Complete Mortgage Terminology Glossary

Amortization

The gradual repayment of a loan through scheduled installments of principal and interest.

Annual Percentage Rate (APR)

The total yearly cost of borrowing, including interest and fees.

Appraisal

A professional estimate of a property's market value.

Assumable Mortgage

A home loan that can be transferred from the current borrower to a new buyer.

Balloon Mortgage

A loan with small monthly payments followed by a large final lump-sum payment.

Borrower

The person responsible for repaying the mortgage loan.

Broker

A licensed professional who connects borrowers with lenders.

Closing

The final step in a real estate transaction where documents are signed and ownership transfers.

Closing Costs

Fees paid at closing, including lender charges, title fees, taxes, and insurance.

Co-Borrower

A second borrower equally responsible for the mortgage.

Collateral

The property securing the loan; the lender can claim it if the borrower defaults.

Conforming Loan

A mortgage that meets Fannie Mae and Freddie Mac guidelines.

Construction Loan

Short-term financing used to build a home, often converted to a permanent mortgage.

Credit Score

A numerical rating of a borrower's creditworthiness.

Debt-to-Income Ratio (DTI)

A measure comparing monthly debt payments to monthly income.

Default

Failure to meet mortgage payment obligations.

Down Payment

The upfront amount paid toward the purchase price of a home.

Earnest Money

A buyer’s deposit showing commitment to purchase.

Equity

The difference between the home's value and the mortgage balance.

Escrow

A third-party account holding funds for taxes, insurance, or closing.

FHA Loan

A government-insured loan designed for lower-income or first-time buyers.

Fixed-Rate Mortgage

A loan with an interest rate that stays the same for the entire term.

Foreclosure

The legal process where a lender takes possession of a home after default.

Freddie Mac

A government-sponsored enterprise that buys and securitizes mortgages.

Fannie Mae

A similar GSE that supports mortgage liquidity.

Good Faith Estimate (GFE)

A disclosure listing estimated closing costs (now replaced by the Loan Estimate).

HELOC

A revolving credit line secured by home equity.

Home Equity Loan

A second mortgage using home equity as collateral.

Home Inspection

A professional evaluation of a property's condition.

Interest Rate

The cost of borrowing money, expressed as a percentage.

Jumbo Loan

A mortgage exceeding conforming loan limits.

Lien

A legal claim against a property until a debt is paid.

Loan Estimate

A standardized disclosure outlining loan terms and closing costs.

Loan-to-Value Ratio (LTV)

The percentage of the home's value financed by the mortgage.

Mortgage

A loan used to purchase real estate, secured by the property.

Mortgage Insurance

Protection for the lender if the borrower defaults.

Mortgage Note

The legal document outlining loan terms and repayment obligations.

Origination Fee

A lender charge for processing a mortgage application.

Points

Upfront fees paid to reduce the interest rate.

Preapproval

A lender’s conditional commitment stating how much a borrower can qualify for.

Prepayment Penalty

A fee charged for paying off a loan early.

Principal

The amount borrowed, excluding interest.

Private Mortgage Insurance (PMI)

Insurance required when the down payment is under 20%.

Rate Lock

A guarantee that the interest rate won’t change before closing.

Refinancing

Replacing an existing mortgage with a new one, often for a lower rate.

Second Mortgage

A subordinate loan secured by home equity.

Seller Concession

Costs the seller agrees to pay to help the buyer close.

Short Sale

A sale where the lender accepts less than the mortgage balance.

Title

Legal ownership of a property.

Title Insurance

Protection against title defects or ownership disputes.

Underwriting

The lender’s process of evaluating risk and approving the loan.

VA Loan

A government-backed loan for eligible veterans and service members.

Variable-Rate Mortgage

A loan with an interest rate that can change over time.

Verification of Employment (VOE)

A lender check confirming the borrower’s job status.