Plain-English mortgage glossary
Essential home-loan terms explained without the industry language.
APR
Annual percentage rate: a standardized estimate of borrowing cost that combines the interest rate with certain finance charges.
Closing costs
Fees and expenses associated with obtaining the loan and transferring the property, separate from the down payment.
Debt-to-income ratio (DTI)
A comparison of qualifying monthly debts with gross qualifying monthly income.
Discount points
Upfront interest paid to obtain a lower mortgage rate. One point equals 1% of the loan amount.
Escrow account
An account used to collect and pay eligible property taxes and homeowners insurance as part of the monthly mortgage payment.
Loan-to-value ratio (LTV)
The loan amount divided by the property's eligible value or purchase price, as determined under program rules.
Mortgage insurance
Insurance that protects the lender or program when required, commonly based on loan type and down payment.
Pre-approval
A conditional assessment of a borrower's ability to qualify, based on the information and documentation reviewed at that time.
Rate lock
An agreement that holds eligible rate terms for a defined period, subject to loan and lock conditions.
Underwriting
The review of the borrower, property and documentation against the selected loan program's requirements.