A plain English loan dictionary for people making serious money decisions.
Mortgages come with a language of their own and most loan officers are
busy throwing out industry jargon to make themselves feel smart. We don't do that here.
Debt-to-Income Ratio (DTI)
What is it:
The percentage of your gross monthly income that goes toward required debt payments.
Why it matters:
DTI helps lenders assess financial stress and payment sustainability.
What most people get wrong:
That DTI alone determines approval.
Loan Some Dough Insight (Expert Take):
DTI is only one piece of the puzzle. Credit, reserves, income stability, and loan structure often matter more than the raw number.
Credit Score
What is it:
A numerical snapshot of how you've managed credit over time.
Why it matters:
It impacts rate, mortgage insurance and loan eligibility.
What most people get wrong:
You need perfect credit to buy.
Loan Some Dough Insight (Expert Take):
Strategy beats perfection. Many buyers qualify sooner than they tine.
Credit Report
What is it:
A detailed history of your credit accounts and payment behavior.
Why it matters:
Underwriters use it to verify consistency and risk.
What most people get wrong:
That one late payment ruins everything.
Loan Some Dough Insight (Expert Take):
Patterns matter more than isolated mistakes.
Hard Inquiry vs. Soft Inquiry
What is it:
Hard inquiries impact credit slightly; soft inquiries do not.
Why it matters:
Mortgage pulls are hard inquiries—but typically grouped together.
What most people get wrong:
That shopping rates destroys credit.
Loan Some Dough Insight (Expert Take):
Rate shopping within a short window is smart, not harmful.
Qualifying Income
What is it:
The income lenders can legally and consistently count.
Why it matters:
This determines how much you can borrow.
What most people get wrong:
That their full paycheck always counts.
Loan Some Dough Insight (Expert Take):
Consistency and documentation matter more than raw earnings.
Stable Employment
What is it:
A demonstrated pattern of reliable income.
Why it matters:
It reduces lender risk.
What most people get wrong:
That job changes automatically disqualify you.
Loan Some Dough Insight (Expert Take):
Same line of work often matters more than the same employer.
Compensating Factors
What is it:
Strengths that offset higher risk elsewhere in the file.
Why it matters:
They can make approvals possible.
What most people get wrong:
That guidelines are black and white.
Loan Some Dough Insight (Expert Take):
Strong files are built, not guessed.
Reserves
What is it:
Money left after closing, measured in months of payments.
Why it matters:
Reserves signal financial resilience.
What most people get wrong:
That reserves must be spent.
Loan Some Dough Insight (Expert Take):
Liquidity often matters more than equity.
Assets vs. Funds to Close
What is it:
Assets = total savings; funds to close = what you actually use.
Why it matters:
Lenders evaluate both.
What most people get wrong:
That all money must go into the house.
Loan Some Dough Insight (Expert Take):
Preserving cash can be a strategic win.
Down Payment
What is it:
The portion of the purchase price you pay upfront.
Why it matters:
It affects loan type, rate, and mortgage insurance.
What most people get wrong:
You need 20% down.
Loan Some Dough Insight (Expert Take):
Many strong options exist well below 20%.
Cash to Close
What is it:
Total money due at closing.
Why it matters:
This is the number that hits your bank account.
What most people get wrong:
That it equals the down payment.
Loan Some Dough Insight (Expert Take):
Strategy can significantly reduce this number.
Earnest Money Deposit (EMD)
What is it:
Good-faith money submitted with an offer.
Why it matters:
Shows seller commitment.
What most people get wrong:
That it’s extra money.
Loan Some Dough Insight (Expert Take):
EMD usually applies toward closing, which means it reduces the cash you have to bring to closing.
Seller Concessions
What is it:
Seller-paid funds toward buyer costs.
Why it matters:
They preserve buyer liquidity.
What most people get wrong:
Price cuts are always better.
Loan Some Dough Insight (Expert Take):
Concessions often win mathematically.
Gift Funds
What is it:
Money given by an approved donor.
Why it matters:
Allows lower cash barriers.
What most people get wrong:
That gifts are suspicious.
Loan Some Dough Insight (Expert Take):
Properly documented gifts are common and acceptable.
Prepaid Items
What is it:
Upfront payments for taxes and insurance.
Why it matters:
They affect cash to close.
What most people get wrong:
That they’re junk fees.
