Mortgage Glossary
Deciphering the language of lending.
A
Amortization
The process of paying off a debt over time through regular payments.
Appraisal
An unbiased professional opinion of a home's value.
C
Closing Costs
Fees and expenses, over and above the price of the property, incurred by the buyer and seller.
D
Debt-to-Income (DTI) Ratio
The percentage of your gross monthly income that goes to paying your monthly debt payments.
Down Payment
The portion of the purchase price that you pay upfront in cash.
E
Equity
The difference between the market value of your home and the amount you owe on your mortgage.
Escrow
A neutral third party that holds funds and documents during a real estate transaction.
F
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the entire life of the loan.
L
Loan-to-Value (LTV) Ratio
A risk assessment ratio that compares the amount of the mortgage with the appraised value of the property.
P
PMI (Private Mortgage Insurance)
Insurance that protects the lender in case you default on your loan, usually required if your down payment is less than 20%.
Pre-Approval
A written commitment from a lender to give you a mortgage loan up to a specific amount.
T
Title Insurance
Insurance that protects the lender (and optionally the owner) against losses due to disputes over the title of the property.