Adam Styer is a mortgage broker in Austin, TX with over 1,000 loans closed since 2017. This glossary covers the terms that come up in every Austin TX home purchase and refinance — defined the way I explain them to clients, not the way a textbook does. NMLS #513013.
Qualification Terms
Pre-Approval
A pre-approval is a formal lender review of your credit, income, and assets that results in a written commitment for a specific loan amount. Pre-approval requires a credit pull and document verification. In Austin's competitive market, sellers typically require a pre-approval letter before accepting an offer. See also: Pre-Qualification. Get pre-approved with Adam Styer →
Pre-Qualification (Pre-Qual)
A pre-qualification is an informal estimate of what you might borrow, based on self-reported income and assets with no credit check or document review. A pre-qual is useful for early planning but carries no weight with Austin sellers in a competitive offer situation. If you need a letter that actually wins offers, you need a pre-approval.
DTI — Debt-to-Income Ratio
DTI is the percentage of your gross monthly income that goes toward monthly debt payments. Lenders calculate two numbers: front-end DTI (housing payment only) and back-end DTI (all debts: housing, car, student loans, credit cards). Most conventional loans require back-end DTI below 45–50%. A lower DTI means more loan programs and better pricing. Example: $5,000/month gross income, $2,000/month in debts = 40% DTI.
LTV — Loan-to-Value Ratio
LTV is the percentage of the home's appraised value covered by your mortgage. If you buy a $400,000 home with $80,000 down (20%), your LTV is 80%. LTV affects your rate, whether you need PMI, and which programs you qualify for. Lower LTV = less lender risk = better pricing. See also: CLTV.
CLTV — Combined Loan-to-Value Ratio
CLTV includes all liens on a property, not just the first mortgage. If you have a first mortgage at 70% LTV and a HELOC at 10%, your CLTV is 80%. CLTV matters on cash-out refinances, home equity loans, and second lien products where total debt against the property affects approval.
AUS — Automated Underwriting System
AUS is a software system that evaluates your loan application and issues an automated approval, called an Approve/Eligible (or Accept). The two main systems are DU (Fannie Mae) and LP (Freddie Mac). Getting an AUS approval is the first major milestone in the mortgage process — it means the computer-driven risk model likes your file. A human underwriter still reviews the deal, but AUS approval makes that review faster and more predictable.
DU — Desktop Underwriter
Desktop Underwriter (DU) is Fannie Mae's automated underwriting system. When your lender submits your application to DU and receives an "Approve/Eligible" response, it means your loan profile meets Fannie Mae's conventional guidelines. DU approval drives the document requirements for your loan.
LP — Loan Prospector (LPA)
Loan Prospector (now called Loan Product Advisor, or LPA) is Freddie Mac's automated underwriting system. It works similarly to DU but applies Freddie Mac's guidelines. Some loan scenarios get better results through LP than DU — your broker will typically run both to find the best outcome.
Loan Types
Conventional Loan
A conventional loan is a mortgage that is not backed by a government agency. Conventional loans follow guidelines set by Fannie Mae (FNMA) or Freddie Mac (FHLMC). They require a minimum 3% down payment and generally need a 620+ credit score. Conventional loans avoid upfront mortgage insurance premiums and allow PMI to be removed at 80% LTV. Most Austin TX home purchases use conventional financing. Learn more →
FHA Loan
An FHA loan is insured by the Federal Housing Administration. FHA loans require as little as 3.5% down with a 580+ credit score (or 10% down with scores as low as 500). The tradeoff is MIP — mortgage insurance that stays for the life of the loan if you put less than 10% down. FHA is a strong fit for first-time buyers or borrowers with limited credit history. Learn more →
VA Loan
A VA loan is guaranteed by the Department of Veterans Affairs. VA loans offer zero down payment, no monthly mortgage insurance, and typically the lowest rates available to eligible veterans, active duty service members, and surviving spouses. VA loans are one of the best mortgage benefits available and are widely used in Austin's large veteran community. Learn more →
USDA Loan
A USDA loan is backed by the U.S. Department of Agriculture and offers zero down payment for income-eligible buyers in qualifying rural and suburban areas. Many properties in Austin's outer suburbs — including parts of Bastrop, Hutto, Florence, Jarrell, and Smithville — qualify for USDA financing. Income limits apply by county and household size. Learn more →
Jumbo Loan
A jumbo loan is any mortgage above the conforming loan limit, which is $806,500 in most Texas counties for 2026. Jumbo loans require stricter credit and reserve requirements and are not eligible for sale to Fannie Mae or Freddie Mac. Austin's higher-priced neighborhoods — Tarrytown, Westlake, Circle C, and Lake Travis — frequently require jumbo financing. Learn more →
DSCR Loan
A DSCR (Debt Service Coverage Ratio) loan qualifies the borrower based on rental income from the property, not personal W-2 income. DSCR is calculated by dividing monthly rental income by the monthly mortgage payment. A DSCR of 1.0 means rent covers the payment exactly; most lenders want 1.1–1.25 or higher. DSCR loans are popular with real estate investors and self-employed buyers who want to keep investment properties off their personal tax returns. Learn more →
ARM — Adjustable-Rate Mortgage
An ARM is a mortgage with an interest rate that adjusts periodically after an initial fixed period. A 5/1 ARM has a fixed rate for 5 years, then adjusts annually. ARMs can offer lower initial rates but carry the risk of rate increases at adjustment. ARMs make sense for buyers who plan to sell or refinance before the initial fixed period ends. See also: Fixed vs. Adjustable-Rate Mortgages.
