Mortgage Glossary &
Key Finance Terms

A tax-deferred exchange under IRS Section 1031 that allows a real estate investor to sell a property, reinvest the proceeds in a 'like-kind' property, and defer capital gains taxes. The replacement property must be identified within 45 days and closed within 180 days of selling t…

A self-contained residential unit on the same lot as a primary residence, with its own kitchen, bathroom, and entrance. Can be attached (above a garage, basement conversion), detached (backyard cottage), or a converted space within the main home. Oregon and California have signif…

A mortgage with an interest rate that is fixed for an initial period (commonly 5, 7, or 10 years) and then adjusts periodically based on a market index plus a margin. A 7/1 ARM is fixed for 7 years, then adjusts annually. Rate caps limit how much the rate can move at each adjustm…

A revolving credit facility secured by a first mortgage on agricultural real estate, providing farmers and ranchers with on-demand access to their land equity. Lines available up to $10 million with a 5- or 10-year draw period, semi-annual interest-only payments (January 1 and Ju…

Permanent multifamily financing originated through Fannie Mae's Delegated Underwriting and Servicing (DUS) program or Freddie Mac's Optigo platform. Agency loans offer the lowest fixed rates in apartment lending — typically 20–100 basis points below comparable bank or CMBS quotes…

The process of paying off a loan through scheduled, fixed payments over time. Each payment covers both interest and a portion of the principal. Early in the loan, most of the payment goes toward interest; over time, more goes toward principal. A 30-year amortization schedule has …

The true annual cost of borrowing, expressed as a percentage. Unlike the note rate (interest rate), APR includes lender fees, discount points, and mortgage insurance rolled into a single comparable number. A loan with a 6.875% note rate and significant origination fees may carry …

A licensed appraiser's independent estimate of a property's market value, conducted to protect the lender from lending more than the property is worth. The appraisal considers the property's condition, size, location, and recent comparable sales (comps). If the appraised value co…

A software platform used by lenders to assess a loan application against agency guidelines and return an automated underwriting decision: Approve/Eligible, Refer, or Refer with Caution. The two primary systems are Fannie Mae's Desktop Underwriter (DU) and Freddie Mac's Loan Produ…

The ratio of all monthly debt obligations — housing payment plus minimum payments on all other debts (car loans, student loans, credit cards, etc.) — to gross monthly income. The back-end ratio is the primary DTI figure lenders use for qualifying. Most conventional programs cap t…

Standard exceptions to non-recourse commercial loan protection that trigger personal liability for the borrower. Activated only by egregious behavior: fraud, intentional environmental contamination, voluntary bankruptcy filing, misapplication of rents or insurance proceeds, unaut…

A non-QM mortgage program that qualifies self-employed borrowers using 12 or 24 months of personal or business bank statements instead of tax returns. Lenders calculate an income figure by averaging deposits and applying an expense factor. Bank statement loans typically require h…

A unit equal to one one-hundredth of a percentage point (0.01%). Used by lenders and the Federal Reserve to describe interest rate changes precisely. A rate increase from 6.50% to 6.75% is a 25-basis-point move. PMI costs and origination fees are also commonly quoted in basis poi…

A single effective interest rate that represents the weighted average cost of two or more loans secured by the same property. Used to evaluate whether refinancing into a new first mortgage makes economic sense compared to keeping the existing low-rate first mortgage and adding a …

The minimum occupancy rate at which a property's income covers its operating expenses plus debt service. Break-Even Ratio = (Operating Expenses + Debt Service) ÷ Gross Potential Rent. A break-even ratio below 85% is generally considered healthy — it means the property can sustain…

A short-term loan — typically 6 to 24 months — that uses the equity in your current home to fund the down payment and closing costs on your next home, allowing you to buy before you sell. Bridge loans are interest-only during their term and are repaid when your departing home sel…

