Glossary
Terms, without the fog.
A concise reference for language you’ll see throughout the mortgage process.
- Amortization
- The process of paying down a loan over time through scheduled payments of principal and interest.
- APR
- Annual Percentage Rate. A broader measure of borrowing cost that can include certain fees in addition to interest.
- Closing Costs
- Fees and prepaid items due at the end of a real estate transaction to finalize the mortgage and transfer.
- Debt-to-Income Ratio
- A comparison of monthly debt obligations to gross monthly income, used in underwriting evaluations.
- Earnest Money
- A deposit made with an offer to demonstrate serious intent to purchase a property.
- Escrow
- An account or arrangement that holds funds for taxes, insurance, or transaction purposes according to agreed terms.
- Loan Estimate
- A standardized disclosure that outlines estimated loan terms, payments, and closing costs early in the process.
- Pre-Approval
- A preliminary assessment of borrowing capacity based on reviewed financial information, subject to full underwriting.
- Principal
- The amount borrowed, excluding interest. Principal is reduced as the loan amortizes.
- Private Mortgage Insurance (PMI)
- Insurance that may be required on certain conventional loans with lower down payments.