Mortgage Glossary

One-sentence definitions, each with the source it comes from.

Cash-Out Refinance: A new, bigger mortgage that replaces your current one and pays you the difference in cash, usually with closing costs.
Certificate of Eligibility (COE): The VA document that confirms to your lender that you meet the service requirements for a VA-backed home loan; getting it is the first step.
Closing Disclosure: A form with the final terms and costs of your mortgage, which the lender must give you at least three business days before you close.
Draw Period: The time at the start of a HELOC, often around 10 years, when you can borrow up to your credit limit; after it ends you can't borrow more and you repay the balance.
Eligible Non-Borrowing Spouse: A spouse who isn't a borrower on a HECM but, if they meet HUD's conditions, can stay in the home after the borrower dies without the loan becoming due, though they get no more money from it.
HECM (Home Equity Conversion Mortgage): The FHA-insured reverse mortgage for homeowners 62 and older, which lets you borrow against your home's equity with no monthly mortgage payment while you live there and keep up with taxes, insurance and upkeep.
HECM Counseling: A required session with a HUD-approved HECM counselor, by phone or in person, that every borrower must complete before a lender can process a HECM application.
HELOC (Home Equity Line of Credit): An open-ended line of credit secured by your home that lets you borrow against your equity more than once, usually at a variable rate.
Loan Estimate: A standard form a lender must give you within three business days of your application, showing the loan's estimated rate, payments and closing costs.
Maximum Claim Amount: For a HECM, the lesser of the home's appraised value, the FHA's HECM limit or the sales price; the 2026 HECM limit is $1,249,125.
Mortgage Insurance Premium (MIP): The mortgage insurance FHA charges on its loans, made up of an upfront premium and an annual premium; it's required on all FHA loans.
Principal Limit: The most you can borrow with a HECM, worked out from the age of the youngest borrower or eligible non-borrowing spouse, the expected interest rate and the maximum claim amount.
Private Mortgage Insurance (PMI): Insurance that protects the lender, not you, which you usually pay on a conventional loan when your down payment is less than 20 percent of the price.
Rate Lock: A lender's promise that your interest rate won't change between the offer and closing, as long as you close within the agreed time and nothing changes in your application.
Right of Rescission: Your right to cancel most loans secured by the home you live in that aren't used to buy it, such as refinances and home equity loans, until midnight of the third business day after closing.
VA Funding Fee: A one-time payment on a VA-backed or VA direct home loan, set as a percent of the loan; some borrowers, such as those receiving VA disability compensation, don't pay it.