Mortgage Jargon Cheat Sheet

Mortgage Jargon Cheat Sheet

Loan Basics

  • Mortgage – A loan you use to buy a home. You pay it back over time, usually with interest.

  • Principal – The actual amount of money you borrow.

  • Interest – The cost of borrowing money, shown as a percentage (rate).

  • Amortization – The schedule of payments that gradually reduce your loan balance over time.

Loan Types

  • VA Loan – A benefit for Veterans, active duty, and some surviving spouses that often requires no down payment.

  • Conventional Loan – A standard loan not insured by the government. Usually requires good credit and a down payment.

  • FHA Loan – A government-backed loan with lower credit and down payment requirements.

  • USDA Loan – A loan for homes in rural areas, often with no down payment.

Up-Front Costs

  • Down Payment – The money you pay toward the home up front (VA loans often don’t require one).

  • Closing Costs – Fees for processing the loan, title work, and other services at closing.

  • Earnest Money – A deposit you put down with your offer to show the seller you’re serious.

Monthly Costs

  • PITI – Stands for Principal, Interest, Taxes, and Insurance. This is your total monthly mortgage payment.

  • Escrow – An account set up by the lender to pay property taxes and insurance on your behalf.

  • PMI (Private Mortgage Insurance) – Insurance required on many loans when you put less than 20% down. Not required on VA loans.

Loan Terms & Rates

  • Fixed-Rate Mortgage – The interest rate stays the same for the entire loan term.

  • Adjustable-Rate Mortgage (ARM) – The interest rate can change after an initial fixed period.

  • APR (Annual Percentage Rate) – The true yearly cost of your loan, including interest and some fees.

  • Loan Term – How long you have to pay the loan back (like 15 years or 30 years).

Appraisal & Approval

  • Prequalification – An estimate of what you may be able to borrow based on your information.

  • Preapproval – A lender’s written commitment after reviewing your credit and finances.

  • Appraisal – A professional estimate of the home’s value.

  • Underwriting – The process where the lender reviews your finances and decides if you qualify.

  • DTI (Debt-to-Income Ratio) – A measure of your monthly debts compared to your income.

After Closing

  • Equity – The part of the home you truly “own.” It’s the difference between what your home is worth and what you owe.

  • Refinance – Replacing your old mortgage with a new one, often to get a lower rate or better terms.

  • Foreclosure – When the lender takes back the home if you stop making payments.

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