Mortgage Glossary

A document submitted to a lender when you apply for a mortgage. The application is detailed and contains information about the property, the borrower's financial situation, employment history and more.

A report that determines the fair market value of a property. It looks at the condition and quality of the home and how it compares to similar properties in the area. A licensed appraiser performs this assessment. Lenders typically require an appraisal to decide how much they will lend for a specific property. The borrower usually pays for this report.

Things of value owned by a person, such as vehicles, property, savings, or retirement funds. Lenders use assets to calculate a borrower's net worth and determine their ability to cover the down payment and closing costs on a home.

The upfront fees paid, usually by the borrower, when finalizing a home purchase. These can include origination charges, appraisal fees, title insurance, the down payment and more. Lenders are required to provide an estimate of all costs in the Loan Estimate and Closing Disclosure forms.

A document that outlines the final details of a mortgage loan, including the loan terms, projected monthly payments and closing costs. Lenders must provide this form at least 3 business days before closing so borrowers can review it and compare it with the initial Loan Estimate.

A condition that must be met before a real estate contract becomes legally binding. Common contingencies include home inspections, appraisal results, and financing approval.

A record of how a borrower has managed debt over time. It includes the number and types of credit accounts, how long they have been open, balances owed, and payment patterns.

A detailed report from the three major credit bureaus (Equifax, Experian, and TransUnion) showing a person's credit history. Consumers can request one free copy from each bureau per year.

A three digit number calculated by Equifax, Experian, and TransUnion based on your history of on time payments, outstanding debt, and how much of your available credit you are using. Lenders use this score to gauge how likely you are to repay a mortgage.

Your total monthly debt payments divided by your gross monthly income. Lenders use this number to see how much debt you already carry and to determine how large a mortgage you may qualify for.

The amount of money you pay upfront toward the purchase of a home. This typically ranges from 0% to 20% of the home's price. A larger down payment generally means a lower loan amount and smaller monthly payments.

A deposit you make to the seller to show you are serious about buying the home. This money is usually applied toward your down payment at closing.

An account your lender sets up to hold funds for property taxes, homeowners insurance, and mortgage insurance on your behalf. Your monthly mortgage payment typically includes a portion that goes into this account.

A review of your escrow account, done at least once a year, to make sure enough money is being collected to cover taxes and insurance. These amounts can change over the life of the loan.

An agreement between you and your lender to temporarily pause or reduce your mortgage payments, usually due to financial hardship.

The legal process through which a lender takes possession of a property when a borrower stops making mortgage payments. The property is typically sold at public auction to recover the remaining loan balance.

Insurance that protects your home against damage from events like fires, hurricanes, theft, and vandalism. It also typically includes personal liability coverage in case someone is injured on your property.

A thorough visual examination of a home's physical condition, structure, and systems, from the foundation to the roof. Buyers usually hire a licensed inspector before finalizing a purchase.

A form you sign when you have chosen a lender and agree to move forward with the mortgage process.

The cost you pay a lender for borrowing money, calculated as a portion of the loan balance.

The percentage a lender charges you to borrow money. A higher rate means higher total costs over the life of the loan. Early in the loan term, a larger share of each payment typically goes toward interest rather than paying down the principal.

A person's debts or financial obligations, such as car loans, student loans, or credit card balances.

A document your lender provides within 3 business days of your mortgage application. It includes key details like the estimated rate, monthly payment, and closing costs.

A change to the terms of your existing mortgage, typically done to help bring your loan current or lower your monthly payment.

A loan specifically used to buy real estate. Mortgages are usually repaid over 15 to 30 years. Monthly payments typically include principal, interest, property taxes, and homeowners insurance.

A licensed professional who works with multiple lenders to find the right mortgage for your financial situation. Brokers have access to a range of loan products and can help borrowers compare options.

The amount you still owe on a loan, not including interest, fees, or taxes.

Taxes assessed by your local government based on the value of your property. These are typically collected as part of your monthly mortgage payment through an escrow account.

A legally binding contract between a buyer and seller that outlines the terms and conditions of a property sale, including the price, contingencies, and closing timeline.

A licensed professional who represents buyers or sellers in real estate transactions. Agents help buyers find homes, tour properties, and handle negotiations.

The process of replacing your current mortgage with a new one, usually to get a lower interest rate, change the loan term, or access home equity. Refinancing may have requirements such as a minimum time since your last closing.

When the company managing your loan changes. A new servicer takes over collecting your payments, managing escrow, and handling any questions about your mortgage.

A company that verifies the seller has the legal right to transfer ownership of a property. Title companies also issue title insurance, which protects homeowners and lenders against any future ownership disputes.

Fees paid at closing to cover the cost of verifying and insuring the property's title. These help protect you and your lender in case any ownership issues come up later.

The process where a lender reviews your loan application, income, credit, and the property to determine how much risk they are taking. All regulations and guidelines must be followed during this review.