Mortgage Dictionary
Search common mortgage terms and what they actually mean.
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that adjusts periodically based on a market index after an initial fixed period.
Amortization
The process of paying off a loan over time through scheduled payments of principal and interest.
Annual Percentage Rate (APR)
The yearly cost of a loan expressed as a percentage, including interest and most lender fees.
Appraisal
An independent professional opinion of a property's market value, typically required by the lender.
Closing Costs
Fees paid at closing, such as origination, title, appraisal, recording, and prepaid taxes and insurance.
Conventional Loan
A mortgage not insured or guaranteed by a government agency, usually following Fannie Mae or Freddie Mac guidelines.
Debt-to-Income Ratio (DTI)
Your total monthly debt payments divided by your gross monthly income, used to gauge affordability.
Down Payment
The portion of the purchase price you pay up front, expressed in dollars or as a percentage.
Earnest Money
A good-faith deposit submitted with your offer that is typically applied to your down payment or closing costs.
Equity
The difference between your home's market value and the amount you still owe on your mortgage.
Escrow
An account held by the servicer to collect and pay property taxes and homeowners insurance on your behalf.
FHA Loan
A mortgage insured by the Federal Housing Administration, often allowing lower down payments and more flexible credit.
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the entire loan term.
Interest Rate
The percentage charged by the lender for borrowing the loan amount, excluding other loan costs.
Jumbo Loan
A mortgage that exceeds the conforming loan limits set for the county where the property is located.
Loan Estimate
A standardized three-page disclosure showing estimated rate, payment, and closing costs for your loan.
Loan-to-Value Ratio (LTV)
The loan amount divided by the appraised value of the home, expressed as a percentage.
Mortgage Insurance (PMI/MIP)
Insurance that protects the lender if a borrower defaults, typically required with a lower down payment.
Origination Fee
A fee charged by the lender for processing and underwriting your mortgage application.
Points
Prepaid interest paid at closing to lower your interest rate. One point equals 1% of the loan amount.
Pre-Approval
A lender's conditional commitment based on a review of your credit, income, and assets.
Principal
The amount borrowed, or the remaining unpaid balance of your loan.
Rate Lock
A lender's commitment to hold a specific interest rate for a set period while your loan is processed.
Refinance
Replacing an existing mortgage with a new one, often to change the rate, term, or access equity.
Title Insurance
Protection against losses from defects in the property's title, such as liens or ownership disputes.
Underwriting
The lender's review and verification of your credit, income, assets, and the property before final approval.
USDA Loan
A mortgage guaranteed by the U.S. Department of Agriculture for eligible rural and suburban buyers.
VA Loan
A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, Veterans, and spouses.
