Real estate jargon can be confusing. Use our comprehensive dictionary to understand your mortgage from A to Z.
A mortgage in which the interest rate is applied on the outstanding balance and varies throughout the life of the loan. Typically, the initial interest rate is fixed for a period of time, after which it resets periodically.
The process of paying off a loan over time through regular, equal payments. A portion of each payment goes toward the principal balance, and the rest goes toward interest.
The total cost of borrowing money, expressed as a yearly percentage. It includes the interest rate plus other fees, such as mortgage insurance, most closing costs, discount points, and loan origination fees.
A professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage, and construction quality.
The valuation placed on a property by a public tax assessor for purposes of taxation.
A refinancing of an existing mortgage loan, where the new mortgage is for a larger amount than the existing mortgage, and you (the borrower) get the difference in cash.
Fees and expenses, over and above the price of the property, incurred by the buyer and seller in the property transfer. These typically include origination fees, appraisal fees, title insurance, and taxes.
A mortgage loan not insured by any government program, typically meeting the lending limits and requirements set by Fannie Mae and Freddie Mac.
A personal finance measure that compares an individual's monthly debt payment to their monthly gross income. Lenders use this to measure your ability to manage the monthly payments to repay the money you plan to borrow.
The portion of the home's purchase price that you pay upfront and does not come from a mortgage lender.
A deposit made to a seller that represents a buyer's good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections.
The difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
An account held by the lender into which the homebuyer pays money for tax or insurance payments. Also refers to the period during a real estate transaction where a third party holds funds and documents.
A mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, they require lower minimum down payments and credit scores than many conventional loans.
A home loan with an interest rate that stays the same for the entire life of the loan.
A line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans.
An organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and their residents.
A form of property insurance that covers losses and damages to an individual's house and to assets in the home. It also provides liability coverage against accidents in the home or on the property.
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
A mortgage used to finance properties that are too expensive for a conventional conforming loan. The maximum amount for a conforming loan is set by the Federal Housing Finance Agency (FHFA).
A three-page form that you receive after applying for a mortgage. It tells you important details about the loan you have requested, including the estimated interest rate, monthly payment, and total closing costs.
A financial term used by lenders to express the ratio of a loan to the value of an asset purchased. It is calculated by dividing the amount borrowed by the appraised value of the property.
An insurance policy used in FHA loans if your down payment is less than 20%. The FHA assesses either an upfront MIP at the time of closing, or an annual MIP that is calculated every year and paid in 12 installments.
An evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan from the lender, or the maximum amount that the lender would be willing to lend.
An initial evaluation of the creditworthiness of a potential borrower, used to determine the estimated amount that the person can borrow. It's less rigorous than a pre-approval.
The amount of money borrowed or the amount still owed on a loan, separate from interest.
A type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.
Insurance that protects the lender and buyer against any losses incurred from disputes over the title of the property.
The process a lender uses to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable.
A mortgage loan available through a program established by the United States Department of Veterans Affairs (VA). They are available to veterans, active-duty personnel, and surviving spouses.