Mortgage Glossary
Mortgage paperwork is full of jargon. This glossary defines the terms you'll run into most often when buying or refinancing a home, each with a short, plain-English explanation and links to the calculators and guides where the term comes up.
Want the bigger picture rather than a single definition? Browse our mortgage guides for step-by-step explanations.
- Adjustable-Rate Mortgage (ARM)
- A loan with a rate that is fixed at first and then adjusts periodically with the market.
- Amortization
- Paying off a loan over time through scheduled payments of principal and interest.
- Annual Percentage Rate (APR)
- The yearly cost of a mortgage including interest and most lender fees, shown as one percentage.
- Appraisal
- A licensed estimate of a home's market value, required by the lender before closing.
- Closing Costs
- The fees you pay to finalize a mortgage, such as origination, appraisal, and title charges.
- Conventional Loan
- A mortgage not backed by a government agency — the most common U.S. loan type.
- Debt-to-Income Ratio (DTI)
- A percentage comparing your monthly debt payments to your gross monthly income.
- Discount Points
- Upfront fees paid at closing to buy down your mortgage interest rate.
- Down Payment
- The upfront cash you pay toward a home's price, reducing how much you borrow.
- Earnest Money
- A good-faith deposit submitted with an offer, credited toward your costs at closing.
- Escrow
- An account a lender uses to hold and pay your property taxes and homeowners insurance.
- FHA Loan
- A government-insured mortgage with easier credit requirements and 3.5% minimum down.
- Fixed-Rate Mortgage
- A loan whose interest rate stays the same for the whole term, keeping payments steady.
- Home Equity
- The share of your home you own outright — market value minus the remaining loan balance.
- Homeowners Insurance
- Required insurance covering the home and liability; the second "I" in PITI.
- Jumbo Loan
- A mortgage above the conforming loan limit, with stricter credit and down-payment requirements.
- Loan-to-Value Ratio (LTV)
- A percentage comparing how much you borrow to the home's value, used by lenders to judge risk.
- Mortgage Pre-Approval
- A lender's documented, credit-checked estimate of how much you can borrow.
- PITI
- Principal, Interest, Taxes, Insurance — the four components of a full monthly housing payment.
- Principal
- The amount you borrow and still owe on a mortgage, separate from interest.
- Private Mortgage Insurance (PMI)
- A fee on conventional loans with less than 20 percent down that protects the lender, not you.
- Property Tax
- The annual local levy on your home's assessed value; the "T" in PITI.
- Rate Lock
- A lender's guarantee that your quoted rate won't change for a set period before closing.
- Refinancing
- Replacing an existing mortgage with a new loan, typically for a better rate or different term.
- Title Insurance
- One-time insurance protecting the lender (and optionally you) against hidden defects in a home's ownership history.
- Underwriting
- The lender's final verification of your finances and the property before loan approval.
- VA Loan
- A zero-down mortgage guaranteed by the Department of Veterans Affairs for eligible service members.
