- Adjustable-Rate Mortgage (ARM)
- A mortgage with an interest rate that changes periodically after an initial fixed period, based on a market index.
- Amortization
- The process of paying off a loan over time through regular payments that cover both principal and interest, with the split between the two shifting as the loan matures.
- Annual Percentage Rate (APR)
- The total yearly cost of a loan, including the interest rate plus certain fees, expressed as a percentage. APR is usually higher than the interest rate and is the better number for comparing loan offers.
- Appraisal
- A professional assessment of a property's market value, typically required by lenders before approving a loan.
- Closing Costs
- Fees and expenses paid at the end of a real estate transaction, beyond the property price — such as loan origination fees, title insurance, and recording fees.
- Closing Disclosure
- A federally required document outlining the final terms and costs of a mortgage, provided to the borrower at least three business days before closing.
- Conventional Loan
- A mortgage not insured or guaranteed by a government agency, typically requiring stronger credit and a larger down payment than government-backed loans.
- Debt-to-Income Ratio (DTI)
- The percentage of a borrower's gross monthly income that goes toward debt payments, used by lenders to assess repayment ability.
- Down Payment
- The portion of a home's purchase price paid upfront in cash, reducing the amount that needs to be financed.
- Earnest Money
- A deposit made to show a buyer's good faith when making an offer on a home, typically held in escrow and applied toward closing costs or the down payment.
- Equity
- The difference between a home's current market value and the outstanding balance on any loans secured against it.
- Escrow
- A neutral third-party account that holds funds or documents during a transaction — or an ongoing account a lender uses to collect and pay a homeowner's property taxes and insurance.
- FHA Loan
- A mortgage insured by the Federal Housing Administration, often allowing for lower down payments and more flexible credit requirements.
- Fixed-Rate Mortgage
- A mortgage with an interest rate that stays the same for the entire loan term.
- Home Equity Line of Credit (HELOC)
- A revolving line of credit secured by a home's equity, allowing a homeowner to borrow, repay, and borrow again up to a set limit.
- Loan Estimate
- A standardized document lenders must provide within three business days of a loan application, detailing estimated rates, payments, and closing costs.
- Loan-to-Value Ratio (LTV)
- The loan amount expressed as a percentage of the property's appraised value. A lower LTV generally means less risk to the lender.
- Mortgage Insurance (PMI / MIP)
- Insurance that protects the lender if a borrower defaults, typically required when the down payment is below a certain threshold. PMI applies to conventional loans; MIP applies to FHA loans.
- NMLS
- The Nationwide Multistate Licensing System — the database that licenses and tracks mortgage professionals and companies across the U.S.
- Origination Fee
- A fee charged by a lender or broker for processing a new loan application.
- Points (Discount Points)
- An upfront fee paid to reduce the interest rate on a loan. One point typically costs 1% of the loan amount.
- Pre-Approval
- A lender's conditional commitment to lend a specific amount, based on a review of the borrower's financial documents — a stronger position than pre-qualification.
- Pre-Qualification
- An informal estimate of how much a borrower might be able to borrow, based on self-reported financial information, without verification.
- Principal
- The amount of money borrowed, not including interest.
- Rate Lock
- A lender's guarantee to hold a specific interest rate for a set period while a loan is being processed.
- Refinance
- Replacing an existing mortgage with a new one, typically to secure a better rate, change the loan term, or access home equity.
- Title Insurance
- Insurance that protects against losses from defects in a property's title, such as unknown liens or ownership disputes.
- Underwriting
- The process by which a lender evaluates a borrower's creditworthiness and the property's value to decide whether to approve a loan.
- VA Loan
- A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, service members, and some surviving spouses — often with no down payment required.