Glossary
The terms, in plain English.
35 terms you'll meet shopping HELOCs, DSCR, P&L and hard money loans, defined the way Arran would explain them on a call.
Program details last reviewed: October 12, 2026 · Questions? Call or text (949) 401-7593
- DSCR (Debt Service Coverage Ratio)
- Monthly rent divided by the full monthly payment: principal, interest, taxes, insurance and any HOA dues. At 1.00 the rent exactly covers the payment. A DSCR loan qualifies the property on this ratio instead of your personal income, so no tax returns are involved; a ratio under 1.00 can still work at a lower loan-to-value. Learn more →
- Non-QM loan
- A mortgage that documents income differently from the standard tax-return file: DSCR, P&L, bank statement, no-ratio and hard money loans are all non-QM. It doesn’t mean subprime; it means the lender looks at different proof.
- LTV (Loan-to-Value)
- The loan as a percentage of the property’s value. A $400,000 loan on a $500,000 home is 80% LTV. The lower the LTV, the more equity you have and the more programs open up.
- CLTV (Combined Loan-to-Value)
- Every loan on the property added together, divided by its value. It’s the number that matters for a HELOC behind your first mortgage: ours goes up to 90% combined (80% in Texas: state law on a home you live in, our own limit on a rental). Learn more →
- HELOC (Home Equity Line of Credit)
- A revolving line of credit secured by your equity that sits behind your first mortgage, so the first mortgage stays as it is. You draw what you need during the 5-year draw window and pay interest only on what you use. Ours runs from $50,000 to $5,000,000 with a 620 minimum credit score, and can fund in as little as 5 business days. Learn more →
- HEI (Home Equity Investment)
- Also called a home equity agreement. Not a loan: you get cash today for a share of your home’s future value, with no monthly payments and no interest, and you settle it when you sell, refinance or buy it back. Credit is accepted from 500, the HEI is never more than 25% of your home’s value, and it’s available in AZ, CA, CO, FL, OH, OR, PA, TN, UT & WA. Learn more →
- Credit band (HEI)
- On an HEI, your credit range sets the most you can have against the home, counting the HEI: 75% at 580+, 65% at 540–579 and 60% at 500–539, each 10 points lower on an investment property. Learn more →
- Cash-out refinance
- Replacing your mortgage with a larger one and taking the difference in cash. A conventional cash-out goes up to 80% of value on a primary home, and a VA cash-out up to 100%. Because it replaces your first mortgage, keeping a first mortgage you like usually points to a HELOC instead. Learn more →
- Rate-and-term refinance
- Replacing your current loan with a new one to change its terms or length, without taking cash out. Learn more →
- P&L loan
- A loan where one profit and loss statement is the whole income file: no tax returns and no bank statements. Built for business owners whose write-offs shrink their taxable income. Ours takes 640+ credit and starts at $150,000. Learn more →
- Bank statement loan
- A loan that measures income from 12 months of personal or 12 or 24 months of business bank statements instead of tax returns. 620+ credit in first position. Learn more →
- No-ratio loan
- A loan with no income documents and no debt-to-income calculation: approval rests on your credit, your liquid assets and the equity. Ours starts at 680 credit and goes up to 65% of value. Learn more →
- DTI (Debt-to-Income ratio)
- Your monthly debt payments divided by your gross monthly income. Full-documentation loans live by it; DSCR, P&L and no-ratio loans are built to work around it.
- Hard money loan
- A short-term, asset-based loan underwritten mainly on the property and your equity rather than your income. Ours: refinances up to 70% of value, purchases with 10% down at 700+ credit (15% at 620–699; below 620, rentals only, with 50% down), primary homes in California, Oregon & Washington only. Learn more →
- Bridge loan
- Short-term financing that carries you to a sale or a long-term refinance: buy now, sell or refinance later. Hard money is the usual tool. Learn more →
- Seasoning
- How long you have owned the property, or held the current loan, before a lender will refinance it or use today’s value. Our HELOC has no title seasoning requirement; every VA refinance, the IRRRL included, waits about 210 days from the current loan’s first payment, with 6 payments made.
