California Mortgage Glossary: Key Terms Every Buyer Should Know

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. I structure LLC and trust financing for California investors regularly — getting the vesting right at the start saves problems later. Call (800) 239-1103.

Buying a home in California means navigating some of the most complex real estate markets in the country — and a vocabulary to match. Whether you’re purchasing in San Jose, Los Angeles, or Sacramento, understanding these mortgage terms gives you power at the negotiating table. This glossary covers the terms you’ll run into from pre-approval through closing, with California-specific notes where the rules here differ.

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Quick-Reference Ratios

A

Adjustable-Rate Mortgage (ARM)

An ARM has a fixed rate for an initial period (commonly 5, 7, or 10 years), then adjusts based on an index plus a margin. Conforming ARMs today are mostly 5/6, 7/6, and 10/6 — fixed for 5, 7, or 10 years, then adjusting every six months — while many jumbo lenders still offer 5/1, 7/1, and 10/1 ARMs that adjust yearly. Caps limit how much the rate can move at the first adjustment, at each later adjustment, and over the life of the loan (for example, 2/1/5 or 5/1/5).

California context: ARMs are common on Bay Area and Los Angeles jumbo loans for buyers who expect to sell or refinance within the fixed period. Always check the worst-case payment at the lifetime cap.

→ See: ARM vs. Fixed-Rate Mortgage

Amortization

Amortization is the process of paying off your mortgage through regular installment payments over the loan term. Each monthly payment covers both principal (loan balance reduction) and interest. In the early years, most of your payment goes to interest; by year 20, the majority goes to principal. A 30-year loan at 7% on a $600,000 balance pays approximately $3,990/month — roughly $3,500 in interest and $490 in principal in month one.

Annual Percentage Rate (APR)

APR is the true annual cost of your loan expressed as a percentage, including the interest rate plus fees such as origination charges, discount points, and mortgage broker compensation. APR is always higher than the stated interest rate and is the best apples-to-apples comparison tool when shopping multiple lenders. A loan quoted at 6.875% with $5,000 in fees will have a higher APR than a loan at 7.0% with zero fees.

Appraisal

A licensed appraiser’s independent estimate of a property’s market value, ordered by the lender. The appraiser compares the home to recent comparable sales (“comps”). Lenders base the loan on the lower of the price or appraised value, so a low appraisal means renegotiating, bringing more cash, restructuring the loan, requesting a reconsideration of value, or canceling under an appraisal contingency.

→ See: Home Appraisal Came In Low: What Happens Next

Assumable Mortgage

An assumable mortgage lets a buyer take over the seller’s existing loan, rate, and remaining balance, subject to the lender’s approval. FHA, VA, and USDA loans are generally assumable; most conventional loans are not. Assuming a low-rate loan from 2020–2021 can mean a much lower payment, but the buyer usually needs cash or a second loan to cover the seller’s equity.

→ See: Assumable Mortgages in California

B

Balloon Mortgage

A balloon mortgage features low fixed payments for a set term (typically 5–7 years), after which the entire remaining balance becomes due in one lump sum. These are rare in residential lending but occasionally appear in commercial or portfolio loans. If you can’t refinance or sell when the balloon comes due, you risk foreclosure.

Bank Statement Loan

A bank statement loan (a type of Non-QM mortgage) allows self-employed borrowers to qualify using 12 or 24 months of business or personal bank statements instead of tax returns. Because many California entrepreneurs and business owners write off significant expenses, their taxable income on paper understates actual cash flow. Bank statement loans solve this problem.

California context: Particularly popular with business owners in Silicon Valley, Los Angeles entertainment, and real estate investors throughout the state.

→ See: California Bank Statement Loans

Bridge Loan

A short-term loan (typically 6–12 months) that lets you tap equity in your current home to fund the down payment on a new home before your existing home sells. Bridge loans solve the timing problem of buying before you sell, but carry higher interest rates and fees. They’re most common in competitive California markets where contingent offers are at a disadvantage.

Buydown (2-1 Buydown / 3-2-1 Buydown)

A buydown temporarily reduces your mortgage rate in the first years of the loan. In a 2-1 buydown, the rate is 2% below the note rate in year one, 1% below in year two, then at the full rate from year three forward. The cost is typically paid by the seller as a concession. Example: On a 7% loan, you pay 5% in year one and 6% in year two, then 7% permanently.