Costs & Fees
APR — Annual Percentage Rate
APR is the total cost of a loan expressed as a yearly rate, including the interest rate and most lender fees (origination, points, and certain other charges). APR is always higher than the stated interest rate. APR is useful for comparing loan offers side by side, but it can be misleading when comparing loans with different term lengths or when you plan to sell or refinance before the loan pays off. Always compare both rate and APR when evaluating lender offers.
Points (Discount Points)
One point equals 1% of the loan amount paid at closing in exchange for a permanently lower interest rate. Paying points (also called "buying down the rate") makes sense if you plan to stay in the home long enough to recoup the upfront cost through lower monthly payments. The breakeven calculation: cost of points ÷ monthly savings = months to break even. At $400,000 and 1 point ($4,000) to reduce rate by 0.25%, monthly savings of ~$55 means 73 months (~6 years) to break even. Use our buydown calculator to run the math on your scenario.
PMI — Private Mortgage Insurance
PMI is required on conventional loans when your down payment is less than 20% (LTV above 80%). PMI protects the lender — not you — if you default. Rates typically run 0.3%–1.5% of the loan amount per year, added to your monthly payment. PMI automatically cancels when your LTV reaches 78% of the original purchase price (by federal law). You can request removal at 80% LTV by demonstrating current value through a new appraisal.
MIP — Mortgage Insurance Premium
MIP is the mortgage insurance on FHA loans. Unlike PMI, MIP includes both an upfront premium (1.75% of the loan amount, rolled into the loan) and an annual premium (0.55%–0.85% depending on LTV and term). MIP cannot be removed on FHA loans originated with less than 10% down — it stays for the life of the loan. Borrowers who want to eliminate MIP must refinance into a conventional loan once they have 20% equity.
LLPA — Loan-Level Price Adjustment
LLPAs are risk-based fees charged by Fannie Mae and Freddie Mac on conventional loans based on your credit score, LTV, loan purpose, and property type. LLPAs are built into your rate or charged as upfront fees — you may not see them as a line item, but they directly affect your pricing. Higher credit scores and lower LTVs reduce LLPAs. This is why improving your credit score by even 20 points before applying can meaningfully lower your rate.
Origination Fee
An origination fee is charged by the lender to process and underwrite your loan. Origination fees are typically 0%–1% of the loan amount. As a broker, Adam Styer discloses origination fees clearly on your Loan Estimate — and shops them against other wholesale lenders to keep your total cost competitive. Some loan programs offer no-origination-fee options in exchange for a slightly higher rate.
Rate Lock
A rate lock is a lender's guarantee to hold a specific interest rate and points for a defined period — typically 15 to 60 days — while your loan processes. If rates rise before closing, your locked rate stays the same. If rates fall, you keep your locked rate unless you negotiated a float-down option upfront. Missing your closing date can cause your lock to expire, which may require an extension fee or a full re-lock at current (potentially higher) market rates.
Float
Floating means choosing not to lock your rate — leaving it subject to market movement until you choose to lock. Floating carries the risk of rates rising before your lock but gives you the opportunity to lock at a lower rate if the market improves. Floating is a judgment call based on market conditions and your risk tolerance. Most borrowers in purchase transactions lock once they have a contract.
