Appraisal
An independent opinion of property value used in the lending process. It is different from a home inspection.
The mortgage glossary
A little clarity goes a long way.
Search the terms you hear. Understand what they mean for the conversation.
APR
A yearly measure of borrowing cost that includes interest and certain loan charges. It is different from the interest rate.
Balloon payment
A larger final payment that repays the remaining balance on certain loans. Plan how that balance will be paid as part of choosing the loan.
Cash to close
The funds due from you at closing after deposits, credits and other adjustments are applied.
Closing costs
Charges associated with originating the loan and completing the property transaction, separate from the down payment.
Closing Disclosure
The final loan terms and closing-cost disclosure for most closed-end consumer mortgages. Compare it with your Loan Estimate.
Collateral
Property pledged to secure a loan. A lender may have rights against it if the loan is not repaid.
Conventional loan
A mortgage that is not insured or guaranteed by a federal government loan program.
Debt-service coverage (DSCR)
A comparison of property income with debt payments. The income and expense calculation depends on the lending program.
Debt-to-income ratio (DTI)
Monthly debt payments divided by gross monthly income. Lenders use it to understand how a proposed payment fits your overall finances.
Discount points
An upfront charge paid in exchange for a lower interest rate. Compare the cost with your expected time in the loan.
Down payment
The portion of the purchase price you contribute instead of borrowing through the purchase mortgage.
Equity
The difference between a property’s value and the debt secured by it. A financing review helps identify how much equity a particular loan can make available.
Escrow account
An account used by a mortgage servicer to collect and pay certain property expenses, such as taxes and insurance.
Fixed rate
An interest rate that stays the same for the loan term. Taxes and insurance can still change the total payment.
Interest rate
The percentage charged for borrowing money. Compare it with APR to understand interest alongside certain additional loan costs.
Loan Estimate
A standardized form showing proposed mortgage terms, projected payments and estimated closing costs. Use it to compare offers and prepare questions as your application moves forward.
Loan-to-value ratio (LTV)
The loan amount divided by the property value used by the lender. It shows the relationship between financing and equity in the property.
Maturity
The date when a loan’s remaining balance becomes due under the agreement.
Mortgage insurance
Coverage that protects the lender against certain borrower defaults. Cost and cancellation rules depend on the loan.
Occupancy
How a property is actually used: a primary home, second home, rental or business premises, for example.
Preapproval
A conditional financing assessment based on an initial review of your finances. It helps guide your property search as the property review and final underwriting move forward.
Principal
The amount borrowed or the remaining unpaid loan balance, excluding interest.
Rate lock
An agreement to hold specified pricing for a stated period, subject to its conditions. Confirm the expiration date.
Rent roll
A property schedule showing units or tenants, rents, lease terms and occupancy.
Reserves
Eligible assets remaining after closing that provide a financial cushion. A loan program may include a reserve requirement in its financial review.
Underwriting
The lender’s review of the borrower, property and documents against the requirements of a loan program.
Zoning
Local rules that define permitted property uses and development. Reviewing the parcel’s zoning helps connect your plans with the property’s possibilities.
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