Why it matters: Sellers offering buydowns compete better in slow markets. Ask DiVita whether to negotiate a buydown versus a price reduction.

C

Chain of Title

The chain of title is the chronological history of all recorded ownership transfers for a property, from the original deed to the present owner. A clear, unbroken chain is required to obtain title insurance. Gaps, disputes, or fraudulent transfers in the chain can delay or kill a transaction.

Clear to Close (CTC)

“Clear to Close” is the underwriter’s final approval indicating all loan conditions have been satisfied and the loan is ready to fund. Receiving CTC typically means closing will happen within 1–3 business days. It’s the milestone every homebuyer is waiting for.

Closing Costs

Fees and prepaid items paid to complete the purchase and the loan: lender charges, appraisal, title insurance, escrow, recording, prepaid interest, homeowners insurance, and impound reserves. Many California buyers should plan on roughly 2% to 3% of the loan amount, more with discount points or a high insurance premium. California closings are handled by escrow companies, not attorneys.

→ See: Closing Costs in California

Closing Disclosure (CD)

The final five-page statement of your loan terms and closing costs. You must receive it at least 3 business days before closing. Compare it line by line to your Loan Estimate; federal tolerance rules limit how much many charges can increase.

Cloud on Title

A cloud on title is any encumbrance, claim, or defect that makes a property’s ownership status unclear or questionable — such as an old unpaid lien, a recorded easement, an error in a prior deed, or an unresolved probate matter. Clouds must be resolved before closing. This is why title searches and title insurance are essential.

Co-Borrower / Co-Signer

A co-borrower (also called a co-applicant) is listed on the mortgage and the title — they share both the debt obligation and property ownership from day one. Their income and credit are included in qualification. A co-signer is responsible for the debt if the primary borrower defaults, but typically has no ownership interest in the property. Co-borrowers strengthen a California application by adding income; co-signers are less common in purchase transactions.

Conforming Loan

A loan that meets Fannie Mae and Freddie Mac guidelines and loan limits. For 2026, the one-unit baseline limit is $832,750, and the ceiling in the highest-cost areas is $1,249,125. In California, counties at the ceiling include San Francisco, Marin, San Mateo, Santa Clara, Alameda, Contra Costa, Santa Cruz, Los Angeles, and Orange; many other counties fall in between. Loans above the baseline but within a county’s higher limit are called “high-balance” conforming loans.

→ See: 2026 Conforming Loan Limits by California County

Construction Loan

A construction loan finances the building of a new home, typically disbursing funds in draws as construction milestones are completed. Construction-to-permanent loans convert to a standard mortgage once the home is finished. During construction, borrowers usually pay interest-only. These loans require detailed builder contracts, permits, and inspections.

Contingency

A condition in the purchase contract that must be satisfied or removed for the sale to go forward — commonly loan, appraisal, and inspection contingencies. Removing a contingency before your loan and appraisal are secure puts your deposit at risk.

Conventional Loan

A conventional loan is any mortgage not backed by a federal agency (FHA, VA, or USDA). These loans are purchased by Fannie Mae or Freddie Mac on the secondary market (if conforming) or held in lender portfolios. Conventional loans offer competitive rates for borrowers with strong credit and typically require at least 3% down, though 20% down avoids PMI.

Credit Score

Mortgage lenders typically pull reports from all three bureaus and use the middle score; with more than one borrower, the rules for which score counts depend on the program. Scores affect both approval and pricing, and conventional loans carry price adjustments by credit score and loan-to-value.

• Conventional: most lenders look for about 620 or higher. Fannie Mae removed its hard 620 floor for loans run through Desktop Underwriter in November 2025, but many lenders keep their own minimums. The best pricing generally goes to scores of 780 and above.
• FHA: 580+ for 3.5% down; 500–579 requires 10% down. Many lenders set higher minimums.
• VA: no VA-set minimum; lenders set their own, often around 580–620.
• Jumbo: commonly 700–740+ depending on the lender and down payment.