Buy, Rehab, Rent, Refinance, Repeat — the strategic framework for scaling a multifamily portfolio without continuously deploying fresh equity. Acquire with a bridge loan, execute renovations, lease at market rents, refinance into permanent debt (agency/HUD/DSCR) at the higher sta…

California's state housing finance agency, which offers below-market mortgage programs and down payment assistance (DPA) for first-time homebuyers and low-to-moderate income borrowers in California. CalHFA's MyHome Assistance Program provides a silent second mortgage for up to 3.…

Net Operating Income ÷ Property Value, expressed as a percentage. Cap rate measures the unlevered return on an investment property — the return you'd earn if you paid all cash. A $500,000 property generating $35,000 NOI has a 7% cap rate. Cap rates are market-specific and propert…

Net Operating Income (NOI) divided by property value — the rate of return on a multifamily asset if purchased with all cash. Used by appraisers in the income approach to establish property value: Value = NOI ÷ Cap Rate. A lower cap rate means higher value for the same NOI. In val…

Annual pre-tax cash flow ÷ Total cash invested, expressed as a percentage. CoC measures how efficiently your out-of-pocket capital generates annual income. If you invested $80,000 in cash (down payment + closing costs) and the property generates $6,400 in annual net cash flow aft…

A refinance in which the new loan amount exceeds the existing mortgage balance, with the difference paid to the borrower as cash at closing. Homeowners use cash-out refis to fund home improvements, consolidate high-interest debt, finance an ADU build, or cover large expenses. The…

A document issued by the local building authority certifying that a newly constructed or significantly renovated structure meets all applicable building codes and is safe for occupancy. For construction-to-permanent loans, the CO (or a temporary CO) is typically required before t…

A lender's declaration that all underwriting conditions have been satisfied and the loan is approved to fund. CTC typically comes 3–5 days before the closing date. Once CTC is issued, the closing disclosure (CD) is sent, and the borrower reviews final loan terms before signing. C…

Fees paid at the time of closing to complete a real estate transaction. Typically 2–5% of the loan amount, closing costs include lender origination fees, appraisal, title insurance, escrow fees, prepaid taxes and insurance, and recording fees. Some costs are negotiable; others ar…

Commercial Mortgage-Backed Securities — commercial real estate loans pooled together and sold as bonds to investors. CMBS conduits offer non-recourse financing at moderate rates (70-75% LTV) but with strict prepayment penalties (defeasance or yield maintenance) and limited flexib…

The ratio of all loans secured by a property to its appraised value. CLTV = (First Mortgage + HELOC or Second Mortgage) ÷ Property Value × 100. If a home is worth $600,000, the first mortgage is $400,000, and a HELOC is $60,000, the CLTV is 76.7%. CLTV determines eligibility for …

Positive attributes of a borrower's file that offset higher-than-ideal risk factors such as a high DTI or lower credit score. Common compensating factors include: significant cash reserves (12+ months PITI), a history of making comparable housing payments, a large down payment, m…

Requirements the borrower or transaction must satisfy before final loan approval or funding. Prior-to-approval conditions might include providing additional pay stubs, an explanation letter, or updated bank statements. Prior-to-doc conditions must be cleared before loan documents…

A mortgage that meets the purchase guidelines set by Fannie Mae and Freddie Mac, including loan limits ($832,750 for a single-family home in most U.S. counties in 2026), credit score minimums, and documentation standards. Conforming loans generally offer the most competitive rate…

A USDA program that pays farmers annual rental payments in exchange for removing environmentally sensitive cropland from production and establishing conservation cover for 10–15 year contract periods. CRP payments are considered stable, recurring income in agricultural loan under…

A single-close loan that funds both the construction phase and the permanent mortgage. During construction, the borrower draws funds to pay contractors as work is completed (the draw period). After construction is complete and a certificate of occupancy is issued, the loan automa…

A budget cushion set aside for unexpected costs, change orders, or price overruns during construction. Industry standard is 5–15% of hard costs. Most construction lenders require a contingency reserve as part of the approved budget and will hold these funds until needed. Using co…

