Jumbo loans glossary

Amortization: Repaying a loan through scheduled payments that cover interest first and gradually more principal.
Annual percentage rate: The yearly cost of credit including interest and certain finance charges, disclosed under the Truth in Lending Act.
Appraisal: An independent opinion of market value used by the lender.
Cash-out refinance: A refinance where the new loan exceeds the payoff and the borrower receives the difference.
Closing Disclosure: The five-page form you receive at least three business days before closing showing final loan terms and costs.
Conforming loan limit: The maximum loan size Fannie Mae and Freddie Mac can buy, set each year by the FHFA.
Debt-to-income ratio (DTI): Monthly debt payments divided by gross monthly income.
Discount points: Prepaid interest paid at closing to reduce the interest rate.
Escrow account: An account your servicer uses to pay property taxes and insurance from monthly deposits.
High-cost area: A county where the conforming limit is raised because of local home values.
Jumbo loan: A loan above the conforming limit for its county.
Lender credit: A credit toward closing costs in exchange for a higher interest rate.
Loan Estimate: The standardized three-page form a lender must provide within three business days of application.
Loan-to-value (LTV): The loan amount divided by the property value.
Non-QM: A loan outside the qualified mortgage definition, often with alternative documentation.
Piggyback loan: A second mortgage used alongside a first to reduce the first loan’s size.
Rate lock: A lender’s commitment to hold a rate and price for a set period.
Rescission: The right to cancel certain refinances of a primary residence within three business days after closing.
Reserves: Assets remaining after closing, measured in months of payments.
Servicer: The company that collects payments and manages the loan after closing.