→ See: Credit Score Requirements for California Buyers

D

Debt-to-Income Ratio (DTI)

DTI compares your monthly debt payments, including the new housing payment, to your gross monthly income. Conventional loans can go up to 50% with an automated underwriting approval; FHA’s automated system can approve higher ratios with strong compensating factors; VA looks at 41% plus residual income. Jumbo lenders are often stricter.

Example: gross income of $15,000 a month, a proposed housing payment of $4,200, and $600 in car and student loan payments = $4,800 ÷ $15,000 = 32% DTI.

→ See: Debt-to-Income Ratio for California Mortgages

Debt Service Coverage Ratio (DSCR)

For investment property loans, the property’s rent divided by its monthly housing payment (principal, interest, taxes, insurance, and HOA). A DSCR of 1.0 means rent covers the payment. DSCR loans qualify on the property’s income instead of the borrower’s personal income; many lenders want 1.0 or higher, and some allow lower with bigger down payments.

→ See: DSCR Loans in California

Deed of Trust

California does not use “mortgages” in the legal sense — it uses Deeds of Trust. A Deed of Trust involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee) who holds title as security. If the borrower defaults, the trustee can conduct a non-judicial foreclosure (Trustee’s Sale) without court involvement, making the process faster than in states using traditional mortgages. When you’ve fully paid your loan, the trustee conveys title back to you via a Deed of Reconveyance.

Down Payment

The part of the price you pay in cash. Minimums range from 0% (VA and USDA) to 3% (conventional, for eligible buyers) and 3.5% (FHA), up to 10%–20% or more for many jumbo loans. A larger down payment lowers your loan-to-value, can eliminate mortgage insurance, and can improve your rate. Gift funds and down payment assistance programs can help.

→ See: California Down Payment Assistance Programs

E

Earnest Money Deposit (EMD)

Earnest money is a good-faith deposit — typically 1–3% of the purchase price in California — submitted with your offer to demonstrate serious intent. It’s held in escrow until closing, where it’s applied to your down payment or closing costs. If you back out of the contract without a valid contingency, you may forfeit your deposit. In competitive California markets, buyers sometimes offer 2–3% EMD to strengthen their offer.

Equity

Equity is the difference between your home’s current market value and what you owe on it. If your Marin County home is worth $1.4M and you owe $900K, your equity is $500K. Equity builds through appreciation and principal paydown. It can be accessed via a cash-out refinance, HELOC, or home equity loan for major expenses or investment.

Escrow

In California, “escrow” refers to two different things: (1) the transaction escrow — a neutral third party (escrow company) that holds all funds, documents, and instructions until all purchase conditions are met and the transaction closes; and (2) the impound escrow account held by your servicer for property taxes and insurance (see Impound Account). California is an escrow state — attorneys do not typically close real estate transactions here.

F

FHA Loan

Insured by the Federal Housing Administration, FHA loans allow 3.5% down with a 580+ credit score, or 10% down with scores from 500 to 579. They require an upfront mortgage insurance premium of 1.75% of the base loan (usually financed) plus an annual premium; with less than 10% down, the annual premium lasts for the life of the loan.

2026 FHA limits in California: from $541,287 in lower-cost counties up to $1,249,125 in the highest-cost counties such as San Francisco, Marin, Los Angeles, and Orange.

→ See: FHA Loans in California

Fixed-Rate Mortgage

A fixed-rate mortgage locks your interest rate for the entire loan term — typically 15, 20, or 30 years. Your principal and interest payment never changes, giving you predictable budgeting. The 30-year fixed is the most popular mortgage in the U.S. The 15-year fixed pays off faster and carries a lower rate, but requires a higher monthly payment.

Forbearance

Forbearance is a temporary agreement between borrower and servicer to pause or reduce mortgage payments during financial hardship (job loss, medical emergency, natural disaster). Forbearance is not forgiveness — missed payments must be repaid via lump sum, repayment plan, or loan modification. Millions of U.S. homeowners used forbearance under the CARES Act during COVID-19.

Foreclosure

The legal process a lender uses to take and sell a property after default. Most California foreclosures are non-judicial trustee’s sales: the servicer must first attempt contact, then a Notice of Default is recorded; at least three months later a Notice of Trustee’s Sale can be recorded, and the sale can occur at least 20 days after that. Homeowners have options — reinstatement, loan modification, short sale — before the sale.