Any mortgage not backed by a federal agency (FHA, VA, or USDA). Conventional loans are either conforming (meeting Fannie/Freddie guidelines) or non-conforming (jumbo, non-QM). They typically require stronger credit and a larger down payment than government-backed loans, but do no…

Net Operating Income ÷ Total Debt Service (annual mortgage payment). DSCR measures a property's ability to cover its mortgage obligations with rental income alone. A DSCR of 1.25 means the property generates 25% more income than needed to service the debt. DSCR lenders typically …

Net Operating Income ÷ Loan Amount, expressed as a percentage. Debt yield measures the lender's return if they had to foreclose on the property and operate it. A $3M loan on a property with $300K NOI has a 10% debt yield. Many commercial lenders use a minimum debt yield threshold…

The percentage of your gross monthly income consumed by monthly debt obligations. Lenders calculate two ratios: the front-end ratio (housing payment ÷ gross income) and the back-end ratio (all monthly debts ÷ gross income). Most conventional loans allow up to 45–50% back-end DTI …

A commercial loan prepayment mechanism where the borrower purchases a portfolio of U.S. Treasury securities that replicates the remaining loan payment schedule. The Treasuries substitute as collateral, the borrower is released from the mortgage, and the loan stays on the lender's…

Fannie Mae's automated underwriting system. Lenders submit loan applications to DU, which analyzes credit, income, assets, and the subject property against Fannie Mae's guidelines and returns a findings report with an approve/eligible, refer, or refer with caution decision. DU fi…

Prepaid interest paid to the lender at closing in exchange for a lower note rate. One point equals 1% of the loan amount. Paying one point on a $500,000 loan costs $5,000 upfront and typically reduces the rate by 0.125–0.25%, depending on the lender and market. Points make sense …

The portion of the purchase price paid by the buyer at closing, not financed by the loan. A larger down payment reduces the loan amount, eliminates or reduces mortgage insurance requirements, and lowers your monthly payment. Conventional loans require as little as 3% down; FHA lo…

A pre-agreed plan that outlines how and when construction loan funds are disbursed to the builder or borrower based on verified project milestones (e.g., foundation complete, framing complete, rough-in complete, drywall, finish). An independent inspector typically inspects the si…

A Non-QM investment property loan that qualifies based on the property's rental income and Debt Service Coverage Ratio — not the borrower's personal income. No W-2s, tax returns, or employment verification are required. The property must generate enough rent to achieve a minimum …

The permanent mortgage that replaces the short-term construction loan upon project completion. In a two-time close structure, the end loan is originated separately and subject to prevailing market rates and underwriting at the time of completion. The borrower qualifies for the en…

The portion of a property's value that you own outright — the market value minus any outstanding loan balances. Equity builds through principal paydown (loan amortization), property appreciation, and improvements. Equity can be accessed through a cash-out refinance or HELOC. Lend…

Refers to two distinct concepts in real estate: (1) A neutral third-party account that holds earnest money and funds during the purchase transaction; (2) A lender-managed account that collects a monthly portion of property taxes and homeowners insurance as part of your mortgage p…

Oregon's primary farmland preservation zoning designation — and arguably the strictest in the United States. Land zoned EFU is restricted to agricultural use and a narrow set of farm-related activities. It cannot be subdivided for residential development, rezoned for commercial o…

Government-guaranteed agricultural loans administered by the USDA's Farm Service Agency. FSA offers farm ownership loans, operating loans, and microloans with favorable terms — including down payments as low as 5% for qualifying beginning farmers and ranchers. Eligibility require…

The secondary market for agricultural real estate loans, analogous to Fannie Mae and Freddie Mac in the residential space. Farmer Mac purchases and guarantees agricultural mortgage loans from approved lenders, providing liquidity and enabling competitive fixed rates for agricultu…

