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Mortgage Terms Glossary

Get a better understanding of home buying terms with this handy glossary.

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Know the home buying lingo.

Buying a house can be confusing, especially with some of the terms used. This glossary can help you understand the home buying process easier.

A schedule on how the loan will be repaid, which typically includes amount borrowed, interest rate paid and term.
Written estimate of property’s current market value based on sales for comparable properties. 
Annual percentage rate; annual cost of loan that reflects interest, points paid, fees and mortgage insurance.
Adjustable rate mortgage; a mortgage with a fixed rate of interest for a short period of time, then adjusts based on an index.
Refinance of mortgage to get money from home’s equity.
Title free of liens and disputes.
Money needed to close the mortgage. These could include real estate, escrow or recording fees, transfer taxes or title insurance.
What lenders use to determine if the borrower has the ability to repay the loan, comparing monthly payments to monthly income.
Money that lets buyer know you’re serious about the purchase; goes into escrow account and is credited toward purchase.
An account borrowers are generally required to create for setting aside a percentage of the yearly taxes at loan closing. The lender manages the account, and it also contains additional money collected monthly, which is used to pay tax bills regularly.

Federal Housing Administration; agency that is a part of the U.S. Department of Housing and Urban development providing insurance on FHA mortgage loans.

A mortgage where the term of the loan and interest rate are negotiated and fixed for the duration of the loan. 

This is a loan that does not meet the general guidelines of government sponsored enterprises (such as Fannie Mae and Freddie Mac) and is therefore usually kept by the lending institution and not sold. These types of loans are used when the borrowers are self-employed, have unique income circumstance, or want to borrow outside the maximum loan amount. Examples of non-conforming loans are jumbo loans and bank statement loans.

Cost of processing, underwriting and funding a mortgage loan.
Private mortgage insurance; is required for conventional loans with less than 20% down payment.
Money paid upfront on a home loan to lower interest rate. Each point equals 1% of mortgage.
The amount borrowed from a lender for a home purchase.
Insurance obtained by the borrower to ensure that the property is clear of any liens.
The review process done by a lender to determine if the amount of risk under certain parameters is acceptable when offering a mortgage loan to a borrower.
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