This is a short, plain-English glossary of the mortgage terms buyers ask about most. Use the search box to find a term fast.
Jump to:A · C · D · E · F · L · M · P · R · T · U · V
A
APR (Annual Percentage Rate)
APR reflects the yearly cost of your loan, including the interest rate plus certain lender fees. It’s helpful for comparing loan options.
Appraisal
An independent opinion of value completed by a licensed appraiser. Lenders use it to confirm the home’s value supports the loan amount.
ARM (Adjustable-Rate Mortgage)
A mortgage where the interest rate can change after an initial fixed period. Payments may go up or down depending on the adjustment terms.
C
Cash to Close
The final amount you bring to closing (down payment + closing costs − credits/earnest money and other adjustments). Shown on your Closing Disclosure (CD).
Closing Costs
Costs due at closing related to the loan and transaction (title, lender fees, recording, escrow setup, etc.). Separate from your down payment.
Conventional Loan
A mortgage that is not insured by FHA or guaranteed by VA/USDA. Often offers flexible options depending on credit, down payment, and property type.
Credit Score
A number based on your credit history. It helps lenders evaluate risk and can affect your rate, loan options, and mortgage insurance.
D
Down Payment
The portion of the purchase price you pay out of pocket. The required amount varies by loan program and qualifications.
DTI (Debt-to-Income Ratio)
Your monthly debt payments divided by your gross monthly income. Lenders use DTI to gauge affordability.
E
Earnest Money
A deposit paid after contract acceptance to show good faith. It’s typically credited toward your cash to close (subject to the contract terms).
Equity
The difference between what your home is worth and what you owe on it. Equity can be used (in some cases) for cash-out refinancing.
Escrow Account
An account your lender may collect into monthly to pay property taxes and homeowners insurance when they come due.
F
FHA Loan
A mortgage insured by the Federal Housing Administration. Often more flexible on credit and down payment than conventional, but requires FHA mortgage insurance.
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the life of the loan, so principal and interest payments are stable.
L
LTV (Loan-to-Value)
The loan amount compared to the home’s value (purchase price or appraised value, depending on the situation). Lower LTV typically means more equity.
Loan Estimate (LE)
A standard form you receive after applying that shows estimated rate, payment, and closing costs. It’s an early estimate—not the final numbers.
M
Mortgage Insurance (MI / PMI)
Insurance required on some loans when down payment is below a certain threshold. It protects the lender—not the borrower.
Mortgage Payment (PITI)
A common shorthand for Principal, Interest, Taxes, and Insurance. Not all loans include taxes/insurance in the monthly payment.
P
Points (Discount Points)
Optional fees paid upfront to reduce the interest rate. Whether points make sense depends on how long you plan to keep the loan.
Pre-Approval
A stronger qualification step that typically includes a credit check and documentation review. It helps show sellers you’re a serious, ready buyer.
Principal
The amount you borrowed (or the balance you still owe), not including interest.
PMI (Private Mortgage Insurance)
Mortgage insurance commonly required on conventional loans with less than 20% down. It can often be removed once you reach certain equity thresholds.
R
Rate Lock
Locks your interest rate for a set period while the loan is processed. Lock timing and terms vary by lender and scenario.
Refinance
Replacing your current mortgage with a new one—often to lower the rate/payment, change the term, remove MI, or access equity (cash-out refinance).
T
Title & Title Insurance
Title confirms legal ownership and identifies liens. Title insurance helps protect against certain past issues (liens, recording errors, etc.).
Taxes & Insurance (Escrowed vs. Non-Escrowed)
Some loans collect taxes/insurance monthly (escrowed). Others allow you to pay them separately. Requirements depend on loan type and equity.
U
Underwriting
The lender’s review to confirm the loan meets guidelines (income, assets, credit, property, and documentation).
Conditions
Items underwriting requests before final approval (updated documents, explanations, corrections, etc.). Clearing conditions is normal.
V
VA Loan
A mortgage guaranteed by the Department of Veterans Affairs for eligible borrowers. Often offers competitive terms and may allow low or no down payment.
VOE / VOD
Verification of Employment (VOE) and Verification of Deposit (VOD) are documents used to confirm employment/income and assets, when required.