- Soft pull vs. hard pull
- A soft credit inquiry shows your scores without affecting them: seeing your options with us works that way. A hard pull happens later, only with your permission, when you apply.
- AVM (Automated Valuation Model)
- A data-driven estimate of a property’s value used in place of an appraisal appointment. In most cases it’s how our HELOC skips the appraisal and funds in days. Learn more →
- Appraisal
- A licensed appraiser’s opinion of value after inspecting the property. Most purchase and refinance loans require one; an FHA Streamline and a VA IRRRL don’t.
- PMI (Private Mortgage Insurance)
- Insurance a conventional loan carries when you put less than 20% down. You can ask to drop it once you reach 20% equity, and it ends on its own at 22%, one of the ways conventional differs from FHA. Learn more →
- MIP (FHA Mortgage Insurance Premium)
- FHA’s mortgage insurance: an upfront premium of 1.75% of the loan, which can be financed, plus an annual premium paid monthly. With at least 10% down the annual premium ends after 11 years; with less, it lasts for the life of the loan. Learn more →
- VA funding fee
- A one-time fee VA charges on most VA loans, 0.5–3.3% of the loan amount depending on the loan type, your down payment and prior use. It can be financed into the loan, and it’s waived if you receive VA disability compensation. Learn more →
- IRRRL (VA Interest Rate Reduction Refinance Loan)
- VA’s streamline refinance of an existing VA loan: no appraisal, no income documents and no cash out, even on a former home you now rent. It works in Texas, where our lenders don’t offer VA cash-out. Learn more →
- FHA Streamline
- A refinance of an existing FHA loan with minimal paperwork and no appraisal, including on a former home you now rent out. Learn more →
- Certificate of Eligibility (COE)
- The VA document that confirms your entitlement to a VA loan. We help you get it. Learn more →
- Reverse mortgage (HECM)
- A loan for homeowners generally 62 and older that turns equity into cash with no monthly mortgage payment while you live in the home. Your current balance must be under 50% of the home’s value, you keep paying taxes, insurance and upkeep, and HUD-approved counseling comes first. It’s repaid when you sell or leave the home. Learn more →
- Texas home equity rule (Art. XVI §50(a)(6))
- The Texas constitutional rule for a home you live in (a homestead): home-equity lending capped at 80% combined loan-to-value, and a 12-day wait before closing. That part is state law, not ours. Our HELOC keeps the same 80% limit on a Texas rental, and our lenders don’t offer VA cash-out refinances in Texas.
- Owner-occupied vs. investment property
- Owner-occupied means you live (or will live) there; investment means you hold it for income. It decides which programs fit and how much down a purchase needs: 20% on a DSCR purchase and 20% on a conventional rental. We lend on both, in all 35 states + D.C. where Arran is licensed.
- Lien position
- The order loans are repaid from the property: the first mortgage first, then a second lien such as a HELOC, then a third. An HEI can sit in 1st, 2nd or 3rd position (1st or 2nd only with credit from 500 to 539).
- STR / LTR (Short-term / long-term rental)
- Short-term means nightly or weekly stays (Airbnb, Vrbo); long-term means a standard lease. DSCR loans can qualify either, on market rent or short-term rental history. Learn more →
- 1031 exchange
- A tax-code provision that lets an investor defer capital-gains tax by rolling sale proceeds into a like-kind property on a strict timeline. Ask your tax advisor how it applies to you; we can talk through the financing side.
- Escrow / impounds
- An account your servicer uses to collect and pay property taxes and insurance along with your mortgage payment. DSCR math counts taxes and insurance in the payment.
- Points
- An upfront fee at closing measured against the loan: one point is 1% of the loan amount. Every point and fee shows on your loan estimate before you commit.
- Prepayment penalty
- A fee for paying a loan off early, common on investor loans. Ask how a program’s prepayment terms fit your exit plan before you sign.
- Credit score (FICO)
- The score most mortgage lenders use. Our floors: HELOC 620, P&L 640, no-ratio 680, bank statement 620, HEI 500, and 620 for standard conventional, FHA and VA terms (below 620 with a larger down payment or more equity, and on FHA down to HUD’s 500 floor). Reverse mortgages have no score requirement.