The vocabulary, in one sentence each.

34 terms

Amortization

The schedule that splits each payment between interest and principal. Early payments are mostly interest, and the principal share grows every month.

Annual percentage rate (APR)

The interest rate plus certain financing costs, expressed as a yearly percentage. Useful for comparing similar offers you plan to keep long term.

Appraisal

A licensed appraiser's supported opinion of the home's value. The lender lends against the lower of price or appraised value.

Cash to close

Everything you need at settlement: down payment, closing costs, and prepaid escrow, less credits and your earnest money deposit.

Closing disclosure

The final statement of loan terms and settlement costs, delivered at least three business days before closing.

Contingency

A condition in the purchase contract that allows you to withdraw for a stated reason within a stated window, such as inspection or financing.

Conventional loan

A mortgage not insured by a government agency, typically following Fannie Mae or Freddie Mac guidelines.

Debt to income (DTI)

Monthly debt obligations divided by gross monthly income. It sets the maximum housing payment a lender will approve.

Down payment

The share of the purchase price you contribute from your own funds or eligible assistance.

Earnest money

A good faith deposit held in escrow after your offer is accepted. It is credited toward your funds at settlement.

Equity

The difference between what the home is worth and what you owe on it.

Escrow account

An account your servicer uses to collect and pay property taxes and homeowners insurance alongside your mortgage payment.

FHA loan

A loan insured by the Federal Housing Administration, with flexible credit standards and its own mortgage insurance structure.

Fixed rate

An interest rate that does not change for the life of the loan. Only principal and interest are fixed, not taxes or insurance.

Funding fee

A one time fee on VA loans that can be financed, and that is waived for certain veterans.

HELOC

A home equity line of credit. A revolving second lien you draw from as needed, usually at a variable rate.

Loan estimate

A standardized three page disclosure of rate, payment, and costs, provided shortly after you apply.

Loan to value (LTV)

The loan amount divided by the home's value. It drives pricing and whether mortgage insurance is required.

Lock

A commitment that holds your interest rate for a set number of days. Extensions usually cost money.

Mortgage insurance

Insurance that protects the lender when the down payment is below twenty percent. Removable on conventional loans, generally permanent on most FHA loans.

Origination charges

Lender fees for making the loan, shown on page two of the loan estimate.

PITI

Principal, interest, taxes, and insurance. The four parts of a typical escrowed mortgage payment.

Points

Prepaid interest you can buy to lower the rate. One point equals one percent of the loan amount.

Pre-approval

A lender's review of your income, credit, and assets that establishes what you can borrow. Stronger than a pre-qualification.

Prepaids

The first year of homeowners insurance and the initial escrow deposit for taxes, collected at settlement.

Rate and term refinance

A refinance that changes the rate, the term, or both, without taking cash out.

Reserves

Funds remaining after closing, measured in months of housing payments. Sometimes required by underwriting.

Right of rescission

A three business day window after signing a refinance on a primary residence during which you may cancel.

Seller assist

A negotiated seller contribution toward your closing costs, limited by loan program.

Title insurance

Coverage that protects against defects in ownership history, such as undisclosed liens or errors in the record.

Transfer tax

A tax on the transfer of real estate. In Pennsylvania it is commonly split between buyer and seller and varies by municipality.

Underwriting

The lender's formal review of your file, which produces an approval with conditions to satisfy before closing.

USDA loan

A government backed loan for eligible rural and small town areas that allows no down payment within household income limits.

VA loan

A loan guaranteed by the Department of Veterans Affairs with no required down payment and no monthly mortgage insurance.