Definitions
Browse our mortgage, real estate, and financial terminology guide. Use the search bar to find specific terms, or click on the letters A-Z to jump to terms starting with that letter. Click on any term to see its detailed explanation.
Browse our mortgage, real estate, and financial terminology guide.
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Adjustable-Rate Mortgage (ARM) - A home loan with an interest rate that changes periodically based on market conditions.
Amortization - The process of gradually paying off a debt through regular installment payments of principal and interest.
Annual Percentage Rate (APR) - The yearly cost of a loan expressed as a percentage, including interest and certain fees.
Appraisal - A professional assessment of a property's market value, typically required by lenders before approving a mortgage.
Assumable Mortgage - A loan that allows a buyer to take over the seller's existing mortgage with the same terms and remaining balance.
Balloon Payment - A large, one-time payment required at the end of a loan term to pay off the remaining balance.
Biweekly Mortgage - A payment schedule where mortgage payments are made every two weeks instead of once a month.
Bridge Loan - A short-term financing option that helps homeowners purchase a new home before selling their current one.
Cash-Out Refinance - A type of mortgage refinancing that allows homeowners to borrow more than they owe and take the difference in cash.
Closing Costs - Fees and expenses paid by both the buyer and seller when finalizing a real estate transaction.
Contingency - A condition in a real estate contract that must be met for the transaction to proceed.
Conventional Loan - A mortgage that is not guaranteed or insured by a government agency.
Debt-to-Income Ratio (DTI) - A percentage that compares your total monthly debt payments to your gross monthly income.
Deed in Lieu of Foreclosure - A process where a homeowner voluntarily transfers property ownership to the lender to avoid foreclosure.
Discount Rate - The interest rate charged by the Federal Reserve to commercial banks for short-term loans, influencing other interest rates including mortgages.
Down Payment - An initial upfront payment made when purchasing a home, representing a percentage of the total purchase price.
Earnest Money - A deposit made by a buyer to demonstrate serious intent to purchase a property.
Equity - The difference between the current market value of a property and the amount still owed on the mortgage.
Escrow - A third-party account that holds and disburses funds for property taxes, insurance, and other costs related to a property.
FHA Loan (FHA) - A government-backed mortgage insured by the Federal Housing Administration, designed for homebuyers with lower credit scores or smaller down payments.
Fixed-Rate Mortgage (FRM) - A mortgage loan with an interest rate that remains constant for the entire loan term.
Foreclosure - The legal process by which a lender takes possession of a property after the borrower fails to make mortgage payments.
Good Faith Estimate (GFE) - A document that lenders must provide to borrowers detailing estimated closing costs and loan terms.
Grace Period - A set timeframe after the payment due date during which a borrower can make a payment without incurring a late fee or penalty.
Home Equity Line of Credit (HELOC) - A revolving line of credit secured by the equity in a home, which homeowners can draw from as needed.
Interest-Only Mortgage - A loan where the borrower pays only interest for a specified period, after which payments increase to include principal.
Jumbo Loan - A mortgage loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac.
Lien - A legal claim against a property that must be paid when the property is sold.
Loan Modification - A permanent change to one or more terms of an existing loan to make it more affordable for the borrower.
Loan-to-Value Ratio (LTV) - A percentage that compares the amount of the loan to the appraised value of the property.
Mortgage Insurance Premium (MIP) - Insurance required on FHA loans that protects the lender against borrower default.
Origination Fee - A fee charged by a lender for processing a new loan application.
Piggyback Loan - A second mortgage or home equity loan taken out simultaneously with a first mortgage to avoid paying private mortgage insurance.
Points - Fees paid directly to the lender at closing in exchange for a reduced interest rate on the mortgage.
Pre-Approval - A preliminary evaluation by a lender indicating how much money a potential borrower might be eligible to borrow.
Pre-Payment Penalty - A fee charged by some lenders when a borrower pays off their mortgage loan earlier than the agreed-upon term.
Principal, Interest, Taxes, and Insurance (PITI) - The four components that make up a typical mortgage payment.
Private Mortgage Insurance (PMI) - Insurance that protects the lender if a borrower defaults on a conventional loan with a down payment less than 20%.
Quitclaim Deed - A legal document that transfers any ownership interest a person may have in a property without any warranties or guarantees.
Real Estate Owned (REO) - A property owned by a lender, typically a bank, after an unsuccessful foreclosure auction.
Refinancing (Refi) - The process of replacing an existing mortgage with a new loan, usually to secure better terms.
Reverse Mortgage (HECM) - A loan that allows homeowners 62 or older to convert part of their home equity into cash without selling the home or making monthly mortgage payments.
Short Sale - A real estate transaction where a property is sold for less than the amount owed on the mortgage with the lender's approval.
Subordinate Financing - A loan or lien that ranks behind the primary mortgage in priority of repayment.
Subprime Mortgage - A type of loan granted to borrowers with lower credit scores who do not qualify for conventional loans.
Title Insurance - Insurance that protects the lender and/or homeowner against losses arising from defects in the property title.
Truth in Lending Act (TILA) - A federal law requiring lenders to provide borrowers with clear, accurate information about loan terms and costs.
Underwriting - The process by which a lender evaluates the risk of lending money to a potential borrower.
USDA Loan (USDA) - A government-backed mortgage program designed to promote homeownership in rural and some suburban areas.
VA Loan (VA) - A government-backed mortgage loan available to eligible veterans, active-duty service members, and certain surviving spouses.