Mortgage Glossary

A loan whose interest rate can change after an initial fixed period, based on a published index.

The process of paying off a loan over time through regular payments of principal and interest.

The yearly cost of a loan including interest and certain fees, expressed as a percentage. Useful for comparing loans.

A professional estimate of a home's market value, required by lenders to confirm the property is worth the loan amount.

Replacing your mortgage with a larger one and taking the difference in cash, drawing on your home equity.

Fees paid at the close of a real estate transaction, typically 2–5% of the loan amount.

A standardized form detailing your final loan terms and costs, provided at least three business days before closing.

A conventional loan that meets the dollar limits set by the Federal Housing Finance Agency.

A condition in a purchase contract — such as financing, appraisal, or inspection — that must be met for the sale to proceed.

The percentage of your gross monthly income that goes toward debt payments. Lenders use it to assess affordability.

The portion of a home's price you pay upfront, expressed as a percentage of the purchase price.

A good-faith deposit a buyer puts down with an offer, credited toward the purchase at closing.

The portion of your home you truly own — its market value minus the amount you still owe.

An account held by your lender to collect and pay property taxes and insurance on your behalf.

An account your servicer uses to collect and pay property taxes and homeowners insurance as part of your monthly payment.

A mortgage insured by the Federal Housing Administration, popular for low down payments and flexible credit.

A loan whose interest rate stays the same for the entire term.

A home equity line of credit — a revolving, usually variable-rate loan you can draw against using your home's equity.

A one-time lump-sum loan against your home's equity, typically at a fixed rate repaid in installments.

The cost of borrowing the loan amount, expressed as a yearly percentage — distinct from APR, which also folds in certain fees.

A mortgage that exceeds conforming loan limits and has stricter qualification requirements.

A standardized 3-page form showing estimated loan terms, payments, and closing costs.

The loan amount as a percentage of the home's value; a lower LTV (more equity) generally earns better terms.

Insurance that protects the lender if a borrower defaults; required on many low-down-payment loans.

A lender's charge for processing a new loan, usually shown as a percentage of the loan amount.

Optional upfront fees (1 point = 1% of the loan) paid to lower your interest rate.

A lender's conditional commitment to lend up to a certain amount based on a review of your finances.

A fee some loans charge for paying the balance off early; many modern mortgages have none — always ask.

The amount of money you borrow, or the remaining balance you owe.

A lender's guarantee to hold a quoted interest rate for a set period while your loan is processed.

Replacing your current mortgage with a new one, usually to lower the rate, change the term, or tap equity.

A policy protecting the buyer and lender against defects in the property's ownership history.

The lender's process of verifying your finances and the property before approving a loan.

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