A government-backed mortgage insured by the Federal Housing Administration (FHA). Key features include a 3.5% minimum down payment (with a 580+ FICO score), flexible debt-to-income ratios, and allowance for gift funds. FHA loans carry an upfront mortgage insurance premium (UFMIP)…

Mortgage insurance on FHA loans, structured as two components: (1) Upfront MIP (UFMIP) — 1.75% of the base loan amount, typically financed into the loan; (2) Annual MIP — paid monthly as part of PITI, ranging from 0.45% to 1.05% depending on loan term, LTV, and loan amount. MIP c…

A numerical measure of creditworthiness, ranging from 300 to 850, calculated by the Fair Isaac Corporation using payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%). Mortgage lenders pull scores from all three bureaus …

A mortgage where the interest rate and monthly principal-and-interest payment remain constant for the entire loan term. Common terms are 10, 15, 20, and 30 years. Fixed-rate loans offer payment predictability and protect against rising rates. The tradeoff is a higher initial rate…

The ratio of your proposed housing payment (PITI) to your gross monthly income. Also called the 'housing ratio.' For conventional loans, lenders prefer this below 28–31%, though AUS systems often allow higher ratios with strong credit. Used alongside the back-end ratio to assess …

Money given to a borrower by a relative, employer, or charitable organization to use toward a down payment or closing costs. Gift funds are permitted on most loan programs but must be properly documented: the donor must provide a signed gift letter stating no repayment is expecte…

Property Value ÷ Annual Gross Rent. GRM is a quick valuation shortcut that compares a property's price to its rental income — before expenses. A GRM of 12 means the property costs 12 years' worth of gross rent. Lower GRM = better value relative to income. Unlike cap rate, GRM ign…

Annual gross rent ÷ Total project cost (acquisition + renovation + closing costs), expressed as a percentage. Yield on cost is used to evaluate whether a value-add or new construction project makes economic sense before expenses. A yield on cost meaningfully above the prevailing …

Direct, tangible construction expenses: labor, materials, concrete, lumber, framing, roofing, mechanical/electrical/plumbing (MEP), finish work, and landscaping. Hard costs are typically the largest component of a construction budget, often 70–80% of total project cost. Lenders s…

A credit inquiry initiated by a lender when you formally apply for credit. Hard inquiries can temporarily lower your credit score by a few points. Importantly, multiple mortgage inquiries within a 45-day window are treated as a single inquiry by FICO scoring models, allowing you …

A revolving credit line secured by your home's equity, allowing you to borrow, repay, and borrow again up to a maximum limit during the draw period (typically 10 years). HELOCs usually have variable interest rates tied to the prime rate. After the draw period ends, the outstandin…

Similar to CLTV, but includes the full credit line of any HELOC — not just the amount currently drawn — in the denominator. Lenders use HCLTV to evaluate worst-case exposure if the HELOC is fully drawn. HCLTV = (First Mortgage + Full HELOC Credit Line) ÷ Property Value × 100. Mor…

FHA's construction and substantial rehabilitation program for multifamily housing: non-recourse, fully assumable, 40-year amortizing fixed-rate loans at up to 83.3% of total development cost for market-rate properties (87% for affordable). The longest fixed-rate term and highest …

FHA's acquisition and refinance program for stabilized multifamily properties: non-recourse, fully assumable, 35-year amortizing fixed-rate loans at up to 83.3% of appraised value (85% for Section 8/affordable). Requires three or more years of stabilized operating history. Proces…

A fully funded escrow account established at bridge loan closing to cover interest payments during the renovation and lease-up period — used when the property's in-place rental income is insufficient to service the bridge loan's interest-only payments. The interest reserve is ded…

During the construction phase of a C2P or standalone construction loan, the borrower typically pays interest only on funds that have been drawn (not on the full loan commitment). This keeps monthly costs lower during construction when the borrower may also be paying rent elsewher…

