schedule, and caps.
A standardized measure designed to reflect the cost of credit as an annual rate. APR includes the interest rate and certain finance charges, so it may be higher than the note rate.
An independent opinion of a property’s value prepared by a licensed or certified appraiser. An appraisal is not a home inspection and does not guarantee the property’s condition.
Funds or property with financial value, such as checking and savings accounts, retirement accounts, investments, and real estate. A lender may verify eligible assets used for closing, reserves, or qualifying.
A financing arrangement that reduces the borrower’s payment for a period of time. With a temporary buydown, funds are set aside to subsidize early payments, but qualification is generally based on the permanent note rate or other applicable program requirement, not the temporarily reduced payment.
The amount a borrower must bring to closing after accounting for the down payment, closing costs, prepaid items, deposits, lender credits, seller credits, and other verified adjustments.
Expenses associated with obtaining the mortgage and transferring the property. They may include lender, appraisal, title, recording, settlement, prepaid interest, tax, insurance, and escrow charges.
A disclosure for most closed-end consumer mortgages that summarizes final loan terms, projected payments, and closing costs. It replaced the HUD-1 Settlement Statement for most consumer mortgage transactions covered by the TILA-RESPA Integrated Disclosure rule.
A conventional mortgage whose loan amount and other characteristics meet requirements for potential purchase by Fannie Mae or Freddie Mac. The maximum loan amount varies by year, county, property type, and number of units.
A mortgage that is not insured or guaranteed by a federal government agency such as FHA, VA, or USDA. Conventional loans can be conforming or nonconforming.
A numerical measure derived from information in a credit report. Mortgage qualification and pricing may consider the score along with the full credit history and other loan factors.
A percentage that compares qualifying monthly debt obligations with qualifying gross monthly income. The debts and income included depend on the loan program and documentation.
Upfront finance charges paid in exchange for a particular interest rate. One point equals 1% of the loan amount. Whether paying points makes sense depends on the cost, rate difference, and expected time in the loan.
The portion of a purchase price not financed by the first mortgage. Down-payment requirements vary by program, occupancy, property, credit, and other transaction details.
A buyer’s good-faith deposit under a purchase contract. At closing, verified earnest money is generally credited toward the buyer’s required funds, subject to the contract and loan requirements.
An account maintained by the mortgage servicer to collect and pay eligible property taxes, homeowners insurance, and other required property charges. The escrow portion of the payment can change as those bills change.
A mortgage made by an approved lender and insured by the Federal Housing Administration. FHA loans are not limited to first-time buyers and include upfront and annual mortgage insurance.
A mortgage whose interest rate does not change during the loan term. The principal-and-interest payment is fixed, although the total monthly payment can change because of taxes, insurance, mortgage insurance, or other charges.
Payments required by a homeowners or condominium association. Mortgage qualification generally includes required HOA dues in the monthly housing expense.
Insurance that generally protects the home and certain personal property against covered losses and provides liability coverage. Lenders typically require adequate property insurance while the mortgage is outstanding.
A mortgage that generally exceeds the applicable conforming loan limit for the property’s location and unit count. Jumbo underwriting and pricing vary by lender and investor.
A standardized disclosure for most closed-end consumer mortgages that summarizes estimated loan terms, projected payments, and closing costs early in the application process. It is an estimate, and certain items can change under applicable rules.
The loan amount divided by the property’s value used for underwriting. For a purchase, that value is often the lower of the purchase price or appraised value, subject to program rules.
Insurance that protects the lender or insurer against certain losses. Conventional private mortgage insurance is commonly called PMI. FHA mortgage insurance is commonly called MIP. Cost and cancellation or duration rules vary.
A lender’s conditional assessment of a borrower’s ability to qualify based on reviewed information and documentation. A preapproval is not a final loan approval and remains subject to underwriting, property, program, and other conditions.
An initial estimate of possible borrowing ability, often based on borrower-provided information. It may involve less documentation and review than a preapproval.
The amount borrowed or the remaining unpaid loan balance, excluding interest and most fees. Principal is different from “principle.”
An agreement to hold a specific mortgage rate and pricing for a stated period, subject to its terms and the loan remaining eligible. Extensions or changes can affect cost.
A new mortgage used to replace an existing loan. Common goals include changing the rate or term, accessing equity, consolidating debt, or changing borrowers, subject to qualification and cost-benefit analysis.
Eligible funds remaining after closing that may be measured in months of housing payments. Reserve requirements vary by program, property, occupancy, and borrower profile.
An amount the seller agrees to contribute toward eligible buyer closing costs, prepaid items, or other permitted expenses. Program limits, the contract, and the actual amount of eligible costs control how much can be used.
Insurance against certain covered title defects or claims. A lender’s policy protects the mortgage lender. An owner’s policy protects the buyer or homeowner, subject to the policy’s terms and exclusions.
The process of evaluating the borrower, property, loan structure, documents, and program requirements to determine whether the mortgage meets approval standards.
A mortgage made by an approved lender and backed in part by the U.S. Department of Veterans Affairs for eligible service members, Veterans, and qualifying surviving spouses. Eligibility, entitlement, occupancy, credit, income, property, and lender requirements apply.
Still have questions? Contact Milestone Home Mortgage or call 303-800-4595 for an explanation based on your situation.
This glossary is educational and does not replace loan disclosures, program guidelines, contracts, or legal, tax, or financial advice.
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