Amortization is the schedule for how your loan is paid down over time. Each monthly payment includes some interest and some principal, and amortization shows how your balance slowly drops month by month.

APR measures the overall cost of a loan over a year, including interest and certain fees. It’s designed to help you compare one loan to another, beyond just the interest rate.

An appraisal is a licensed appraiser’s opinion of what a property is worth in today’s market. Lenders use it to confirm that the home’s value supports the loan amount.

An adjustable-rate mortgage starts with a fixed rate for a set period, then can adjust up or down at set times. It can be a great fit if you’re not planning to keep the loan long term and are comfortable with potential changes later.

Assessed value is what your local county or municipality says your property is worth for property tax purposes. It often differs from both the appraised value and what the home could sell for on the open market.

Cash to close is the total amount you need to bring to closing. It includes your down payment plus closing costs, minus any credits from the seller or lender.

Closing costs are the fees and charges needed to complete your loan and transfer ownership—things like title fees, lender fees, taxes, and insurance. They typically run a few percent of the purchase price.

The Closing Disclosure is the final, official breakdown of your loan terms and closing costs. You receive it near the end of the process so you can review everything before you sign.

Collateral is the property that secures the loan. If the loan is not repaid according to the terms, the lender’s legal claim is against this collateral.

Comparable sales—or “comps”—are recent sales of similar homes in your area. Appraisers review comps to help determine your home’s value.

A conforming loan meets Fannie Mae and Freddie Mac guidelines for size and rules. These loans typically receive more favorable pricing than loans that fall outside those guidelines.

Your credit score is a three-digit number (usually 300–850) that reflects how you’ve handled credit in the past. Higher scores usually mean better loan options and pricing.

DTI is your monthly debt payments (including the new mortgage) divided by your gross monthly income. Lenders use it to gauge how comfortably you can handle the new payment.

Discount points are optional upfront fees you can pay at closing to reduce your interest rate. One point equals 1% of your loan amount. Whether it’s worth it depends on how long you keep the loan.

Your down payment is the amount of your own money you put toward the purchase. It’s the difference between the purchase price and the loan amount.

Earnest money is a good-faith deposit you put down when your offer is accepted. It shows the seller you’re serious and usually gets applied toward your closing costs or down payment at closing.

Equity is the portion of the home you truly “own”: your home’s value, minus what you still owe on your mortgage and any other liens.

An escrow account is a special account your lender or servicer uses to collect and pay property taxes and homeowners insurance on your behalf. Those costs are built into your monthly mortgage payment.

FHA loans are backed by the Federal Housing Administration and offer more flexible guidelines. They can be helpful for first-time buyers or borrowers with lower credit scores or smaller down payments.

A fixed-rate mortgage keeps your interest rate the same for the life of the loan. That means your principal and interest payment won’t change.

Gift funds are money given to you—usually by a relative or close connection—to help with down payment or closing costs. Lenders require a paper trail and a letter stating it’s a gift, not a loan.

A home inspection is a review you hire for—not the lender—to examine the home’s condition: roof, foundation, electrical, plumbing, and more. It helps you understand what you’re buying and plan for repairs.

An HOA is an organization that manages rules and common areas for certain neighborhoods, condos, or townhomes. If there’s an HOA, you’ll likely pay a monthly or quarterly fee.

Homeowners insurance protects your home and belongings from covered losses like fire, certain storms, or theft. Lenders require it as long as there’s a mortgage on the property.

Your interest rate is the cost of borrowing money, expressed as a percentage of your loan amount. Along with your loan term, it heavily influences your monthly payment.

A jumbo loan is larger than the conforming loan limit for your area. Jumbo loans follow different rules and often have slightly different pricing and reserve requirements.

A late payment is one made after your grace period. Besides possible late fees, repeated late payments can damage your credit and make future borrowing more expensive.

Lender credits are funds the lender gives you toward your closing costs, usually in exchange for a slightly higher interest rate. They’re a way to bring less cash to closing.

The Loan Estimate is a standardized form you receive early in the process that outlines your estimated rate, payment, and closing costs. It’s built to make comparison between lenders easier.

The loan term is how long your loan lasts if you make payments as scheduled—commonly 15, 20, or 30 years. Shorter terms usually mean a higher monthly payment but less total interest.

LTV is your loan amount divided by the home’s value or purchase price (whichever is lower). Higher LTV means lower down payment and typically higher risk for the lender.

Mortgage insurance protects the lender if you default when you put less than a certain amount down. It can be monthly, upfront, or both. It does not protect your belongings like homeowners insurance does.

The mortgage note is the legal document where you promise to repay the loan under the agreed terms (rate, payment, term, and so on). Think of it as your official IOU to the lender.

PITI stands for principal, interest, taxes, and insurance—the four main parts of most mortgage payments. Lenders think in terms of PITI, not just principal and interest.

Pre-approval is a deeper review of your income, assets, credit, and debts that results in a letter showing how much you may qualify to borrow. It’s stronger than a pre-qualification when you write offers.

Pre-qualification is a quick estimate based on information you provide. It’s useful for early planning but not as strong as a full pre-approval when it’s time to make offers.

Principal is the amount you actually borrow and still owe, not including interest. Each payment gradually reduces your principal balance over time.

Property taxes are charges from your local government based on the property’s assessed value. They’re often collected in your monthly mortgage payment and paid from your escrow account.

A rate lock is an agreement that holds your interest rate for a set period while you finalize your loan. It helps protect you if market rates move before closing.

A recast is when your lender recalculates your monthly payment after you make a large lump-sum payment toward principal. Your rate and term usually stay the same; your payment drops because your balance is lower. Not all loans or servicers offer this option.

Refinancing means replacing your current mortgage with a new one, usually to change your rate, term, loan type, or to access cash. A refinance has its own application, approval, and closing process.

Reserves are extra funds you have remaining after closing, usually measured in months of mortgage payments. Some loan programs require a certain amount of reserves for approval.

Seller concessions are costs the seller agrees to pay on your behalf at closing, such as part of your closing costs. There are program limits on how much the seller can contribute.

Title insurance protects against certain problems with the legal ownership of the property—like undiscovered liens or claims. It’s usually a one-time cost at closing, with separate policies for the lender and, optionally, the owner.

Underwriting is the behind-the-scenes review where the lender checks your income, assets, credit, and the property against loan guidelines to decide if the loan can be approved.

VA loans are a mortgage benefit for eligible veterans, active-duty service members, and some surviving spouses. They often allow for no down payment and no monthly mortgage insurance, subject to VA and lender guidelines.