AZ VA loan glossary
Mike Certo · Cornerstone First Mortgage · NMLS #260555 ·
VA loans + AZ-specific veteran programs have a vocabulary of their own. This glossary collects the terms vets actually encounter, plain-English definitions, and AZ-relevant context where useful. Bookmark this page.
A
AMI (Area Median Income) — Income benchmark used by AZ DPA programs (Home Plus, Home In Five, Pathway) to determine eligibility. 2026 Maricopa AMI is ~$112,000 for a household of 4.
Assumable — A VA loan can be assumed by a qualified buyer (veteran or non-veteran). The original veteran's entitlement stays tied to the loan unless the assuming party is also a veteran substituting their own entitlement. Full guide.
ARM (Adjustable Rate Mortgage) — VA permits ARMs but most VA loans are fixed-rate. Less common in AZ market.
B
BAH (Basic Allowance for Housing) — Monthly housing stipend paid to active-duty service members. Varies by base + rank + dependent status. 2026 Luke AFB E-5 w/dep = $2,289. BAH calculator.
Back-end DTI — Total debt obligations (PITI + other monthly debts) as a percentage of gross income. VA guideline: 41%. Some lenders accept higher with strong residual income.
C
Cash-out refi — VA refinance that pulls equity out of the home. VA allows up to 100% LTV cash-out (higher than conventional 80% cap). Funding fee applies (2.15% first use / 3.30% subsequent).
CFD (Community Facilities District) — Special assessment districts in some AZ master-planned communities (Verrado, Vistancia, Eastmark). Adds to monthly housing cost; VA underwriter includes in DTI.
Closing costs — Fees paid at closing — typically 2-4% of loan amount. VA caps several. Seller can pay up to 4% in concessions.
Cluster home — Detached or semi-detached home in a planned community with shared common-area maintenance. Common in AZ retirement communities. VA loan eligible if HOA approved.
COE (Certificate of Eligibility) — VA-issued document confirming a veteran's eligibility for the VA loan benefit. Free, obtained through VA.gov or via Mike. Required before VA loan can close.
Community property — AZ is one of nine community property states. Means spouse has automatic 50% interest in property acquired during marriage. Affects how VA loans are titled + how divorce + estate planning interact with the home.
Compensation — VA disability monthly payment based on rating (10%-100%). Federally tax-free in all states.
Conforming loan limit — Maximum loan size for standard VA (or conventional) financing. 2026 AZ baseline: $832,750 statewide.
D
Defensible space — Cleared/maintained vegetation around a home in wildfire-prone areas. Required by VA MPR + AZ Department of Forestry in WUI zones.
DD-214 — Discharge document issued at military separation. Used to verify VA loan eligibility + claim other vet benefits.
Disability rating (VA) — Percentage rating (0% to 100%, in 10% increments) assigned by VA based on service-connected disabilities. 10%+ = waives VA funding fee. 100% in AZ = full property tax exemption under HB 2792.
DPA (Down Payment Assistance) — AZ programs that provide grants or forgivable seconds to help with down payment + closing costs. Top programs: Home Plus, Home In Five Advantage (with vet bonus), Pathway to Purchase. Stacker guide.
DTI (Debt-to-Income ratio) — Total monthly debt divided by gross monthly income. VA guideline: 41% back-end. Front-end (PITI only) typically should be ≤29%.
E
Earnest money deposit (EMD) — Money buyer puts up at offer acceptance to show good faith. Standard AZ EMD is 1% of price; 2-3% strengthens VA offers in competitive markets.
Entitlement — Veteran's $0-down VA loan capacity. Currently $144,000 basic + 25% of FHFA conforming limit = roughly $208,000 total entitlement in 2026. Limits the $0-down amount; doesn't cap the loan size for vets with full entitlement.
Escrow account — Account where lender holds property tax + insurance funds and pays them when due. Most AZ VA loans use escrow.
F
FAIR Plan (AZ FAIR Plan) — Insurance of last resort for homes that can't get standard market insurance — typically high-wildfire-risk AZ properties. More expensive, more limited coverage.
FHFA limit — Federal Housing Finance Agency conforming loan limit. 2026 baseline: $832,750 across all 15 AZ counties.
First use — A veteran's first time using VA loan benefit. Lower funding fee (2.15% at $0 down) vs subsequent use (3.30%).
Front-end DTI — PITI as a percentage of gross income. VA prefers ≤29% but DTI alone doesn't decide approval.
Funding fee — One-time VA fee paid at closing (can be financed). 2.15% first use, 3.30% subsequent at $0 down. Waived for 10%+ disability rating. Calculator.
G
Gross income — Income before taxes. Used for DTI calc.
Gross-up — Treatment of tax-free income (VA disability, BAH, etc.) as higher equivalent taxable income for mortgage qualification. Standard 25% boost. Calculator.
H
HB 2792 — Arizona House Bill 2792 (effective Feb 12, 2026), expanded disabled veteran property tax exemption. 100% rated vets get full exemption on primary residence. Full guide.
HOA (Homeowners Association) — Community association charging monthly/annual fees for shared amenities + maintenance. Common in AZ master-planned communities. Affects VA DTI calculation.