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac ($832,750 for most single-family properties in 2026). Jumbo loans are not eligible for purchase by the GSEs, so lenders carry the risk themselves. They typically require stronger credit (720+), l…

A smaller ADU (up to 500 sq ft) created within the walls of the existing primary structure — such as a converted bedroom or portion of the living space. JADUs must have their own entrance and a kitchen (which can be a kitchenette), but can share a bathroom with the main home. JAD…

A written statement from the borrower explaining a specific item in their loan file that requires clarification — such as a credit inquiry, late payment, employment gap, large deposit, or change in income. LOEs are a routine part of the underwriting process. A clear, concise expl…

Using borrowed money to amplify investment returns. In real estate, leverage means financing a portion of the purchase price with a mortgage, so you can control a large asset with a smaller cash investment. Positive leverage occurs when the return on the property exceeds the cost…

A commercial mortgage originated by a life insurance company (MetLife, Prudential, New York Life, TIAA, Northwestern Mutual). Life cos match long-duration insurance liabilities against long-duration real estate assets, enabling the lowest fixed rates in CRE — typically 120–180 ba…

Freddie Mac's automated underwriting system (formerly Loan Prospector). Operates similarly to Fannie Mae's DU — lenders submit a file and receive a risk assessment and documentation requirements. Some loan scenarios that are 'Refer' in DU may receive an 'Accept' in LPA, making it…

The ratio of total loan amount to total project cost (acquisition price plus renovation budget plus closing costs). Bridge lenders for value-add multifamily typically lend 65–80% LTC, requiring the borrower to contribute 20–35% equity. LTC is the primary sizing metric for acquisi…

Loan Amount ÷ Total Project Cost (acquisition price + renovation/construction costs), expressed as a percentage. LTC is the primary leverage metric for value-add and construction deals where the current appraised value doesn't yet reflect the completed project. A lender offering …

The ratio of the loan amount to the appraised value (or purchase price, whichever is lower), expressed as a percentage. LTV = Loan Amount ÷ Property Value × 100. An 80% LTV means the borrower is financing 80% of the value and has 20% equity. LTV is the primary determinant of PMI …

Subordinate financing secured by the borrower's equity interest in the property-owning entity (not by the real estate itself). Mezzanine debt fills the gap between senior mortgage proceeds and the borrower's equity — for example, combining a 65% LTV senior loan with 15% mezzanine…

Insurance that protects the lender — not the borrower — if the borrower defaults. On conventional loans, it's called PMI (Private Mortgage Insurance) and is required when the down payment is less than 20%. On FHA loans, it's called MIP (Mortgage Insurance Premium) and includes bo…

Gross rental income minus operating expenses (vacancy loss, property management, repairs and maintenance, property taxes, insurance, HOA). NOI excludes debt service (mortgage payments), capital expenditures, and depreciation. It represents the cash a property generates before fin…

A mortgage that does not meet the Consumer Financial Protection Bureau's (CFPB) definition of a 'qualified mortgage.' Non-QM loans are often used for self-employed borrowers using bank statements instead of tax returns, investors using rental income (DSCR loans), foreign national…

The stated interest rate on your promissory note — the actual rate used to calculate your monthly principal and interest payment. Distinct from APR, which includes fees. When a lender quotes '6.75%', that is the note rate. Your monthly P&I payment is calculated using this rate, y…

A construction arrangement where the property owner acts as their own general contractor, managing subcontractors and the build directly rather than hiring a licensed GC. Owner-builder loans are more difficult to obtain — most lenders require the borrower to demonstrate verifiabl…

A standardized investigation of a commercial property's environmental history — reviewing historical records, aerial photographs, regulatory databases, and conducting a site inspection to identify recognized environmental conditions (RECs) such as prior gas stations, dry cleaners…

Acronym for Principal, Interest, Taxes, and Insurance — the four components of a complete monthly mortgage payment. Principal reduces the loan balance; Interest is the cost of borrowing; Taxes are property taxes collected monthly by the lender and held in escrow; Insurance includ…

