Mortgage Glossary & Product Guide
Understand the language of home loans and compare top mortgage products side by side.
APR (Annual Percentage Rate)
The total yearly cost of a mortgage expressed as a percentage, including interest and fees. Always higher than the base interest rate.
Amortization
The process of paying off a loan over time through regular payments that cover both principal and interest.
Closing Costs
Fees and expenses paid at the closing of a real estate transaction, typically 2–5% of the loan amount. Includes appraisal, title insurance, and origination fees.
Debt-to-Income Ratio (DTI)
A percentage comparing your monthly debt payments to your gross monthly income. Most lenders prefer a DTI below 43%.
Down Payment
The upfront cash payment made toward the purchase price. Conventional loans typically require 3–20%, while some government loans allow 0% down.
Earnest Money
A deposit made to a seller showing the buyer's good faith in a transaction. Typically 1–3% of the purchase price.
Escrow
An account held by a third party where funds are kept until all conditions of a transaction are met. Also used for tax and insurance payments.
Equity
The difference between your home's market value and the remaining balance on your mortgage. Builds over time as you pay down the loan.
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the entire loan term, providing predictable monthly payments.
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on market conditions. Often starts with a lower introductory rate.
Interest Rate
The percentage charged by the lender for borrowing money, expressed as an annual rate. Does not include fees (see APR).
Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the appraised value of the property. An LTV above 80% typically requires PMI.
PMI (Private Mortgage Insurance)
Insurance required when your down payment is less than 20%. Protects the lender if you default. Can be removed once you reach 20% equity.
Pre-Approval
A lender's conditional commitment to lend you a specific amount based on your financial information. Stronger than pre-qualification.
Pre-Qualification
An informal estimate of how much you may be able to borrow, based on self-reported financial information.
Principal
The original amount of money borrowed, or the remaining balance owed on a loan, not including interest.
Refinance
Replacing your existing mortgage with a new one, typically to get a lower interest rate, change loan terms, or access equity.
Title Insurance
Insurance that protects against losses from defects in the title to a property, such as liens or ownership disputes.
Underwriting
The process a lender uses to evaluate your creditworthiness and the risk of lending to you before approving a mortgage.
Points (Discount Points)
Upfront fees paid to the lender at closing to reduce your interest rate. One point equals 1% of the loan amount.