Mortgage glossary

Short definitions in ordinary language. They are not the wording from a mortgage note, and each one links to the calculator that actually uses the term.

• AmortizationThe schedule for paying off a loan through regular payments of principal and interest.
• AppraisalA licensed opinion of a home's value, used by a lender to judge the collateral.
• APRAnnual percentage rate, a comparison figure that includes the note rate and certain upfront finance charges.
• ARMAn adjustable-rate mortgage, whose interest rate can change after an initial period, subject to caps.
• Closing costsThe lender, title, government, and prepaid amounts due to finish a mortgage.
• Conventional loanA mortgage that is not insured by FHA or guaranteed by VA or USDA.
• Credit scoreA number that summarizes information in a credit report.
• Down paymentThe portion of the purchase price you pay up front and do not finance.
• DTIDebt-to-income ratio: monthly debt payments divided by gross monthly income.
• EquityThe home's value minus the mortgage balances secured by it.
• EscrowAn account a servicer uses to collect and pay property taxes and homeowners insurance.
• FHA loanA mortgage insured by the Federal Housing Administration.
• Fixed-rate mortgageA loan whose note rate stays the same for the term.
• Good Faith EstimateAn older form used to disclose estimated loan terms. Most mortgages now use a Loan Estimate.
• HOAA homeowners association, which can charge dues and enforce community rules.
• Homeowners insuranceA policy that covers the house against insured damage and liability.
• Interest rateThe note rate used to calculate interest on the remaining balance.
• Jumbo loanA mortgage larger than the conforming loan limit for the county and year.
• LTVLoan-to-value ratio: the loan amount divided by the home's value.
• MIPMortgage insurance premium on an FHA loan, with an upfront amount and an annual amount.
• Origination feeA lender charge for making the loan, often expressed as a percent of the loan amount.
• PITIPrincipal, interest, taxes, and insurance, a shorthand for the core housing payment.
• PMIPrivate mortgage insurance on many conventional loans that start with less than 20% equity.
• PointsDiscount points are prepaid interest, often 1% of the loan per point, paid for a lower rate.
• Pre-approvalA lender's conditional review of your income, assets, and credit.
• Pre-qualificationAn informal estimate of how much you might borrow, often based on figures you state.
• PrincipalThe amount you still owe, or the portion of a payment that reduces that amount.
• Rate lockA lender's agreement to hold a quoted rate for a set number of days.
• RefinanceReplacing an existing mortgage with a new one.
• Title insuranceA policy that protects against covered defects in the ownership history of the property.
• UnderwritingThe lender's review of whether to make a particular loan.
• USDA loanA mortgage backed by the U.S. Department of Agriculture for eligible rural properties and incomes.
• VA loanA mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and some surviving spouses.