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Mortgage Glossary

The mortgage process comes with a language all its own. Learn the meaning of unfamiliar words and terminology with this handy glossary.

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The repayment of a loan over time by installments, dealing with how much of your payment goes toward interest and how much is paid toward principal


Annual percentage rate (APR)
The actual interest rate you pay on your mortgage, including fees, points and other costs associated with the loan


A comprehensive report that determines the value of a property based on a number of factors


The last step in the loan process where documents are signed at a title company or attorney’s office


Closing Costs
The fees associated with purchasing a property that are not included in the purchased price, typically origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate fees, prepayment of taxes and insurance and real estate transfer taxes


Construction Loan
A short-term loan to finance the construction of a new residence, business or investment property, typically converted to a conventional loan after construction


Conventional Loan
A mortgage that is not guaranteed or insured by a government entity such as the Federal Housing Agency (FHA) or Veterans Affairs (VA)


Credit Report
A detailed report that includes vital information about you and your credit history, compiled through credit reporting agencies


Debit-to-Income Ratio
The ratio of your liabilities (monthly bills and living expenses) versus your gross monthly income


An official public document that establishes property ownership


Down Payment
A portion of money paid at the beginning of a loan to demonstrate commitment to the purchase


Earnest Money
Money paid to the seller by the buyer as a pledge to complete a real estate transaction


A fund administered by a third party and used to pay taxes and insurance for a mortgage transaction


The value of a property, minus any money owed against it


Fixed-rate Mortgage
A mortgage with a fixed interest rate that will not adjust at any point during the life of the loan


The process by which a bank or lender sells a property after a borrower fails to meet the repayment terms of the loan


Home Equity Line of Credit
A loan that allows you to borrow money from the equity in your home, based on a certain maximum draw amount


The fee charged to the borrower for the use of the borrowed money


Home Inspection
A limited, non-invasion examination of the condition of home that is completed by a third party prior to selling


A legal claim or hold on a piece of property


Market Value
The price a seller can expect to receive for the sale of a property


Origination Fee
A percentage of the mortgage loan charged by the lender for completing the loan process


An up-front fee you pay for obtaining a mortgage; one point equals 1% of the loan value


The process through which a borrower evaluates the credit of a potential lender and determines the maximum amount they would be willing to lend


The unpaid balance on your mortgage loan


Private Mortgage Insurance (PMI)
Extra insurance that a lender requires when a buyer obtains a loan for more than 80% of the home’s value


The act of replacing the existing loan on your property with a new one


The official document that states who owns a piece of real estate property


Title Insurance
Insurance taken out to protect both the borrower and the lender in case of a title dispute


Title Search
Research conducted on a property prior to the sale to make sure there are no existing liens against it


The process a lender uses to determine a borrower’s eligibility for a loan


Warranty Deed
Indicates that there are no past liens or disputes against the property and the holder has the right to sell


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