Mortgage Glossary

The schedule that shows how a loan is paid down over time through regular payments. Early payments are mostly interest; later payments pay down more of the balance.

An independent estimate of a property's value. The lender uses it as part of the mortgage review.

Annual Percentage Rate. It shows the yearly cost of a loan including the interest rate plus certain fees, so it's often higher than the interest rate alone.

Replacing your current mortgage with a new, larger loan and receiving part of your property's equity as cash.

The stage when the lender's required conditions are done and the mortgage is moving toward closing.

The final step, when documents are signed and the purchase or refinance is completed.

Costs connected with completing the mortgage and the real-estate transaction, such as lender, title, appraisal and recording fees.

Information or a document the lender still needs before the mortgage can move forward. Getting conditions is normal.

Financing used to build a property. The money is usually released in stages, called draws, as work is completed. Some budgets include an interest reserve: money set aside to pay loan interest while the project is being built.

A standard mortgage from a private lender. It is not backed by a government program such as FHA or VA.

Your monthly debt payments compared with your monthly income. Example: $2,000 in debts ÷ $6,000 income = about 33% DTI.

The part of the purchase price you pay yourself instead of borrowing.

Debt Service Coverage Ratio. For a rental property, it compares the monthly rent with the monthly mortgage payment and related housing costs the lender uses.

Money the buyer deposits after signing a purchase contract to show serious intent. Whether it can be returned depends on the contract terms.

The difference between your property's value and the debt on it. Example: $500,000 value − $300,000 mortgage = $200,000 equity.

An account that may collect part of each mortgage payment to pay bills like property taxes and homeowners insurance. "Escrow" can also mean money held by a neutral party until a deal closes.

A mortgage insured by the Federal Housing Administration for eligible borrowers and properties.

A mortgage program for eligible borrowers who are not U.S. citizens or permanent residents. Income, credit and assets may be reviewed differently.

Qualifying with standard income papers, such as tax returns, W-2 forms and pay stubs.

Homeowners Association. A group that may manage a community or condo building and charge regular fees.

Insurance that protects the home against covered damage or loss. Lenders generally require it on financed properties.

The percentage charged for borrowing money.

Individual Taxpayer Identification Number. A tax number from the IRS for certain people who can't get a Social Security Number. Having an ITIN does not by itself qualify someone for a mortgage.

A mortgage for a loan amount above the standard limit for most home loans in that area (called the conforming loan limit).

A short written note the lender asks for to clarify something in your file, like an unusual deposit.

The loan amount compared with the property's value. Example: $400,000 loan ÷ $500,000 value = 80% LTV.

A loan that uses real estate as security. If the loan isn't repaid, the lender can take action against the property.

Insurance that may be required on some mortgages, often depending on the program and down payment. It generally protects the lender, not you.

What a rental or commercial property earns after normal operating costs (like taxes, insurance and maintenance), before the mortgage payment.

PITI stands for Principal, Interest, Taxes and Insurance. PITIA adds applicable association dues, such as HOA payments. Lenders may use these housing costs when reviewing a mortgage.

Fees paid upfront, usually at closing. Some points, called discount points, are paid to get a lower interest rate.

A lender's review of your information and some documents before final approval. It shows what you may be able to borrow, but it is not final approval. What it includes can vary by lender.

A charge that may apply if some loans are paid off or refinanced early.

An early review that estimates what you might be able to borrow, based on the information you share. It is not final loan approval.

The amount you still owe on the loan, not counting interest or fees.

A tax charged by the local government based on real estate you own.

The lender's promise to keep your interest rate for a set time while your loan moves toward closing. The lock agreement sets the details.

Replacing your current mortgage with a new loan.

Money or assets a lender may want you to still have after closing. Reserves are not an extra fee paid to the lender.

Title means the legal ownership of a property. Title insurance protects against certain problems with the property's ownership records.

The lender's review of the borrower, documents, property and mortgage requirements.

A mortgage benefit for eligible veterans, active-duty service members and certain surviving spouses, subject to VA and lender rules.