Process & Documents
1003 — Uniform Residential Loan Application
The 1003 is the standard mortgage application form — officially called the Uniform Residential Loan Application (URLA). It covers your personal information, employment history, income, assets, debts, and the property being financed. Submitting a complete 1003 is the first step in the formal mortgage process. Start your application →
Loan Estimate (LE)
The Loan Estimate is a standardized 3-page disclosure that every lender must provide within 3 business days of receiving your application. It shows your estimated interest rate, monthly payment, closing costs, and loan terms. LEs from different lenders are formatted identically — designed so you can compare offers side by side. Review Page 1 (loan terms and monthly payment) and Page 2 (itemized closing costs) closely.
Closing Disclosure (CD)
The Closing Disclosure is the final version of the Loan Estimate — it shows your actual loan terms, final interest rate, closing costs, and cash to close. By law (TRID), you must receive the CD at least 3 business days before closing. Review it carefully against your Loan Estimate — fees should be consistent with what you were quoted. See typical Texas closing costs →
TRID — TILA-RESPA Integrated Disclosure
TRID is the federal rule that governs mortgage disclosure timing. It requires lenders to deliver the Loan Estimate within 3 business days of application and the Closing Disclosure at least 3 business days before closing. TRID also restricts certain fees from changing between LE and CD. Understanding TRID helps you plan your closing timeline — delays in receiving the CD can delay your closing date.
Underwriting (UW)
Underwriting is the process by which a lender's underwriter reviews your loan file — income, assets, credit, and the property — to make a final approval decision. The underwriter may issue conditions (items you must provide or resolve before approval is complete). Working with a broker like Adam Styer means your file is packaged and prepped before it reaches the underwriter, which reduces back-and-forth and speeds up the process.
CTC — Clear to Close
Clear to Close means the underwriter has reviewed and satisfied all loan conditions — your file is fully approved and ready to fund. After CTC, your title company schedules your closing, your final CD is issued, and you prepare your wire or cashier's check for closing. CTC is the finish line before keys in hand.
PTD — Prior to Docs
PTD (Prior to Docs) conditions are items the underwriter requires before the lender can draw closing documents. Common PTD conditions include updated pay stubs, proof of insurance, final appraisal, or HOA certifications. PTD conditions must be cleared before the title company can schedule your signing appointment.
PTF — Prior to Funding
PTF (Prior to Funding) conditions are final items required after you've signed closing documents but before the lender wires the funds to the title company. PTF conditions are typically minor — like a final employment verification (VOE) or confirmation of insurance. The lender reviews PTF conditions and, once cleared, releases the wire and the sale officially closes.
Escrow
Escrow has two uses in mortgage. (1) Escrow account: a lender-managed account where monthly property tax and insurance payments are collected and held until bills are due. Most loans with less than 20% down require an escrow account. (2) Escrow/closing: the period between a signed contract and funding when the title company manages documents, funds, and conditions on behalf of buyer and seller.
Amortization
Amortization is the process of paying off a loan through scheduled monthly payments over time. On a 30-year fixed mortgage, each payment covers interest plus a small portion of principal. Early payments are mostly interest; later payments are mostly principal. Use our mortgage calculator to see how amortization works at any rate and loan amount.
VOE — Verification of Employment
VOE is a lender's process of confirming your employment status, job title, and income with your employer. Lenders typically do a verbal or written VOE before closing and may re-verify after you've signed closing documents (PTF condition). If you're planning to change jobs, notify your lender immediately — a job change during the mortgage process can delay or derail your loan.
EMD — Earnest Money Deposit
EMD is the deposit submitted with your purchase offer to demonstrate you're a serious buyer. In Austin, EMDs typically run 1%–2% of the purchase price. The EMD is held by the title company and applied toward your down payment or closing costs at closing. If you back out outside your contract contingency windows, you may forfeit your EMD.
Conforming Loan Limit
The conforming loan limit is the maximum loan amount eligible for purchase by Fannie Mae and Freddie Mac. For 2026, the conforming limit is $806,500 for most Texas counties. Loans above this limit are jumbo loans and follow different guidelines. The limit is adjusted annually by the FHFA based on home price appreciation.
Rate Buydown / 2-1 Buydown
A rate buydown reduces your interest rate for a set period using upfront funds from the seller, builder, or buyer. A common structure is the 2-1 buydown: your rate is 2% below market in year 1, 1% below in year 2, and at the full note rate in year 3+. The buydown funds are held in escrow and applied monthly to cover the rate difference. Buydowns became popular in 2022–2023 when builders and sellers began offering concessions to offset higher rates. Use our buydown calculator to see if a buydown makes sense for your purchase.