Mortgage Glossary
Every VA term, in plain English.
A complete, alphabetized glossary of VA loan and general mortgage terminology — written for borrowers, not bankers. Every definition reflects 2026 VA policy per the VA Lenders Handbook M26-7 and 38 CFR Part 36.
$0
Down with full entitlement
None
VA-set minimum score
No limit
With full entitlement
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Quick answer
What do VA mortgage terms actually mean?
VA financing has its own vocabulary: the funding fee is the one-time charge that replaces mortgage insurance, COE is the Certificate of Eligibility, entitlement is the VA's guaranty amount backing your loan, NOV is the appraisal's Notice of Value, and MPRs are the Minimum Property Requirements a home must meet.
- Funding fee — one-time charge (0%–3.30%) that replaces monthly mortgage insurance
- COE — Certificate of Eligibility, required to confirm entitlement
- Entitlement — the dollar amount of guaranty the VA provides a lender on your behalf
- NOV — Notice of Value, the outcome of a VA appraisal
- MPRs — Minimum Property Requirements the VA appraiser confirms
What this means for your mortgage
Knowing terms like COE, entitlement, and NOV makes your loan estimate readable, so nothing at closing is a surprise.
Reviewed by the licensed mortgage team at Simply Approved Mortgages · Last verified August 24, 2026 against the VA Lenders Handbook (M26-7)
Read the VA guides61 VA and mortgage terms defined
Jump to a letter, or skim the full list. Terms link to the pages where the rule actually applies.
A
- Amortization
- The schedule of principal and interest payments that pays off your mortgage over its term.
- Annual Percentage Rate (APR)
- The total annual cost of the loan including interest rate, points, and most fees — used to compare loan offers.
- Appraisal
- An independent, licensed appraiser's opinion of a home's market value. On a VA loan, the appraisal is ordered through the VA portal and also confirms Minimum Property Requirements.
- Assumable Mortgage
- A loan a qualified buyer can take over from the seller, inheriting the existing rate. VA loans are assumable, subject to VA-approved buyer qualification.
B
- Basic Entitlement
- The base $36,000 of VA guaranty every eligible veteran has, historically covering 25% of loans up to $144,000.
- Blue Water Navy Vietnam Veterans Act
- The 2019 law, effective January 1, 2020, that removed VA loan limits for borrowers with full entitlement and expanded eligibility for veterans who served offshore during the Vietnam War.
- Bonus Entitlement (Tier 2)
- Additional entitlement above the basic $36,000 that raises total guaranty to 25% of the conforming loan limit, enabling higher loan amounts with $0 down.
C
- Cash-Out Refinance
- A refinance where the new VA loan is larger than the payoff of the existing debt and the veteran receives the difference in cash, generally up to 90% loan-to-value with most lenders.
- Certificate of Eligibility (COE)
- The VA document confirming a veteran's or surviving spouse's eligibility and remaining entitlement. Obtained instantly on VA.gov, through a lender via WebLGY, or by mailing VA Form 26-1880.
- Closing Costs
- Fees paid at closing — including the appraisal, title work, recording, and prepaids — separate from the VA funding fee.
- Closing Disclosure (CD)
- The final statement of loan terms and costs, which must be delivered at least three business days before signing.
- Compensating Factors
- Strengths in a veteran's file (reserves, low debt-to-income, strong residual income, long employment) that allow underwriters to approve a file despite higher-risk attributes elsewhere.
- Conforming Loan Limit
- The FHFA loan-amount ceiling used only for VA borrowers with reduced or partial entitlement; borrowers with full entitlement are not subject to it. The 2026 baseline is $832,750.
D
- DD-214
- The Certificate of Release or Discharge from Active Duty, the primary document veterans use to prove service history when requesting a Certificate of Eligibility.
- Debt-to-Income Ratio (DTI)
- Total monthly debt payments divided by gross monthly income. VA uses 41% as a guideline benchmark, not a hard cap, when residual income supports a higher ratio.
- Deed-in-Lieu
- Voluntarily transferring a home's title to the lender instead of going through foreclosure; the VA imposes a waiting period before a new VA loan afterward.
- Down Payment
- Cash paid toward the purchase price at closing. VA loans require $0 down for eligible veterans with full entitlement.
E
- Earnest Money
- A good-faith deposit made when an offer is accepted, applied toward closing costs or the down payment (if any) at closing.
- Entitlement
- The dollar amount the VA guarantees on a veteran's behalf. Basic entitlement is $36,000; bonus (Tier 2) entitlement brings the total guaranty to 25% of the county conforming loan limit. Full entitlement carries no VA loan limit.
- Equity
- The portion of a home's value the owner holds free of debt — appraised value minus mortgage balance.
- Escrow Account
- An account a servicer uses to collect and pay property taxes and homeowners insurance monthly along with the mortgage payment.
- Extenuating Circumstances
- A documented one-time event beyond a veteran's control, such as a service-related hardship or medical emergency, that can shorten a required waiting period after a credit event.
F
- FICO Score
- The credit score model lenders use to underwrite a loan. The VA itself sets no minimum score; individual lenders set their own overlays, commonly in the 580–620 range.
- Forbearance
- A temporary pause or reduction in mortgage payments, typically granted during financial hardship.
- Funding Fee
- A one-time percentage-of-loan fee that replaces monthly mortgage insurance on a VA loan. Ranges from 1.25% to 3.30% on purchases, 0.50% flat on an IRRRL, and is waived for veterans with a service-connected disability rating and certain surviving spouses.
G
- Gift Funds
- Money from a family member or other acceptable donor used toward closing costs, documented with a signed gift letter.
