A

Amortization
The process of gradually paying off a mortgage through scheduled payments of principal and interest over a set period.

Appraisal
A professional assessment of a property’s market value, typically conducted before a loan is approved.

Annual Percentage Rate (APR)
The total yearly cost of a mortgage, including interest and fees, expressed as a percentage.

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B

Bridge Loan
A short-term loan used to bridge the gap between the sale of one home and the purchase of another.

Buydown
A financing technique where the borrower or seller pays an upfront fee to reduce the interest rate for the first few years or the life of the loan.

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C

Closing Costs
Fees and expenses (not included in the price of the home) paid at the closing of a real estate transaction.

Credit Score
A numerical representation of a borrower’s creditworthiness based on credit history.

Conventional Loan
A mortgage not backed by a government agency, such as FHA or VA.

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D

Down Payment
The initial upfront portion of the total home purchase price that a buyer pays out of pocket.

Debt-to-Income Ratio (DTI)
A ratio that compares your monthly debt payments to your monthly income, used by lenders to assess affordability.

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E

Equity
The difference between the market value of your home and the amount you still owe on your mortgage.

Escrow
An account held by a third party to manage payments like taxes and insurance, or to hold funds during the home buying process.

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F

Fixed-Rate Mortgage
A mortgage with an interest rate that remains constant throughout the life of the loan.

FHA Loan
A mortgage insured by the Federal Housing Administration, often suitable for first-time homebuyers.

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G

Gift Letter
A written statement confirming that funds given for a down payment are a gift and not a loan.

Good Faith Estimate (GFE)
An estimate of closing costs provided by the lender, now replaced by the Loan Estimate under TRID rules.

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H

Home Inspection
An evaluation of a property’s condition conducted by a professional inspector before purchase.

Homeowners Insurance
Coverage that protects against damages to the home and liability for accidents on the property.

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I

Interest Rate
The percentage charged on a loan, representing the cost of borrowing.

Interest-Only Mortgage
A loan where only interest is paid for an initial period, after which principal payments begin.

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J

Jumbo Loan
A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac.

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L

Loan Estimate
A standardized document that outlines key loan terms, monthly payments, and closing costs.

Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the appraised value or purchase price of the property.

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M

Mortgage Insurance
Insurance that protects the lender if the borrower defaults, required on loans with less than 20% down.

Mortgage Pre-Approval
A lender’s conditional commitment to provide a loan, based on income and credit verification.

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P

Points
Fees paid directly to the lender at closing in exchange for a reduced interest rate.

Principal
The original amount of money borrowed, not including interest.

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R

Refinance
Replacing an existing mortgage with a new one, usually to get a better interest rate or loan term.

Rate Lock
An agreement that guarantees a specific interest rate for a certain period, often until closing.

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T

Title Insurance
Protects against potential legal claims or disputes over ownership of the property.

Truth in Lending Act (TILA)
Federal law requiring lenders to disclose loan terms and costs to borrowers.

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V

VA Loan
A mortgage loan available to veterans and active military members, backed by the Department of Veterans Affairs.

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W

Warranty Deed
A document that guarantees a clear title to the buyer of real property.