Mortgage Glossary

Showing 34 of 34 terms.

Adjustable-rate mortgage

A mortgage whose interest rate can change after an initial fixed period, based on an index and margin defined in the loan documents.

Amortization

The schedule by which a loan balance is repaid over time, with each payment split between interest and principal.

Annual percentage rate

A rate that reflects the interest rate plus certain financing costs, intended to help compare loan offers on a broader basis than rate alone.

Appraisal

An independent opinion of a property's value prepared for the lender by a licensed or certified appraiser.

Assets

Funds and holdings you can document, such as checking, savings, and eligible retirement or investment accounts, used for down payment, closing costs, and reserves.

Closing costs

Fees required to originate and close a mortgage, which can include lender, title, appraisal, and recording charges.

Closing Disclosure

A required document provided before closing that details final loan terms, projected payments, and closing costs.

Conforming loan

A loan that meets the applicable loan limit and guidelines to be eligible for purchase by the government-sponsored enterprises.

Conventional loan

A mortgage that is not insured or guaranteed by a government program such as FHA, VA, or USDA.

Credit report

A record of your credit accounts, payment history, balances, and inquiries, compiled by consumer reporting agencies.

Debt-to-income ratio

Your monthly debt obligations, including the proposed housing payment, divided by your qualifying monthly income.

Discount points

An optional upfront charge paid to reduce the interest rate on a loan. One point generally equals one percent of the loan amount.

Down payment

The portion of the purchase price you pay from your own eligible funds rather than financing.

Earnest money

A deposit submitted with a purchase offer to show good faith, typically held by a third party and applied at closing.

Equity

The difference between a property's value and the balances of the loans secured by it.

Escrow

An arrangement in which a third party holds funds or documents. It can refer to the closing process or to an account used to pay taxes and insurance.

FHA loan

A mortgage insured by the Federal Housing Administration, available for eligible primary-residence transactions under program rules.

Fixed-rate mortgage

A mortgage whose interest rate stays the same for the entire loan term, producing a stable principal-and-interest payment.

Homeowners insurance

A policy covering damage to the property and certain liability risks. Lenders require coverage on financed homes.

Jumbo loan

A mortgage with a loan amount above the conforming limit applicable to the property and transaction.

Loan Estimate

A standardized disclosure provided after application that summarizes estimated loan terms, payments, and closing costs.

Loan-to-value ratio

The loan amount divided by the property's value or purchase price, expressed as a percentage.

Mortgage insurance

Insurance that protects the lender against loss. Requirements and costs depend on the program and loan structure.

Origination

The process of taking an application, gathering documentation, and preparing a loan for underwriting and closing.

Pre-approval

A lender's assessment after reviewing documented income, credit, and assets, indicating the terms you may qualify for subject to further review.

Prepaid items

Amounts collected at closing in advance of when they are due, such as interest, homeowners insurance, and property taxes.

Principal and interest

The portion of a monthly mortgage payment that repays the loan balance and pays the interest charged on it.

Private mortgage insurance

Mortgage insurance on a conventional loan, generally required when the down payment or equity is below program thresholds.

Refinance

Replacing an existing mortgage with a new loan, which may change the rate, term, structure, or balance.

Reserves

Documented funds remaining after closing, often measured in months of housing payments. Requirements vary by program.

Title insurance

Insurance protecting against certain defects in the ownership record of a property. Lender and owner policies serve different parties.

Underwriting

The lender's review of the borrower, the documentation, and the property against program guidelines to make a credit decision.

VA funding fee

A one-time fee charged on most VA loans, which may be financed. Some borrowers are exempt based on program rules.

VA loan

A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and qualifying surviving spouses.