G

Gift Letter

A gift letter is a signed document from the donor confirming that funds given to a borrower for a down payment are a gift — not a loan requiring repayment. Lenders require gift letters because borrowed down payments affect DTI and risk calculations. Most loan programs allow gift funds from family members; some allow employer gifts or charitable grants. The letter must state the donor’s name, relationship, amount, and that no repayment is expected.

H

HELOC (Home Equity Line of Credit)

A revolving line of credit secured by your home, usually in second position. You can draw, repay, and redraw during the draw period (often 10 years), then repay over a set term. Rates are usually variable and tied to the Prime Rate.

California context: many lenders cap combined loan-to-value at 80%–90%. On a $1.2M home with a $600K first mortgage, 90% CLTV allows a line of up to $480K. Some programs go higher — I also arrange HELOCs up to 95% CLTV for qualified borrowers.

→ See: HELOCs in California

Home Equity Loan (HELOAN)

A home equity loan delivers a lump sum at a fixed interest rate, secured by your home equity. Unlike a HELOC, the rate and payment are fixed for the life of the loan. HELOANs are ideal for single large expenses: a major remodel, debt consolidation, or investment property down payment. The interest may be tax-deductible if used for home improvement (consult your CPA).

HOA (Homeowners Association)

The association that manages a condo or planned community. HOA dues count in your debt-to-income ratio, and for condos the association’s budget, reserves, insurance, litigation, and owner-occupancy mix affect whether the project qualifies for conventional financing.

→ See: Non-Warrantable Condo Mortgages

Homeowners Insurance

Lenders require hazard insurance on every mortgage. Standard California policies exclude earthquake damage (separate coverage is available, including through the California Earthquake Authority), and in wildfire-prone areas many carriers have limited new policies.

California context: in parts of the North Bay, foothills, and mountain communities, buyers may need the California FAIR Plan plus a “difference in conditions” (wrap) policy. Get quotes early — insurance problems are a common cause of late-stage delays.

→ See: California FAIR Plan and Your Mortgage

I

Impound Account (Escrow Account)

An account your loan servicer uses to collect a monthly share of your property taxes and homeowners insurance and pay the bills when due. Impounds are generally required on FHA, VA, and USDA loans and commonly on conventional loans with smaller down payments; with more equity you may be able to waive them. California law limits when lenders can require impounds on owner-occupied homes.

California property tax note: under Proposition 13 your home is reassessed at the purchase price, and you’ll typically receive a supplemental tax bill for the difference. Your impound payment may rise after the new assessment is reflected.

Index + Margin (ARM Rate Components)

An ARM’s rate after the fixed period equals the index plus the margin, limited by the caps. Most new ARMs use SOFR (Fannie Mae and Freddie Mac require the 30-day average SOFR), which replaced LIBOR. The margin is fixed at closing. Example: if the index is 4.5% and the margin is 2.75%, the fully indexed rate is 7.25%.

J

Jumbo Loan

A loan above the conforming limit for your county — above $1,249,125 in California’s highest-cost counties for 2026, and above lower thresholds elsewhere (the baseline is $832,750). Jumbo loans aren’t purchased by Fannie Mae or Freddie Mac, so each lender sets its own rules; expect stronger credit, larger reserves, and often 10%–20% or more down. Rates can be competitive with conforming loans for strong borrowers.

→ See: California Jumbo Loans

L

Lien

A lien is a legal claim against a property that must be paid when the property is sold or refinanced. Your mortgage itself is a first lien (or first Deed of Trust). Other types of liens include mechanic’s liens (unpaid contractors), judgment liens (from lawsuits), IRS tax liens, and HOA liens. When you refinance or sell, all liens must be satisfied from the proceeds before you receive your equity. A title search reveals all recorded liens on a property.

Loan Estimate (LE)

The Loan Estimate is a standardized 3-page document your lender must provide within 3 business days of receiving a loan application. It discloses the projected interest rate, monthly payment, total closing costs, APR, and loan terms. All lenders use the same form under TRID regulations, making comparison shopping straightforward. Compare Page 2 (fees) and Page 3 (comparisons) across multiple lenders to find the best deal.