- Gift Letter
- A signed statement from an acceptable donor confirming the amount, the relationship, and that no repayment is expected on gifted funds.
- Guaranty
- The VA's promise to reimburse a lender for a portion of the loss if a VA loan defaults, which is what allows lenders to offer $0 down and no mortgage insurance.
I
- IRRRL (Interest Rate Reduction Refinance Loan)
- The VA's streamline refinance for an existing VA loan. VA generally does not require a new appraisal or traditional income review, but lender requirements can; the loan remains subject to seasoning, net-tangible-benefit, rate-reduction, and 36-month fee-recoupment rules.
L
- LES (Leave and Earnings Statement)
- The active-duty service member's monthly pay statement, used by underwriters in place of pay stubs to verify military income.
- Loan Estimate (LE)
- A federally standardized 3-page disclosure a lender must provide within 3 business days of application, showing rate, payment, APR, and closing costs.
- Loan-to-Value (LTV)
- The loan amount divided by the home's appraised value. VA purchase loans can reach 100% LTV for eligible veterans with full entitlement.
M
- Manual Underwriting
- A human underwriter's review used when automated underwriting doesn't produce an approval or the file has notable credit events; VA residual income becomes central to the decision.
- Minimum Property Requirements (MPRs)
- The VA's health, safety, and structural-soundness standards a home must meet to be appraised for VA financing — working utilities, a sound roof, safe access, and no exposed wiring, among others.
N
- NADL (Native American Direct Loan)
- A VA program where the VA itself is the direct lender, for Native American veterans (or a veteran married to one) buying, building, or improving a home on federal trust land, requiring a Memorandum of Understanding with the tribal government.
- NGB-22
- The National Guard Report of Separation and Record of Service, used by Guard members instead of a DD-214 to document service for VA loan eligibility.
- Non-Allowable Fees
- A defined list of closing costs a veteran cannot be charged on a VA loan, including attorney fees for the lender, certain settlement or escrow fees, prepayment penalties, and loan-broker fees.
- Notice of Value (NOV)
- The VA appraiser's official determination of a property's market value and Minimum Property Requirement compliance, issued after a VA appraisal.
O
- One-Time Restoration
- A VA exception allowing entitlement to be restored after a VA loan is paid in full even when the veteran keeps the home rather than selling it — available only once.
- Origination Fee
- The lender's charge for processing and originating the loan. VA caps total lender origination and processing charges at 1% of the loan amount.
P
- Payment Shock
- The increase between a borrower's current housing payment and the proposed new payment; low payment shock is a recognized compensating factor.
- PITI
- Principal, Interest, Taxes, and Insurance — the components of a typical monthly mortgage payment.
- Pre-Approval
- A lender's conditional commitment to lend a specific amount, based on a verified review of credit, income, and assets, backed by an active Certificate of Eligibility.
- Prepaid Items
- Closing costs paid in advance — property taxes, hazard insurance, and prepaid interest.
R
- Rate Lock
- A lender's commitment to hold an interest rate for a set period, typically 30–60 days, while the loan closes.
- Reconsideration of Value (ROV)
- A formal request to have a VA appraisal value re-examined after the Notice of Value is issued, typically submitted with additional comparable sales or evidence of appraiser error.
- Reserves
- Liquid funds remaining after closing, measured in months of PITI, and considered a compensating factor in VA underwriting.
- Residual Income
- The VA's signature qualifying measure: monthly income left over after the mortgage payment, taxes, insurance, debts, and estimated maintenance/utilities, benchmarked by region, family size, and loan amount. Strong residual income can offset a higher debt-to-income ratio.
- Restoration of Entitlement
- The process of returning used VA entitlement to full after a VA loan is paid off and the home is sold, restoring $0-down, no-loan-limit buying power for the next purchase.
S
- SAH Grant (Specially Adapted Housing)
- A VA grant helping veterans with qualifying service-connected disabilities build, buy, or modify a home for accessibility.
- Seasoning
- The required period funds must sit in an account, or a credit event or existing loan must age, before it's acceptable to the VA — for example, the 210-day/6-payment seasoning before an IRRRL.
- SHA Grant (Special Housing Adaptation)
- A VA grant, smaller than SAH, for veterans with certain service-connected disabilities to adapt an existing home for accessibility.
- Sourcing
- Documenting where deposited funds came from. Unsourced large deposits can be excluded from qualifying assets.
- Statement of Service
- A signed letter from a commander or personnel officer documenting an active-duty service member's current service dates, used in place of a DD-214 before separation.
- Substitution of Entitlement
- When a qualified buyer assuming a veteran's VA loan uses their own VA entitlement in place of the seller's, freeing the seller's entitlement for future use.
T
- Tidewater
- A process letting a lender and real estate agent submit additional comparable sales within 3 business days when a VA appraiser signals the value may come in below the contract price, before the Notice of Value is finalized.
- Tri-Merge Credit Report
- A single mortgage credit report combining Equifax, Experian, and TransUnion data, used to determine the qualifying credit score.
U
- Underwriting
- The lender's review of a full loan file to decide whether to approve the loan and on what terms.
V
- VA Amendment to Contract / Escape Clause
- A required clause in every VA purchase contract letting the veteran cancel the deal and recover earnest money if the Notice of Value comes in below the agreed purchase price.
- VASP (Veterans Affairs Servicing Purchase)
- A VA program for helping veterans in financial hardship avoid foreclosure on a VA-guaranteed loan by having the VA purchase the loan from the servicer under specific terms.
W
- WebLGY
- The VA's online portal lenders use to pull a veteran's Certificate of Eligibility and manage VA loan guaranty records.
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