A lender's conditional commitment to lend up to a specific loan amount based on a verified review of your income, assets, credit, and employment. Unlike a pre-qualification, a pre-approval typically involves a hard credit pull and document collection. A pre-approval letter streng…

An informal, usually self-reported estimate of how much you may be able to borrow. Pre-qualification does not require documentation or a hard credit pull, making it a quick starting point — but it carries less weight than a pre-approval with sellers. Think of pre-qualification as…

An equity investment that sits between senior debt and common equity in the capital stack, receiving a preferred return (typically 10-15%) before common equity investors receive distributions. Unlike mezzanine debt, preferred equity is not a loan — it does not create a lien and c…

The dominant water rights system in the western United States, including Oregon, summarized as 'first in time, first in right.' The first person to put water to beneficial use holds a senior right; later users hold junior rights. During drought, junior rights are curtailed first.…

Insurance required on conventional loans when the LTV exceeds 80%. PMI protects the lender — not the borrower — in the event of default. Cost ranges from roughly 0.15% to 1.50% of the loan amount annually, priced heavily by FICO score and LTV. Under the Homeowners Protection Act …

Under California's Proposition 13 (1978), property tax assessments are limited to 1% of the purchase price at acquisition, with annual increases capped at 2% regardless of market appreciation. When agricultural property is sold or transferred (outside narrowed parent-child exclus…

A mortgage that meets the CFPB's ability-to-repay standards, providing lenders with legal protection from certain borrower claims. QM loans must verify a borrower's income, assets, and debts; have a total points-and-fees cap (generally 3% of loan amount); and comply with specific…

The income figure lenders use to calculate DTI. It is not necessarily the same as your gross income. For W-2 employees, it's typically base salary plus documented overtime and bonuses (averaged over 2 years). For self-employed borrowers, it's the net income from tax returns after…

A lender's commitment to hold a specific interest rate and terms for a defined period (typically 30, 45, or 60 days) while the loan is processed and underwritten. Rate locks protect you from rising rates between application and closing. If rates fall before closing, some lenders …

A separate escrow account established by the bridge lender to hold the renovation portion of the loan commitment. Funds are disbursed in tranches as work is completed and inspected — similar to construction lending draw schedules. The borrower submits draw requests with evidence …

Oregon's statewide rent increase cap (SB 608 / HB 2001, 2019) limiting annual rent increases to 7% plus the Portland Consumer Price Index (CPI), with the combined cap not exceeding 10% per year. Applies to residential units more than 15 years old; new construction is exempt for t…

Income from rental properties or ADUs used to offset the housing payment or debts for mortgage qualifying purposes. Fannie Mae allows 75% of documented market rent on a new ADU to offset the primary mortgage payment (reducing DTI) when a signed lease or appraiser-provided market …

Funds remaining in verifiable accounts (checking, savings, retirement) after closing, measured in months of PITI. Many programs require 2–6 months of reserves; jumbo and investment property loans often require 12+ months. Reserves are a compensating factor — strong reserves can h…

Annual net income ÷ Current equity in the property. ROE measures how efficiently your equity is generating returns. As a property appreciates and the loan pays down, equity grows — but if rents stay flat, ROE actually declines over time. Many sophisticated investors use ROE as a …

Total gain from an investment ÷ Total cost of the investment, expressed as a percentage. In real estate, multi-year ROI typically includes: cumulative net rental cash flow + property appreciation, divided by total cash invested. ROI is time-period specific — a 5-year ROI on an AD…

The IRS tax form used to report profit or loss from farming — the primary income documentation for agricultural loan qualification. Agricultural lenders analyze 2–3 years of Schedule F and add back non-cash expenses (depreciation, depletion, amortization) to calculate actual cash…

