Mortgage Glossary | Terms and Definitions

The process of spreading loan payments over time. Early payments go mostly to interest, while later payments go mostly to principal.

Annual Percentage Rate. The true yearly cost of borrowing, including interest and fees.

Adjustable Rate Mortgage. A loan with an interest rate that can change over time based on market conditions.

Fees paid at the end of a real estate transaction, typically 2-5% of the loan amount.

Your monthly debt payments divided by your gross monthly income. Lenders use this to determine eligibility.

The portion of your home you actually own. Calculated as home value minus mortgage balance.

An account where money is held by a third party (usually the lender) to pay for property taxes and insurance.

A loan with an interest rate that stays the same for the entire loan term.

An estimate of a home's market value conducted by a licensed professional.

The percentage of the loan amount that the lender charges for borrowing money.

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac.

The loan amount divided by the home's value. Expressed as a percentage.

Insurance that protects the lender if you default. Required when down payment is less than 20%.

Principal and Interest. The main components of a mortgage payment.

A lender's estimate of how much you can borrow, based on your financial information.

The original loan amount, or the remaining balance of the loan.

Replacing your current mortgage with a new one, typically to get a lower rate or different term.

Insurance that protects against defects in the title to real property.