Loan Some Dough Insight (Expert Take):
They’re real expenses—just paid early.
Closing Costs
What is it:
Fees associated with processing and closing the loan.
Why it matters:
They impact affordability.
What most people get wrong:
That lenders pocket them all.
Loan Some Dough Insight (Expert Take):
Most costs are third-party and unavoidable.
Lender Credits
What is it:
Credits applied in exchange for a slightly higher rate.
Why it matters:
They reduce upfront cash needs.
What most people get wrong:
That higher rate = bad deal.
Loan Some Dough Insight (Expert Take):
Time horizon determines value.
Conventional Loan
What is it:
A mortgage not backed by the government.
Why it matters:
Often lower insurance costs long-term.
What most people get wrong:
Only for perfect borrowers.
Loan Some Dough Insight (Expert Take):
Conventional rewards planning, not perfection.
If you're looking for more info on conventional loans check out our loan types page HERE!
FHA Loan
What is it:
Government-insured loan with flexible guidelines.
Why it matters:
Expands access to homeownership.
What most people get wrong:
Only for perfect borrowers.
Loan Some Dough Insight (Expert Take):
Conventional rewards planning, not perfection.
If you're looking for more info on FHA loans check out our loan types page HERE!
VA Loan
What is it:
Zero-down loan for eligible veterans.
Why it matters:
One of the strongest benefits available.
What most people get wrong:
VA offers are weak.
Loan Some Dough Insight (Expert Take):
Strong VA offers, with a dash of education when needed, win deals.
If you're looking for more info on VA loans check out our loan types page HERE!
USDA Loan
What is it:
Zero-down loan for eligible rural areas.
Why it matters:
Affordable financing option.
What most people get wrong:
Only for farms.
Loan Some Dough Insight (Expert Take):
You'd be surprised how many folks we've helped that live inside city limits with USDA loans.
If you're looking for more info on USDA loans check out our loan types page HERE!
Jumbo Loan
What is it:
Loan exceeding conventional limits.
Why it matters:
Different pricing and guidelines apply.
What most people get wrong:
All jumbo loans are risky.
Loan Some Dough Insight (Expert Take):
Strong borrowers often get excellent jumbo terms.
If you're looking for more info on Jumbo loans check out our loan types page HERE!
Non-QM Loan
What is it:
Loans outside traditional guidelines.
Why it matters:
Expands options for complex income.
What most people get wrong:
They’re predatory.
Loan Some Dough Insight (Expert Take):
Used correctly, they’re powerful tools.
If you're looking for more info on Non-QM loans check out our loan types page HERE!
DSCR Loan
What is it:
A Non-QM investment loan based on rental income.
Why it matters:
Separates personal finances from investments.
What most people get wrong:
Only for pros.
Loan Some Dough Insight (Expert Take):
Great leverage tool when used strategically.
If you're looking for more info on Non-QM loans check out our loan types page HERE!
Bank Statement Loan
What is it:
Uses deposits instead of tax returns
Why it matters:
Helps self-employed buyers.
What most people get wrong:
Anyone can use it.
Loan Some Dough Insight (Expert Take):
Cash flow consistency is key.
If you're looking for more info on Non-QM loans check out our loan types page HERE!
HELOC
What is it:
Revolving line of credit on home equity.
Why it matters:
Flexible access to capital.
What most people get wrong:
It’s always cheap money.
Loan Some Dough Insight (Expert Take):
Rates and risk matter.
Construction Loan
What is it:
Loan to build a home.
Why it matters:
Different structure than purchase loans.
What most people get wrong:
Same rules apply.
Loan Some Dough Insight (Expert Take):
Experience matters here.
If you're looking for more info on Non-QM loans check out our loan types page HERE!
Interest Rate vs APR
What is it:
APR reflects total loan cost.
Why it matters:
Allows fair comparisons.
What most people get wrong:
Lowest rate always wins.
Loan Some Dough Insight (Expert Take):
Time horizon determines best deal.
Loan-Level Pricing Adjustments (LLPAs)
What is it:
Risk adjustments on conventional loans.
Why it matters:
They affect cost and rate.
What most people get wrong:
Lenders invent them.
Loan Some Dough Insight (Expert Take):
Knowing LLPAs saves money.
Discount Points
What is it:
Upfront fees to lower the rate.
Why it matters:
Affects break-even.
