Loan Glossary

The ratio of net operating income to property value, used to evaluate commercial real estate investments. Formula: Cap Rate = NOI ÷ Property Value.

Replacing an existing mortgage with a larger loan and receiving the difference in cash. Homeowners use this to access home equity for renovations, debt payoff, or other purposes.

A nonprofit organization that partners with banks on SBA 504 loans to provide long-term, fixed-rate financing for commercial real estate and equipment purchases.

The complete history of all previous ownership transfers and liens on a property. A clear chain of title is required before a lender will approve a mortgage.

The final step in a real estate transaction where all documents are signed, funds are transferred, and ownership of the property changes hands.

Fees and expenses paid at or before closing, typically 2%–5% of the loan amount. Includes origination fees, appraisal, title insurance, escrow deposits, attorney fees, and prepaid interest.

An additional person who applies for and signs a loan alongside the primary borrower. Their income and credit are considered, and they share equal responsibility for repaying the loan.

An asset pledged to secure a loan. If the borrower defaults, the lender can seize the collateral. For mortgages, the property itself serves as collateral.

Property used for business purposes, including office buildings, retail centers, industrial warehouses, multifamily apartment complexes (5+ units), hotels, and mixed-use properties.

A mortgage that meets Fannie Mae and Freddie Mac guidelines, including loan amount limits set annually by the FHFA. Conforming loans typically offer lower interest rates than non-conforming (jumbo) loans.

A mortgage not insured or guaranteed by a government agency (unlike FHA, VA, or USDA loans). Conventional loans follow Fannie Mae/Freddie Mac guidelines and typically require higher credit scores and down payments.

A numerical representation of a borrower's creditworthiness, ranging from 300 to 850. Lenders use credit scores to evaluate loan eligibility, determine interest rates, and set loan terms.