Like most industries, there are an abundance of mortgage terms and acronyms that may confuse the average homebuyer and/or homeowner.   Read more to find the most commonly used lingo.

ARM (Adjustable-Rate Mortgage) - Also very popular, but somewhat scrutinized in that the simple interest rate established when the loan is originated can fluctuate with market trends.  This means that if a mortgage was established with a 6% interest rate and the rates increase over the life of the loan, the homeowner may pay more than the original rate of 6% which means a higher payment if the homeowner does not sell, refinance and/or otherwise pay-off the loan and the terms established with the origination of the loan dictated as such, (e.g., a 3/1 ARM at 6% in 2022 means that if the rates rise 1% or higher after 3 years, the borrower's rate can increase 1% (1 point) on year 4 and every year thereafter.  

FRM (Fixed-Rate Mortgage) - One of the most popular types of mortgages, it means the simple interest rate charged by the lender to the borrower remains fixed (e.g., a 6% interest rate when the loan is originated will never increase and/or decrease with fluctuating interest rates afterward) for the entire term of the loan (usually 15, 20, 25 or 30 years) and/or until the loan is paid-in-full (e.g., home is sold, refinanced or paid off early).

GSE (Fannie Mae and Freddie Mac) - Two privately owned, Government Sponsored Enterprises that purchase most of the home loans originated by lenders.  These home loans sell on what is referred to as the secondary market.  Much of the conventional loans' underwriting guidelines stem from these enterprises.  If the lender deviates from these guidelines, they may not be able to sell their loans on the secondary market.

Home Purchase - When a borrower is not on the current mortgage for the property and wishes to buy it, then it would be referred to as Home Financing and/or Real Estate Purchase Financing.  If the home is being custom built, the financing would typically be New Construction Financing.  If the home is new but built as a trac home/ subdivision home/spec home, the borrower may need to comply with different earnest/down payment requirements set forth by the builder but will otherwise apply for typical financing for a Home Purchase.  If the real estate will be leased first for a specified period of time, then the borrower will be required to purchase the property (pay cash and/or obtain Financing for a Home Purchase), the term is referred to as a Lease Purchase.  If the real estate will be leased for a specified period of time and during that time, after or up to a specified period of time the borrower has an option to purchase the property (pay cash and/or obtain Home Financing), the term is referred to as a Lease with Option to Buy.

(Primary) Home Purchase Financing - When a buyer purchases real property from a seller with the intent to occupy the premises as his/her primary residence and the buyer wishes to leverage the real estate by obtaining a mortgage or other type of home financing (regardless of if the financing is through a bank, individual or any other type of financing), the transaction is commonly referred to as home sale or home purchase financing.

Mortgage - Also referred to as a lien against real property (real estate), a mortgage is a loan given to a borrower (mortgagor) by a lender (mortgagee) so that the borrower may purchase or refinance real estate.

Mortgage Broker - A mortgage professional who works with many lenders in order to find the right loan for the borrower. A Mortgage Broker must be licensed in the state(s) where the real estate is located, and loan is originated.  He/she must also be registered with the NMLS.

Mortgage Banker - A mortgage professional employed by a financial institution such as a bank or credit union in order to procure and complete mortgage loan applications for customers who wish to obtain a loan directly from the banking establishment for which the mortgage professional is employed.  A Mortgage Banker does not need to be licensed but must be registered with the NMLS.

Mortgage Loan Originator (MLO) - A mortgage professional who works for a mortgage company that typically lends its own funds, later selling the mortgages on the secondary market (e.g., Freddie Mac).  A Mortgage Loan Originator must be licensed in the state where the real estate is located, and loan is originated and must be registered with the NMLS.

NMLS - Nationwide and Multistate Licensing and Registry is the system of record for non-depository, financial services licensing or registration in participating state agencies.  These include District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam.

Real Property - Any type of real estate is generally referred to as real property.  This differs from personal property, such as jewelry, automobiles, tools, equipment, etc.

Refinancing - When a homeowner, a party on the title of real property, wishes to obtain new financing on the property, regardless of if the homeowner is on the current mortgage and/or has an existing mortgage, the type of financing is typically referred to as refinancing.  Note that other types of financing may exist and be available to homeowners wishing to pay off their existing mortgage with the intent to obtain new financing such as Equity Sharing Programs.

• Home Refinance (no cash-out) - When a home is owned (borrower is on the title) and typically mortgaged (borrower is on the mortgage/deed of trust/contract for deed), and he/she wishes to pay-off the current mortgage while simultaneously obtaining a new mortgage with no funds from the home's equity being dispersed to- or on behalf of the homeowner/borrower, the home financing is referred to as a refinance (sometimes referred to as a refi).
• Cash-Out Refinance - When a home is owned (borrower is on the title) and typically mortgaged (borrower is on the mortgage/deed of trust/contract for deed), and he/she wishes to pay-off the current mortgage while simultaneously obtaining a new mortgage loan with funds from the home's equity being dispersed to- or on behalf of the homeowner/borrower, the home financing is referred to as a cash-out refinance (sometimes referred to as a cash-out refi).  The new mortgage may have different terms from the original mortgage and will have a new amortization schedule.  It will be used to pay off the first mortgage, closing costs and any prepaid insurance and taxes with the remaining cash as the disbursement.   
• HELOC (Home Equity Line of Credit) - This type of home equity loan is a mortgage that places a lien (secondary to the first lien holder, if applicable) that allows the borrower to access funds, as needed, up to the maximum approved line of credit based on, among other qualifications, a percentage of available equity in the borrower's home (often 80-85%).  In most cases, the borrower should have average to above average credit, acceptable debt to income ratios (percentage of household debt to household income) and good job history.  The interest is rarely tax deductible for this type of loan, but refer to www.IRS.gov (Publication 936), a tax advisor and/or accountant for advice.
• HELOAN (Home Equity Loan) - This type of home equity loan is a lien (secondary to the first lien, if applicable) that provides the borrower a fixed sum of money, secured by the borrower's equity, up to the maximum approved amount, usually 80-85% of the home's value minus the balance of the first mortgage (if applicable).  It differs from a HELOC, which is a revolving amount of credit instead of a one-time disbursement shortly after closing.  Like the HELOC, the borrower should have average to above average credit, acceptable debt to income ratios (percentage of household debt to household income) and good job history.  The interest is rarely tax deductible for this type of loan, but refer to www.IRS.gov (Publication 936), a tax advisor and/or accountant for advice.
• Debt Consolidation Loan - When referring to a real estate loan, a DCL can reference a HELOC, HELOAN and/or cash-out refinance.  It is a debt relief/repayment strategy meant to combine all or some of the borrower's debts into one loan, often with a lower overall APR and/or monthly payment.  In some cases, the interest from the real estate consolidation loan may be tax deductible but refer to www.IRS.gov (Publication 936), a tax advisor and/or accountant for advice.
• Equity Sharing - Programs that provide homeowners with alternative options to traditional home financing such as home loans.  These programs have independent methods of valuing, listing and/or buying equity from a homeowner in order to provide the homeowner with immediate access to the current value of a percentage of their home's equity in exchange for the repayment at a later date (most commonly by way of sale, buyback, refinance) for that same percentage of equity at the then value.  Fees, rules, regulations and benefits are unique to these programs.