Home In Five Advantage — Phoenix-area DPA program (Maricopa + Pinal counties). 5% standard + 1% veteran bonus. Income limit ~$112,000 (2026). Strong stacker with VA.
Home Plus — Statewide AZ DPA program. Up to 5% of loan amount as grant or 3-year forgivable second.
I
IRRRL (Interest Rate Reduction Refinance Loan) — VA streamline refi. No income docs, no appraisal, no funding fee if disability waiver. Must pass VA's 36-month recoupment test. Calculator.
Inspection — Buyer-paid home inspection (separate from VA appraisal). Identifies condition issues + bargaining points.
J
Joint VA loan — Two veterans buying together can use combined entitlement. Each contributes their entitlement; combined down-payment requirement scales accordingly.
Jumbo VA — VA loan above the FHFA conforming limit ($832,750 in AZ). Vets with full entitlement can finance to ~$4M with select lenders.
L
Land lease — Property where you own the home but lease the land. Rare in AZ. VA typically can't finance.
LO (Loan Officer) — Mortgage professional originating loans. Mike is an LO at Cornerstone First Mortgage. NMLS #260555.
LTV (Loan-to-Value ratio) — Loan amount divided by appraised property value. VA allows 100% LTV (and effectively higher with funding fee financed).
Luke AFB — Luke Air Force Base, Glendale AZ. 56th Fighter Wing — F-35A Lightning II. ~7,000 active-duty + 15,000 family members. Base hub page.
M
MCC (Mortgage Credit Certificate) — Federal tax credit for portion of mortgage interest paid. AZ Housing Authority administers. Can stack with VA + DPA.
MHA (Military Housing Area) — Geographic area used to set BAH rates. Luke AFB falls in Phoenix MHA; Davis-Monthan in Tucson MHA.
MPR (Minimum Property Requirements) — VA's property standards. Working A/C, sound roof, adequate water/sewer, no major safety issues, defensible space in wildfire areas.
N
NADL (Native American Direct Loan) — VA loan program for Native veterans on tribal trust land. VA is the direct lender. Full guide.
Net income — Income after taxes. Used for VA residual income calc.
NMLS — Nationwide Multistate Licensing System for mortgage professionals. Mike: NMLS #260555. Cornerstone: NMLS #173855.
O
Occupancy — VA requires primary residence occupancy within 60 days of closing. No exception for second homes or investment property.
Origination fee — Lender fee for processing the loan. VA caps at 1% of loan amount.
P
Pathway to Purchase — AZ DPA program for specific revitalization-area cities. Up to 10% of price (max $20K) as 5-year forgivable second.
PCS (Permanent Change of Station) — Military relocation between duty stations. 60-day window from arrival for VA primary-residence occupancy. Summer PCS tactics.
PITI — Principal, Interest, Taxes, Insurance. Total monthly housing payment. Calculator.
Pre-underwriting (TBD) — Full underwriting before a specific property is identified. Strongest pre-approval format; Mike issues TBD letters for AZ summer-PCS situations.
Primary residence — VA loan requirement. Must occupy as primary residence within 60 days of closing.
R
Reserves (military) — National Guard + Reserve service. Reservists with 6+ years qualify for VA loan benefit.
Residual income — Net income remaining after PITI + utilities + debts. VA's hidden second qualifying test (separate from DTI). Required minimums by family size + region. Calculator.
Restored entitlement — VA entitlement restored after a previous VA loan is paid off (typically via home sale). Allows reuse for next purchase.
S
Seller concessions — Money seller agrees to pay toward buyer closing costs. VA allows up to 4%.
Subsequent use — Second or later use of VA benefit. Higher funding fee (3.30% at $0 down vs 2.15% first use).
Survivor benefits — Surviving spouse of KIA or service-connected disabled vet may be eligible for VA loan + property tax exemptions + Dependency and Indemnity Compensation.
T
TBD (To Be Determined) — Pre-underwriting before property is identified. Strongest pre-approval letter format.
Term — Length of the loan. Standard VA is 30 years; 15-year and 20-year also available.
Tribal trust land — Land held in trust by the federal government for a tribe or individual Native American. Standard VA can't finance; NADL applies.
U
Underwriting — Lender's full review of borrower + property. Verifies income, credit, assets, property.
V
VA appraisal — VA-ordered appraisal verifying property value + MPR compliance. Different from buyer's inspection.
VA Builder ID — Registration number assigned by VA Regional Loan Center to qualified builders. Required for VA construction loans.
VA disability compensation — Monthly tax-free payment based on service-connected disability rating.
VA loan limit — Maximum loan size at full guaranty. 2026 AZ baseline: $832,750.
Vested veteran — Veteran who has earned the VA loan benefit through qualifying military service.
W
Wildfire Factor — Property-specific wildfire risk score (1-10). Higher scores affect insurance availability + costs. Wildfire guide.
WUI (Wildland-Urban Interface) — Areas where development meets wildland. Subject to defensible-space requirements; mostly AZ mountain communities.
Z
Zero-down — Standard VA loan feature. No down payment required.
Term you encountered that's not here? Email Mike and he'll add it — this glossary grows as AZ vets ask new questions.