Loan-to-Value Ratio (LTV)

LTV is calculated as: Loan Amount ÷ Appraised Value × 100. An 80% LTV on a $1M home means a $800,000 loan. Lower LTV = more equity = lower risk for the lender = potentially better rate. Most conventional loans require PMI above 80% LTV. VA loans allow 100% LTV (no down payment). FHA allows up to 96.5% LTV.

M

Mello-Roos

A special tax levied by a Community Facilities District to pay for infrastructure in many newer California developments. It appears on the property tax bill, counts in your qualifying housing payment, and can last for decades.

→ See: Mello-Roos Guide for California Buyers

Mortgage Broker vs. Mortgage Banker vs. Direct Lender

Understanding who you’re working with matters:

In California, a mortgage broker arranging a residential loan is the borrower’s fiduciary under Civil Code §2923.1. DiVita Home Finance is an independent mortgage broker, which means we shop across many wholesale lenders to find the best rate and program for your specific situation — not just what one bank offers.

Mortgage Insurance: PMI vs. MIP

Mortgage insurance protects the lender if you default. There are two types:

N

Non-QM Loan (Non-Qualified Mortgage)

A Non-QM loan doesn’t conform to the “Qualified Mortgage” (QM) standards set by the CFPB. QM rules require lenders to verify a borrower’s ability to repay using standard documentation. Non-QM loans serve borrowers who have strong finances but don’t fit the traditional mold: self-employed borrowers, real estate investors, foreign nationals, or those with recent credit events. Common Non-QM programs include bank statement loans, DSCR loans (for investors), asset depletion loans, and interest-only mortgages.

→ See: Non-QM Mortgages in California

Notice of Default (NOD)

A Notice of Default is a formal public document recorded by the lender (or trustee) after a borrower is typically 90+ days delinquent on mortgage payments. In California, the NOD triggers a 3-month reinstatement period during which the borrower can cure the default by paying all past-due amounts plus fees. If the default isn’t cured, a Notice of Trustee’s Sale follows, setting the foreclosure auction date.

NMLS

The Nationwide Multistate Licensing System, where mortgage companies and loan originators are registered. You can look up any loan officer’s license and history at NMLS Consumer Access. Michael DiVita is NMLS #241655; DiVita Home Finance is NMLS #323700.

O

Origination Fee

An origination fee is charged by the lender to process, underwrite, and fund your loan. It’s typically 0.5–1% of the loan amount, though some lenders charge flat fees or zero origination in exchange for a slightly higher rate. The origination fee appears on your Loan Estimate and Closing Disclosure. Compare total costs — not just the rate — when shopping lenders.

P

PITI (Principal, Interest, Taxes & Insurance)

PITI is the full monthly housing payment lenders use to qualify you (plus HOA dues and any Mello-Roos, if applicable):

Note: California’s base property tax rate is 1% of assessed value under Proposition 13, plus local voter-approved charges, so total rates often land somewhat above 1%. Assessed value can rise by no more than 2% a year while you own the home.

Points (Discount Points)

One discount point costs 1% of your loan amount and typically reduces your interest rate by 0.25% (though the actual reduction varies by lender and market). Paying points makes sense if you plan to keep the loan long enough for the monthly savings to offset the upfront cost — called the “break-even point.”

Example: On a $700,000 loan, 1 point = $7,000 upfront. If it reduces your rate from 7.0% to 6.75%, monthly savings = ~$115. Break-even = $7,000 ÷ $115 = 61 months (about 5 years). If you plan to stay longer, buying the point saves money.

Portfolio Loan

A portfolio loan is kept by the lender on its own books rather than sold to Fannie Mae, Freddie Mac, or the secondary market. Because these loans don’t need to conform to agency guidelines, lenders have more flexibility on qualifying criteria — making them excellent for unusual properties, high-net-worth borrowers with complex income, foreign nationals, or borrowers needing jumbo amounts with non-standard terms.

Pre-Approval

A lender’s conditional commitment to lend a specific amount, based on verified income and asset documents and a credit report. California sellers expect one with every offer. Because documents and credit age, a pre-approval usually needs updating after a few months.

→ See: California Mortgage Preapproval Checklist

Pre-Qualification

An informal estimate of how much you might borrow, usually based on self-reported income and assets without full verification. It’s useful for early budgeting but carries little weight with California sellers compared with a documented pre-approval.

