A

Amortization: The process of paying off a loan over time through scheduled payments of principal and interest.

APR (Annual Percentage Rate): A broader measure of the cost of a loan that includes interest and certain fees.

Appraisal: A professional estimate of a property’s market value.

B

Borrower: The person or entity receiving the mortgage loan.

Bridge Loan: Short-term financing used until permanent financing is secured.

C

Closing Costs: Fees and expenses paid to complete a real estate transaction.

Credit Score: A numerical measure of creditworthiness based on credit history.

Cash-Out Refinance: A refinance that allows a borrower to access home equity as cash.

D

Debt-to-Income Ratio (DTI): A comparison of monthly debt obligations to gross monthly income.

Down Payment: The upfront portion of the purchase price paid by the buyer.

DSCR (Debt Service Coverage Ratio): A measure of rental income compared to loan payment used in investor financing.

E

Escrow: An account used to hold funds for taxes and insurance or during a transaction.

Equity: The difference between a property’s value and the amount owed on the mortgage.

F

FHA Loan: A government-backed mortgage insured by the Federal Housing Administration.

Fixed-Rate Mortgage: A loan with an interest rate that remains the same for the life of the loan.

G

Gift Funds: Money given to a borrower for down payment or closing costs.

H

HOA (Homeowners Association): An organization that manages common areas and rules in certain communities.

I

Interest Rate: The cost of borrowing money, expressed as a percentage.

L

Loan Estimate: A disclosure outlining estimated loan terms and closing costs.

LTV (Loan-to-Value): The loan amount compared to the property’s value.

M

Mortgage Insurance: Insurance that protects the lender when a borrower makes a low down payment.

P

Pre-Approval: A lender’s conditional approval based on verified financial information.

Principal: The original loan amount, excluding interest.

R

Refinance: Replacing an existing mortgage with a new loan.

Reserves: Funds required to remain available after closing.

T

Title Insurance: Insurance protecting against title defects or ownership claims.

Need Help With a Term or Concept?

If you’re unsure how a term applies to your situation, we’re happy to walk through it with you.

Disclosure: This glossary is for general educational purposes only and is not a commitment to lend. Definitions and requirements may vary by loan program and lender.

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Licensed mortgage broker in Missouri, Kansas, and Louisiana.