What most people get wrong:
Points are always bad.
Loan Some Dough Insight (Expert Take):
Math decides not emotion.
Par Rate
What is it:
Rate with no points or credits.
Why it matters:
Baseline pricing reference.
What most people get wrong:
It’s the best rate.
Loan Some Dough Insight (Expert Take):
Neutral isn't always optimal.
Rate Lock
What is it:
Guarantees your rate for a set time.
Why it matters:
Protects against market movement.
What most people get wrong:
Waiting is safer.
Loan Some Dough Insight (Expert Take):
Locks need strategy.
Temporary Buydown
What is it:
Lower initial payments for a short period.
Why it matters:
Helps cash flow early on.
What most people get wrong:
They’re gimmicks.
Loan Some Dough Insight (Expert Take):
They can be excellent bridge tools.
Permanent Buydown
What is it:
Lower rate for the life of the loan.
Why it matters:
Reduces long-term payment.
What most people get wrong:
Always worth it.
Loan Some Dough Insight (Expert Take):
Break-even analysis is critical.
Pre-Qualification
What is it:
Initial estimate based on stated info.
Why it matters:
Early planning tool.
What most people get wrong:
Same as pre-approval.
Loan Some Dough Insight (Expert Take):
When it comes to writing an offer, a pre-qualification isn't worth the paper it's written on.
Pre-Approval
What is it:
Verified review of income, assets, and credit.
Why it matters:
The information has been verified.
What most people get wrong:
All are equal.
Loan Some Dough Insight (Expert Take):
If a mortgage pro hasn't seen your paystubs and bank statements, you don't have a pre-approval.
Underwriting
What is it:
Risk assessment by the lender.
Why it matters:
Final approval happens here.
What most people get wrong:
It’s arbitrary.
Loan Some Dough Insight (Expert Take):
Preparation makes it smooth.
Automated Underwriting System (AUS)
What is it:
Algorithmic loan evaluation.
Why it matters:
Guides approval path.
What most people get wrong:
Humans don’t matter.
Loan Some Dough Insight (Expert Take):
This is a key step in pre-approvals because it will show us if we have anything to tackle before putting in offers.
Manual Underwrite
What is it:
Human-driven approval review.
Why it matters:
Allows nuance.
What most people get wrong:
Always bad.
Loan Some Dough Insight (Expert Take):
Can unlock approvals.
Conditional Approval
What is it:
Approval pending documentation.
Why it matters:
Most deals pass through here.
What most people get wrong:
It's bad news.
Loan Some Dough Insight (Expert Take):
It's normal.
Clear to Close (CTC)
What is it:
Final approval.
Why it matters:
You’re almost done.
What most people get wrong:
Under contract = safe.
Loan Some Dough Insight (Expert Take):
Execution still matters.
Opportunity Cost
What is it:
What your money could do elsewhere.
Why it matters:
Capital allocation matters.
What most people get wrong:
Debt is always bad.
Loan Some Dough Insight (Expert Take):
Smart leverage builds wealth.
Liquidity vs. Equity
What is it:
Cash access vs property value.
Why it matters:
Flexibility matters.
What most people get wrong:
Equity is always better.
Loan Some Dough Insight (Expert Take):
Liquidity buys options.
Break-Even Analysis
What is it:
Time needed to recoup costs.
Why it matters:
Determines smart moves.
What most people get wrong:
Short-term thinking.
Loan Some Dough Insight (Expert Take):
Always run the math.
Payment Shock
What is it:
Sudden payment increases.
Why it matters:
Affects sustainability.
What most people get wrong:
Payments never change.
Loan Some Dough Insight (Expert Take):
Plan ahead.
Recast
What is it:
Re-amortizing loan after lump sum.
Why it matters:
Lowers payment without refi.
What most people get wrong:
Same as refinance.
Loan Some Dough Insight (Expert Take):
Different tool, different use.
Seasoning
What is it:
Time ownership or funds must age.
Why it matters:
Affects eligibility.
What most people get wrong:
Timing doesn’t matter.
Loan Some Dough Insight (Expert Take):
Timing matters a lot.
Second Opinion
What is it:
Independent strategy review of your loan.
Why it matters:
Mortgages are not one-size-fits-all.
What most people get wrong:
All lenders structure the same.
Loan Some Dough Insight (Expert Take):
Details change outcomes.