Prepaids

Closing items that are your own future costs paid in advance rather than fees: the first year’s homeowners insurance premium, prepaid daily interest from closing to the end of the month, and the initial deposit into your impound account. They appear in Sections F and G of your Loan Estimate and can add thousands of dollars to your cash to close.

Principal

The principal is the outstanding balance you owe on your loan — the original amount borrowed, minus any payments you’ve made that reduced the balance. Early in a 30-year loan, very little of your monthly payment reduces principal because interest dominates. By year 20, most of your payment goes to principal. You can accelerate principal paydown by making extra payments or choosing a 15-year term.

Proposition 13

California’s 1978 constitutional amendment that sets the base property tax rate at 1% of assessed value and limits assessment increases to 2% a year until a change in ownership or new construction. Your purchase price generally becomes your new assessed value.

→ See: Proposition 13 for Home Buyers

Private Mortgage Insurance (PMI)

PMI is required on conventional loans with less than 20% down and protects the lender, not you. The cost depends heavily on your credit score and loan-to-value. Under the federal Homeowners Protection Act, borrower-paid PMI must end automatically when the balance is scheduled to reach 78% of the original value, and you can request cancellation at 80% if you meet the requirements.

→ See: How to Get Rid of PMI in California

R

Rate Lock

A rate lock is a lender’s guarantee to hold your quoted interest rate for a specified period — typically 30, 45, or 60 days — while your loan is processed. If rates rise during that period, you keep the lower locked rate. If rates fall significantly, some lenders offer “float-down” options to capture the improvement. Longer lock periods cost more (through slightly higher rates or lock fees). In volatile rate environments, locking early protects your purchase power.

Refinance

Replacing your current mortgage with a new one to lower the rate, change the term, remove mortgage insurance, or take cash out. Compare the monthly savings to the closing costs to find your break-even point.

California context: many homeowners locked in rates of roughly 2.5%–3.5% in 2020–2021. For them, a HELOC or home equity loan is often a better way to access equity than a cash-out refinance at today’s rates.

→ See: Refinancing in California · Cash-Out Refinance

Reverse Mortgage

A reverse mortgage — most commonly the FHA-insured Home Equity Conversion Mortgage (HECM) — lets homeowners 62 and older turn equity into cash without a required monthly mortgage payment. You still pay property taxes, insurance, and upkeep. The balance grows over time and is repaid when the last borrower sells, moves out, or passes away. Loan proceeds generally aren’t taxed as income; check with a tax advisor.

→ See: California Reverse Mortgage Guide

Right of Rescission

Under the Truth in Lending Act, when you refinance or take out a HELOC or home equity loan on your primary residence, you generally have until midnight of the third business day after closing (or after receiving the required disclosures, if later) to cancel. It does not apply to purchase loans. Funds can’t be disbursed until the rescission period ends.

S

Short Sale

A sale for less than the loan payoff, with the lender’s written approval. It avoids foreclosure and can shorten the wait before qualifying for a new mortgage. In California, Code of Civil Procedure §580e generally bars a deficiency judgment after a lender-approved short sale of a home with one to four units (with exceptions, such as for entity borrowers). Tax treatment of forgiven debt is a separate question for your tax advisor.

SOFR

The Secured Overnight Financing Rate, the benchmark that replaced LIBOR as the index for most new ARMs. Your ARM note states which SOFR measure is used and the margin added to it.

T

Title Insurance

Title insurance protects against claims arising from defects in the title that occurred before you owned the property — such as forged deeds, unknown heirs, unpaid liens, or recording errors. In California, there are two policies: the owner’s policy (protects you as buyer, paid once) and the lender’s policy (protects the lender, required by all mortgage lenders). Title insurance is a one-time premium paid at closing and provides coverage for as long as you own the home.

TRID (Know Before You Owe)

TRID stands for the TILA-RESPA Integrated Disclosure rule, implemented in 2015. It requires lenders to provide two key documents: the Loan Estimate within 3 business days of application, and the Closing Disclosure at least 3 business days before closing. TRID standardized and simplified mortgage disclosure, making it easier to compare lenders and understand exactly what you’re paying. If fees increase beyond TRID tolerances, the lender must cover the difference (“cure” the fee).

