Mortgage Glossary
Our glossary page contains a comprehensive list of terms and definitions related to the mortgage industry, designed to help you better understand the mortgage process and make informed decisions about your home financing.
​
From common terms to more specialized terms, our glossary provides detailed explanations of key concepts and industry jargon. Whether you're a first-time homebuyer, a seasoned investor, or somewhere in between, this glossary is a valuable resource that can help you navigate the complex world of mortgages with confidence.
Key Mortgage Terms
Adjustable-rate mortgage (ARM)
A type of mortgage loan in which the interest rate fluctuates over the life of the loan, based on changes in a specified index.
​
Amortization
The process of gradually paying off a debt, such as a mortgage, over a period of time through regular payments.
​
Annual percentage rate (APR)
The total cost of borrowing money over the life of a loan, expressed as a percentage rate.
​
Appraisal
An evaluation of the value of a property, conducted by a licensed appraiser.
​
Balloon payment
A large, one-time payment that is due at the end of a loan term, often associated with certain types of mortgage loans
​
Bridge loan
A short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing property
​
Cash-out refinance
A type of mortgage refinance in which the borrower takes out a new loan for more than the remaining balance on their existing mortgage, and uses the difference as cash.
​
Certificate of eligibility (COE)
A document issued by the Department of Veterans Affairs (VA) that certifies a veteran's eligibility for a VA loan
​
Closing
The final stage of a real estate transaction, in which the legal transfer of ownership and funds occurs.
Closing costs
The fees and charges associated with the final steps of a real estate transaction, such as appraisal fees, title insurance, and attorney fees.
​
Collateral
Property or assets that are used as security for a loan.
​
Commission
A fee paid to a real estate agent or broker for their services in facilitating a real estate transaction.
Conforming loan
A mortgage loan that meets the guidelines set by Fannie Mae and Freddie Mac, the government-sponsored entities that purchase the majority of mortgages in the US.
​
Conventional mortgage
A mortgage loan that is not insured or guaranteed by the government, typically requiring a higher down payment and more stringent credit requirements.
​
Credit report
A detailed report of an individual's credit history, used by lenders to assess creditworthiness.
​
Debt-to-income ratio (DTI)
A ratio that compares an individual's monthly debt payments to their monthly gross income, used to assess creditworthiness.
​
Default
Failure to make timely payments on a loan or mortgage, resulting in the borrower being in breach of the loan agreement.
​
Delinquency
Failure to make a payment on a loan or mortgage by its due date.
​
Down payment
The amount of money paid upfront by a borrower when purchasing a property, typically a percentage of the total purchase price.
​
Earnest money deposit
A deposit made by a buyer to demonstrate their commitment to a real estate transaction.
​
Equity
The difference between the current value of a property and the outstanding balance of any liens or loans on the property.
​
Escrow
An account held by a third-party that is used to hold funds for a real estate transaction, typically used to pay for property taxes and insurance.
​
Fixed-rate mortgage
A type of mortgage loan in which the interest rate remains the same for the entire term of the loan.
​
Foreclosure
The legal process by which a lender seizes and sells a property due to the borrower's failure to make timely mortgage payments.
​
Home equity line of credit (HELOC)
A type of loan in which a borrower can access funds based on the equity in their home, similar to a credit card.
​
Home inspection
An examination of a property's condition, typically conducted by a licensed home inspector, prior to a real estate transaction.
​
Homeowner's insurance
Insurance that provides coverage for damages to a property and liability for injuries or damage caused by the property owner.
​
Housing expense ratio (HER)
A ratio that compares a borrower's housing expenses to their monthly gross income, used to assess creditworthiness.
​
Interest rate
The percentage charged by a lender for borrowing money, usually expressed as an annual percentage rate (APR).
​
Jumbo mortgage
A mortgage loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, typically requiring higher down payments and more stringent credit requirements.
​
Loan modification
A change made to the terms of an existing mortgage loan, typically to make it more affordable for the borrower.
​
Loan origination fee
A fee charged by lenders to cover the costs of processing a mortgage loan.
​
Loan servicing
The process of managing a mortgage loan after it has been originated, including collecting payments and managing escrow accounts.
​
Loan-to-value (LTV) ratio
The ratio of the loan amount to the value of the property being financed, expressed as a percentage.
​
Margin
The amount added to the index rate of an adjustable-rate mortgage to determine the interest rate charged to the borrower.
​
Maturity date
The date on which a mortgage loan must be paid in full.
​
Mortgage insurance
Insurance that protects the lender in case the borrower defaults on their mortgage payments, typically required for loans with an LTV ratio of 80% or higher.
​
Mortgage note
A legal document that outlines the terms of a mortgage loan, including the interest rate, payment schedule, and borrower and lender obligations.
​
Negative amortization
A situation in which the payment made on a loan is not enough to cover the interest owed, resulting in the balance of the loan increasing over time.
​
Origination
The process of applying for and obtaining a mortgage loan.
​
Pre-approval
The process of obtaining a preliminary approval for a mortgage loan, based on a borrower's creditworthiness and financial situation.
​
Private mortgage insurance (PMI)
Insurance that protects the lender in case the borrower defaults on their mortgage payments, typically required for loans with an LTV ratio of 80% or higher.
​
Property taxes
Taxes paid by property owners to local governments based on the assessed value of their property.
​
Refinancing
The process of replacing an existing mortgage loan with a new one, typically to take advantage of lower interest rates or better terms.
​
Reverse mortgage
A type of loan in which a borrower can access the equity in their home, typically used by older homeowners to supplement retirement income.
​
Second mortgage
A mortgage loan taken out in addition to a primary mortgage, typically used to finance a portion of the purchase price or for home improvements.
​
Title
A legal document that establishes ownership of a property.
​
Underwriting
The process of assessing a borrower's creditworthiness and financial situation to determine their eligibility for a mortgage loan.
​
USDA loan
A mortgage loan guaranteed by the US Department of Agriculture, typically used to finance homes in rural or suburban areas.
​
VA loan
A mortgage loan guaranteed by the US Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses.