Glossary

Lending glossary: the terms, in plain English

32 terms you’ll meet shopping DSCR, P&L-only, HELOC, and hard money loans — defined the way Anthony Huynh would explain them on a call.

1031 Exchange: An IRS provision letting investors defer capital-gains tax by rolling sale proceeds into a like-kind property on a strict timeline. DSCR loans are a common financing tool inside 1031 timelines.
AVM (Automated Valuation Model): A data-driven property valuation used instead of a physical appraisal. Replacing the appraisal with an AVM is one reason a HELOC can fund in days instead of weeks.
Bank-Statement Loan: A non-QM program that derives income from 12–24 months of bank deposits instead of tax returns — a cousin of the P&L-only loan for self-employed borrowers. See bank statement loans.
Bridge Loan: Short-term financing that “bridges” to a sale or a long-term refinance — buy now, sell or refinance later. Hard money is the usual vehicle.
Cash-Out Refinance: Replacing your existing mortgage with a larger one and taking the difference in cash. It resets your first-mortgage rate — which cuts both ways if your current rate is low.
CLTV (Combined Loan-to-Value): All loans on the property combined, divided by its value — the number that matters when adding a HELOC behind an existing first mortgage. Our HELOC goes to 90% CLTV (80% in Texas by state law).
DSCR (Debt-Service Coverage Ratio): The property’s rental income divided by its full housing payment (principal, interest, taxes, insurance). A DSCR of 1.0 means rent exactly covers the payment. DSCR loans qualify the property on this ratio instead of the borrower’s personal income — no tax returns involved.
DTI (Debt-to-Income Ratio): Monthly debt payments divided by gross monthly income — the number conventional underwriting lives by, and the number DSCR and P&L-only programs deliberately route around.
Escrow / Impounds: The account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment. DSCR underwriting counts taxes and insurance in the coverage ratio.
FICO Score: The credit-score model most mortgage lenders use. Program floors here: HELOC 620 (hard), P&L-only 640 (680 in second position), conventional 620; FHA from 500 with 10% down; hard money purchase terms tier at 700.
Hard Money Loan: A short-term, asset-based loan underwritten primarily on the property rather than the borrower’s finances. Used for bridges, fast closings, and files traditional lenders can’t price. See owner-occupied hard money.
HEA (Home Equity Agreement): Not a loan: a provider pays you cash today in exchange for a share of the home’s future value. No monthly payments and no interest; settled when you sell or refinance. Credit accepted from the 500s. See HEA vs. HELOC.
HELOC (Home Equity Line of Credit): A revolving credit line secured by home equity, sitting behind your existing first mortgage. You draw what you need and pay interest on what you use. Ours can fund in as little as 5 business days with no appraisal appointment up to $1M.
IRRRL (VA Interest Rate Reduction Refinance Loan): The VA “streamline” refinance — rate reduction only, no cash out. It remains available in Texas, where VA cash-out refinances are prohibited.
Land Contract (Contract for Deed): A seller-financing arrangement where the buyer pays the seller in installments and receives the deed only once the contract is paid off. Investors commonly refinance out of a land contract into DSCR financing — land-contract refinances carry a 6-month seasoning requirement.
LTV (Loan-to-Value): The loan amount as a percentage of the property’s value. An $800,000 loan on a $1,000,000 property is 80% LTV. Lower LTV means more borrower equity and less lender risk.
No-Ratio / No-Income-Verification Loan: Industry names for a mortgage where no debt-to-income ratio is calculated from tax returns, pay stubs, or W-2s. Here it’s the P&L-only loan under another name: a P&L stands in for the income file and no bank statements are collected. Available on a primary residence and on investment property. See the primary-residence guide.
Non-QM Loan: Any mortgage outside the “qualified mortgage” box of standard tax-return underwriting — DSCR, P&L-only, bank-statement, and hard money loans are all non-QM. Non-QM doesn’t mean subprime; it means income is documented differently.
Owner-Occupied vs. Investment Property: Owner-occupied means you live (or will live) there; investment means it’s held for income. The distinction drives program eligibility, minimum down payments (20% on most investment purchases), and state rules — see where we lend.
P&L-Only Loan: A non-QM program where one profit & loss statement (CPA-prepared, or self-prepared on some programs) is the entire income file — no tax returns, no bank statements. Not limited to the self-employed. Also marketed as a No-Ratio or No-Income-Verification loan. See the P&L loan guide.
PMI (Private Mortgage Insurance): Insurance protecting the lender on conventional loans above 80% LTV. Removable once you build equity — one advantage of conventional over FHA, whose mortgage insurance usually stays for the life of the loan at maximum LTV.
Points: Prepaid interest charged at closing; one point is 1% of the loan amount. Programs trade points for terms — for example, a hard money purchase at 10% down with 700+ credit carries 3.5 points.
Portfolio / Wholesale Lender: A wholesale lender funds loans sourced by brokers; a portfolio lender keeps loans on its own books and can make its own rules. Shopping across many wholesale lenders is how one scenario gets priced many ways.
Prepayment Penalty: A fee for paying a loan off early, common on DSCR and other investor loans and often negotiable in exchange for pricing. Ask how a program’s prepay structure fits your exit plan. See how to choose a DSCR lender.
Probate / Heir Buyout: Paying off other heirs to keep an inherited property. Because the borrower already holds an ownership interest, lenders treat the buyout as a refinance rather than a purchase — the property’s equity funds the payoff, and on rentals the rent can qualify via DSCR.
Reverse 1031 Exchange: A 1031 exchange in reverse order: the investor acquires the replacement property first and sells the relinquished property afterward, using an exchange accommodation titleholder. Financing has to move quickly — one reason DSCR loans are a common fit.
Reverse Mortgage / HECM: A loan for homeowners 62+ that converts equity into cash with no monthly mortgage payment; the balance is settled when the home is sold or vacated. Requires substantial equity — roughly 50% or more. See how reverse mortgages work.
Seasoning: How long you’ve owned a property (or held a mortgage) before a lender will use its current value or allow a refinance. Our HELOC carries no title seasoning. Our DSCR cash-out refinance carries none on loans of $100,000 or more; DSCR loans under $100,000 carry 6 months. See the no-seasoning DSCR guide.
Second Lien / Second Mortgage: Any loan recorded behind your first mortgage — a HELOC is the most common. The first lien gets paid first in a payoff, which is why second-lien terms depend on combined LTV. See DSCR second liens.
Soft Pull vs. Hard Pull: A soft credit inquiry shows your scores without affecting them — it’s how checking your options with us works. A hard pull happens only later, with your permission, at full application.
STR / LTR (Short-Term / Long-Term Rental): STR = nightly or weekly rentals (Airbnb, Vrbo); LTR = traditional leases. Rental programs underwrite both, using market or actual rents.
Texas Homestead Rule (Art. XVI §50(a)(6)): The Texas constitutional provision capping home-equity lending at 80% combined LTV and imposing a 12-day waiting period. It’s also why VA cash-out refinances aren’t available in Texas.

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Definitions are educational and general. Program terms are state- and scenario-specific and change without notice. Not a commitment to lend; all loans subject to credit approval.

Elevate Mortgage · Anthony Huynh, NMLS #1996696 · West Capital Lending, Inc., NMLS #1566096. West Capital Lending, Inc. is an Equal Housing Lender. We do not discriminate on the basis of race, color, religion, national origin, sex, handicap, or familial status.