Trust (Vesting in a Trust)

Many California owners hold title in a revocable living trust so the home can pass to heirs without probate. Conventional, FHA, and VA lenders generally allow it when the trust meets their requirements — typically the borrower is a trustee and beneficiary. The lender and title company review the trust before closing.

→ See: Mortgages and Living Trusts in California

U

Underwriting

Underwriting is the lender’s process of verifying your financial profile and the property to determine loan approval. The underwriter reviews your credit, income documentation, assets, employment history, and the appraisal. They may issue conditions (items you must provide before final approval). After all conditions are satisfied, the underwriter issues a “Clear to Close” (CTC). Underwriting typically takes 1–2 weeks for straightforward files; complex income (self-employed, RSU income, rental properties) may take longer.

USDA Loan

USDA’s guaranteed loan program offers 100% financing in eligible rural and some suburban areas for households within income limits. It carries a 1% upfront guarantee fee and a 0.35% annual fee. In California, eligible areas include many Central Valley, North Coast, foothill, and agricultural communities — check the address on USDA’s eligibility map.

→ See: USDA Loans in California

V

VA Loan

Guaranteed by the Department of Veterans Affairs for eligible veterans, service members, and certain surviving spouses. Key benefits: no down payment with full entitlement, no monthly mortgage insurance, and no VA loan limit for borrowers with full entitlement (since 2020). Most borrowers pay a one-time funding fee unless exempt, such as veterans receiving VA disability compensation.

→ See: California VA Loans

W

Wholesale Lending

The channel through which lenders offer loans to borrowers via mortgage brokers. Wholesale pricing is often more competitive than retail pricing because lenders compete for brokers’ business, and a broker can compare many wholesale lenders for one borrower. It’s not guaranteed to be lower on every loan, which is why comparing Loan Estimates still matters.

→ See: Mortgage Broker vs. Bank in California

Loan Type Comparison: Which Mortgage Is Right for You?

Frequently Asked Questions: Mortgage Terms

What is the difference between the interest rate and the APR?

The interest rate is the cost of borrowing the loan balance. The APR adds certain lender fees and points and expresses the total as a yearly rate, so it’s usually higher than the interest rate. Use the rate to understand your payment and the APR to compare loans with different fee structures.

What credit score do I need to buy a home in California?

It depends on the loan. FHA allows 580 with 3.5% down or 500 to 579 with 10% down; VA has no VA-set minimum but lenders set their own; most conventional lenders look for about 620, and the best conventional pricing goes to scores around 780 and up. Jumbo lenders often want 700 to 740 or higher.

What does clear to close mean?

Clear to close means the underwriter has signed off on every condition and the loan is ready for final documents. The lender then prepares closing documents, you receive your Closing Disclosure at least 3 business days before signing, and escrow coordinates signing, funding, and recording.

How is a mortgage broker different from a bank?

A bank offers only its own loan programs. A mortgage broker like DiVita Home Finance compares programs and pricing from many wholesale lenders for your specific situation, including jumbo, non-QM, and government loans. In California, a mortgage broker arranging a residential loan is the borrower’s fiduciary under Civil Code section 2923.1.

Is an impound account required in California?

Impound accounts are generally required on FHA, VA, and USDA loans and are common on conventional loans with smaller down payments. With more equity you may be able to waive them. California law limits when lenders can require impounds on owner-occupied homes.

What is the conforming loan limit in California for 2026?

The 2026 one-unit baseline is $832,750, and the ceiling in the highest-cost counties is $1,249,125. Counties at the ceiling include San Francisco, Marin, San Mateo, Santa Clara, Alameda, Contra Costa, Santa Cruz, Los Angeles, and Orange; many other California counties have limits in between. A loan above your county’s limit is a jumbo loan.

What is a deed of trust, and why does California use it?

A deed of trust secures your loan with three parties: you (trustor), the lender (beneficiary), and a neutral trustee. If a borrower defaults, it allows non-judicial foreclosure through a trustee’s sale. When the loan is paid off, the trustee records a reconveyance releasing the lien. From the borrower’s day-to-day perspective, it works like a mortgage.

Related Resources

• Mortgage Preapproval Checklist
• Closing Costs in California
• California Mortgage Approval Timeline
• 2026 Conforming Loan Limits by County
• First-Time Home Buyer Guide
• Mortgage Broker vs. Bank
• Non-QM Mortgages