Loan Glossary

A non-binding agreement outlining the basic terms of a commercial real estate purchase or lease before formal contracts are drafted. Sets the framework for negotiation.

A legal claim against a property used as collateral for a debt. Mortgages, home equity loans, and unpaid taxes all create liens. All liens must typically be resolved before a property can be sold.

A condition placed on a commercial loan requiring the borrower to maintain certain financial ratios or operational standards. Violating a covenant can trigger a default even without missed payments.

A standardized disclosure form provided within 3 business days of a mortgage application. It summarizes key loan terms, projected payments, and estimated closing costs.

A fee charged by the lender for processing and underwriting the loan, typically 0.5%–1% of the loan amount. It may be listed as "points" (1 point = 1% of loan amount).

The ratio of the loan amount to the property's appraised value, expressed as a percentage. Higher LTV means more risk for the lender. LTV over 80% typically requires private mortgage insurance (PMI).

A set period during which a lender guarantees a specific interest rate on a mortgage. Rate locks typically range from 30 to 60 days and protect the borrower from rate increases while the loan is processed.

Strategies used by lenders to minimize losses from delinquent loans, including loan modifications, forbearance, short sales, and deed-in-lieu of foreclosure.