1. Mortgage
A mortgage is a loan you get from a lender to buy a home. You agree to pay the money back over time—usually 15 to 30 years—with interest. The home is used as collateral, which means the lender can take it back if you don’t pay.
2. Down Payment
A down payment is the portion of the home’s price that you pay upfront. The amount depends on the loan program (for example, FHA requires at least 3.5%, conventional usually 3–5%, VA loans may require $0 down). It shows financial commitment, but more importantly, it’s a required part of the loan.
3. Interest Rate
This is the cost of borrowing money. It’s shown as a percentage and added to your loan payments. A lower interest rate usually means lower monthly payments.
4. Principal
The principal is the original amount of money you borrow—not including interest or other fees.
5. Escrow
An escrow account is a separate account used to hold money for property taxes and homeowners insurance. Your lender collects a portion of these bills with each mortgage payment and pays them on your behalf when they’re due.
6. Closing Costs
Closing costs are fees you pay to finalize the mortgage and take ownership of the home. These may include lender fees, title charges, appraisal, credit report, and prepaid items like taxes or insurance.
7. Credit Score
A credit score is a number (usually between 300 and 850) that shows how responsible you are with paying back money. Higher scores help you qualify for better interest rates and loan terms.
8. Pre-Approval
Pre-approval is when a lender reviews your income, credit, and debts to estimate how much you may be able to borrow. It’s not a guarantee, but it shows sellers you’re serious and financially qualified.
9. Appraisal
An appraisal is a professional opinion of how much a home is worth. Lenders require it to make sure the home’s value matches the loan amount. They won’t lend more than the home is worth.
10. Equity
Equity is the difference between what your home is worth and how much you still owe on the mortgage. As you pay down the loan—or as the home value increases—your equity grows.
11. PMI (Private Mortgage Insurance)
PMI is insurance that protects the lender—not you—if you stop making payments. It’s usually required if your down payment is less than 20% on a conventional loan.
12. Amortization
Amortization is the schedule that shows how your loan is paid off over time. Each payment covers part of the interest and part of the principal. In the beginning, more of the payment goes to interest.
13. Loan Term
This is how long you have to repay the mortgage. Common terms are 15 years and 30 years. A shorter term means higher monthly payments but less interest paid over time.
14. Fixed-Rate Mortgage
A fixed-rate mortgage has an interest rate that stays the same for the entire loan. That means your monthly principal and interest payment won’t change.
15. Adjustable-Rate Mortgage (ARM)
An ARM starts with a fixed interest rate for a set number of years (like 5 or 7), then adjusts each year based on market conditions. Your payment can go up or down.
16. Underwriting
Underwriting is the process where the lender reviews your financial documents to decide whether to approve your loan. They look at income, credit, debt, and other factors to make sure you meet the loan guidelines.
17. Title
The title is the legal document that proves who owns the home. Before you close, a title company checks to make sure the title is clean—meaning no one else has a legal claim to the property.
18. Homeowners Insurance
This insurance protects you and the lender if something happens to the home—like fire, storm damage, or theft. It’s required by most lenders and usually paid through escrow.
19. Property Taxes
Property taxes are charged by your local government based on the value of your home. These taxes help fund public services like schools, police, and roads.
20. Closing
Closing is the final step in the home buying process. You sign all your documents, pay any remaining costs, and officially become the legal owner of the home.
