FHA loans glossary
The 9 terms the 5 guides on FHA Refinance Options actually use, ordered by how often they come up, starting with FHA, MIP and Appraisal. Each one notes why it matters for FHA loans, quoted from the guide where it appears. 4 core terms you will see on any Loan Estimate follow at the end. Terms marked FHA loans are specific to FHA loans.
Terms these guides use
- FHA FHA loans
The Federal Housing Administration, part of HUD, which insures qualifying mortgages.
Why it matters for FHA loans: “For borrowers who already have an FHA loan.” From FHA Refinance Options Compared
Appears in 5 guides: FHA Refinance Options Compared, Removing FHA Mortgage Insurance, FHA Rate-and-Term Refinance: The Full-Underwriting Option and more
- MIP FHA loans
FHA mortgage insurance premium, charged upfront and annually.
Why it matters for FHA loans: “Paying down principal does not cancel life-of-loan MIP on newer FHA loans.” From Removing FHA Mortgage Insurance
Appears in 4 guides: Removing FHA Mortgage Insurance, FHA Rate-and-Term Refinance: The Full-Underwriting Option, FHA to Conventional: Ending Mortgage Insurance by Refinancing and more
- Appraisal
An independent opinion of market value used by the lender.
Why it matters for FHA loans: “Reduced documentation and often no appraisal.” From FHA Refinance Options Compared
Appears in 4 guides: FHA Refinance Options Compared, FHA Rate-and-Term Refinance: The Full-Underwriting Option, FHA to Conventional: Ending Mortgage Insurance by Refinancing and more
- Loan-to-value (LTV)
The loan amount divided by the property value.
Why it matters for FHA loans: “Lets owner-occupants take equity out, subject to FHA’s maximum loan-to-value and occupancy rules.” From FHA Refinance Options Compared
Appears in 4 guides: FHA Refinance Options Compared, Removing FHA Mortgage Insurance, FHA Rate-and-Term Refinance: The Full-Underwriting Option and more
- Net tangible benefit FHA loans
A measurable benefit a refinance must provide under program rules.
Why it matters for FHA loans: “It must produce a net tangible benefit, such as a lower combined rate and mortgage insurance, or a move from adjustable to fixed.” From FHA Refinance Options Compared
Appears in 3 guides: FHA Refinance Options Compared, FHA Rate-and-Term Refinance: The Full-Underwriting Option, FHA Refinance Glossary: Terms You Will See
- Streamline refinance FHA loans
A refinance of an existing FHA loan with reduced documentation.
Why it matters for FHA loans: “A streamline refinance usually reduces documentation and may not require an appraisal, but limits cash to the borrower.” From FHA Refinance Glossary: Terms You Will See
Appears in 2 guides: FHA Refinance Options Compared, FHA Refinance Glossary: Terms You Will See
- Cash-out refinance
A refinance where the new loan exceeds the payoff and the borrower receives the difference.
Why it matters for FHA loans: “A cash-out refinance lets you take equity and has its own occupancy and seasoning rules.” From FHA Refinance Glossary: Terms You Will See
Appears in 2 guides: FHA Refinance Options Compared, FHA Refinance Glossary: Terms You Will See
- Loan Estimate
The standardized three-page form a lender must provide within three business days of application.
Why it matters for FHA loans: “Ask for Loan Estimates for both before choosing.” From FHA Rate-and-Term Refinance: The Full-Underwriting Option
Appears in 2 guides: FHA Rate-and-Term Refinance: The Full-Underwriting Option, FHA to Conventional: Ending Mortgage Insurance by Refinancing
- Servicer
The company that collects payments and manages the loan after closing.
Why it matters for FHA loans: “Your servicer can tell you the MIP cancellation date, if any.” From Removing FHA Mortgage Insurance
Appears in 1 guide: Removing FHA Mortgage Insurance
Core terms on every Loan Estimate
- Annual percentage rate
The yearly cost of credit including interest and certain finance charges, disclosed under the Truth in Lending Act.
- Closing Disclosure
The five-page form you receive at least three business days before closing showing final loan terms and costs.
- Debt-to-income ratio (DTI)
Monthly debt payments divided by gross monthly income.
- Rate lock
A lender’s commitment to hold a rate and price for a set period.
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Definitions are general. The quoted notes come from the guides on this site, which cite their official sources.