A
Adjustable-Rate Mortgage (ARM)
A mortgage whose interest rate may adjust after an initial period according to the loan terms and an identified index and margin.
Mortgage Terms in Plain English
Mortgage Glossary
An easy-to-search reference for the language used throughout the home-financing process.
A–Z Reference
Know the language behind your loan.
Search by term or choose a letter. Definitions are general and may be applied differently depending on the program, lender and transaction.
A
Amortization
The scheduled repayment of a loan through periodic principal and interest payments over time.
A
Annual Percentage Rate (APR)
A broader measure of borrowing cost expressed as an annual rate. It includes the interest rate and certain loan charges but is not the same as the note rate.
A
Appraisal
A licensed or certified appraiser’s independent opinion of a property’s value based on relevant data and property characteristics.
A
Assets
Funds or property with value, such as checking, savings, investments or eligible retirement accounts, that may be reviewed for qualification and closing.
C
Closing Costs
Charges and prepaid items connected with obtaining the loan and completing the real-estate transaction.
C
Closing Disclosure (CD)
A standardized form that provides final loan terms, projected payments and closing costs for most covered mortgages.
C
Closing/Consummation
The stage when final documents are executed and the borrower becomes contractually obligated on the loan. Recording and key delivery may occur afterward.
C
Conforming Loan
A conventional loan that meets applicable requirements for acquisition by Fannie Mae or Freddie Mac, including loan limits.
C
Credit Report
A record of credit accounts, payment history, balances and public-record information supplied by a consumer reporting company.
D
Debt-to-Income Ratio (DTI)
A comparison of specified monthly debt obligations to qualifying gross monthly income. Calculation methods vary by program.
D
Discount Points
An upfront charge, generally expressed as a percentage of the loan amount, paid in connection with the interest rate.
D
Down Payment
The portion of a purchase price paid from the buyer’s eligible funds or approved assistance rather than financed by the first mortgage.
E
Earnest Money Deposit
Funds a buyer deposits under a purchase agreement to demonstrate good faith, handled according to the contract and local practice.
E
Escrow Account
An account used by a loan servicer to collect and pay certain property taxes, homeowners insurance and other eligible charges.
E
Equity
The difference between a property’s current value and amounts owed against it.
F
FHA Loan
A mortgage insured by the Federal Housing Administration and made by an approved lender, subject to FHA and lender requirements.
F
Fixed-Rate Mortgage
A mortgage with a note interest rate that remains fixed for the stated loan term. Taxes, insurance and other payment components can still change.
F
Funds to Close
The verified amount a borrower must provide at closing after accounting for deposits, credits, loan proceeds and transaction charges.
H
Homeowners Insurance
Property insurance that generally protects against covered damage and liability. Lenders commonly require acceptable coverage.
I
Interest Rate
The percentage charged for borrowing principal. It is not the same as APR.
J
Jumbo Loan
A mortgage amount above the applicable conforming loan limit or otherwise classified as jumbo by the lender or investor.
L
Loan Estimate (LE)
A standardized form showing estimated loan terms, payments and closing costs after a lender receives an application for most covered mortgages.
L
Loan-to-Value Ratio (LTV)
The loan amount divided by the property value used for the transaction, expressed as a percentage.
M
Mortgage Insurance
Coverage that protects the lender or program against certain losses. Requirements and structure vary by loan type.
N
Non-QM Loan
A mortgage that does not meet the federal Qualified Mortgage definition. It may use alternative documentation but remains subject to ability-to-repay and lender requirements as applicable.
N
Note Rate
The interest rate stated in the promissory note and used to calculate principal and interest.
O
Origination Charges
Certain lender or broker charges associated with arranging, processing or underwriting a mortgage.
P
Pre-Approval
A conditional assessment of potential borrowing eligibility based on information reviewed at that time; it is not final approval or a commitment to lend.
P
Prepaid Items
Amounts collected at closing for expenses such as interest, property taxes or insurance that relate to periods before or after closing.
P
Principal
The amount borrowed or the unpaid balance of a loan, excluding interest and other charges.
P
Private Mortgage Insurance (PMI)
Mortgage insurance that may apply to certain conventional loans, often based on down payment or loan-to-value ratio.
R
Rate Lock
A written agreement that protects a specified interest rate for a defined period, subject to its terms and the transaction remaining eligible.
R
Reserves
Eligible funds remaining after closing that may be measured in months of specified housing payments.
T
Title Insurance
Insurance that protects against certain covered title defects. Separate policies may protect the lender and owner.
U
Underwriting
The review of the borrower, property and transaction against credit, risk and program requirements.
U
USDA Loan
An eligible rural-housing mortgage guaranteed or made through a U.S. Department of Agriculture program, subject to property and household requirements.
V
VA Loan
A mortgage benefit backed by the U.S. Department of Veterans Affairs for eligible borrowers, subject to VA and lender requirements.
No matching terms were found.
This glossary is educational and does not modify a loan agreement, disclosure, program guideline or legal definition.
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