Indirect, non-construction expenses associated with a building project: architectural plans, engineering reports, permits, inspections, environmental studies, legal fees, financing costs (construction loan interest), insurance during construction, and developer overhead. Soft cos…

A home built by a developer or builder for speculative sale — without a buyer under contract before or during construction. Spec construction is considered higher risk by lenders because there's no guaranteed exit (sale) at the end of the build. Lenders who finance spec projects …

High-value agricultural crops — including almonds, pistachios, wine grapes, walnuts, strawberries, lettuce, citrus, and avocados — that command higher per-acre revenue than commodity row crops but carry greater price volatility, higher production costs, and more complex labor req…

The point at which a multifamily property achieves consistent occupancy of 90% or higher for 90 or more consecutive days — the threshold that triggers eligibility for agency (Fannie Mae/Freddie Mac) and HUD permanent financing. Stabilization is the critical milestone in the value…

The property being purchased or refinanced — the collateral for the mortgage being underwritten. Underwriters evaluate the subject property for condition (is it habitable?), property type (SFR, condo, multi-unit?), and marketability (comparable sales to support value?). Propertie…

California's landmark groundwater regulation signed into law in 2014, requiring all high- and medium-priority groundwater basins to achieve sustainability by 2040. In overdrafted basins — primarily in the San Joaquin Valley — pumping reductions of 20–40% may be required, potentia…

A form of co-ownership where two or more investors each hold an undivided fractional interest in a property. TIC structures are commonly used in 1031 exchanges when a single replacement property costs more than the relinquished property's equity, or when multiple investors pool c…

Insurance that protects against undisclosed defects in the property's title (ownership history), such as prior liens, unpaid taxes, forgeries, or ownership disputes. There are two policies: (1) a lender's policy, required by virtually all mortgage lenders and paid by the borrower…

A construction loan structure with two separate closings: (1) a short-term construction loan to fund the build, and (2) a new permanent mortgage to pay off the construction loan once the home is complete. Because the permanent loan is underwritten after construction (when the pro…

The dollar amount the Department of Veterans Affairs guarantees to the lender on a VA loan in the event of default. Full entitlement (available to most veterans who haven't used their benefit or have fully restored it) means no VA loan limit — you can borrow as much as the lender…

A one-time fee paid to the Department of Veterans Affairs on VA loans, in lieu of mortgage insurance. The fee ranges from 0.5% to 3.3% of the loan amount depending on service type, down payment amount, and whether it's your first or subsequent VA loan. The fee can be financed int…

The percentage of rental units that are unoccupied over a given period. In underwriting and financial modeling, a standard vacancy factor of 5–10% is typically applied to gross rents to arrive at effective gross income. Real vacancy rates vary by market, property class, and unit …

An investment strategy that targets properties with below-market rents or deferred maintenance, with a plan to improve the property and raise rents or reduce expenses to increase NOI and property value. Value-add deals often involve renovation, repositioning, or adding units (lik…

Documentation confirming the source and balance of funds being used for down payment and closing costs. Lenders typically require 2 months of bank statements showing all recent large deposits. Any deposit that is not a regular payroll deposit may require sourcing and explanation.…

Lender-required confirmation of a borrower's employment status, job title, and start date, obtained directly from the employer (or a third-party service like The Work Number). A verbal or written VOE is typically required before closing and sometimes again the morning of closing …

Legal rights to use water from a specific source (surface water, groundwater, or contractual through an irrigation district) for a defined beneficial purpose. In agricultural lending, water rights are often the single most consequential factor in collateral valuation — a farm wit…

A California state law allowing agricultural landowners to receive reduced property tax assessments in exchange for committing their land to agricultural or open-space use for a minimum of 10–20 years. Williamson Act contracts restrict conversion to non-agricultural use during th…

A commercial loan prepayment provision requiring the borrower to pay the present value of remaining interest payments, discounted at the current Treasury rate, to compensate the lender for lost interest income. On a $5M loan with 8 years remaining at 5.5%, yield maintenance could…