Mortgage Terms
Made Simple.
Confused by mortgage jargon? Our easy-to-understand glossary explains common mortgage and home loan terms so you can make informed decisions.
📌 Organized alphabetically for easy navigation.
Aa.
Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that changes periodically based on market conditions.
Amortization: The process of paying off a loan over time through scheduled payments.
Annual Percentage Rate (APR): The total cost of borrowing, including interest and lender fees, expressed as a yearly rate.
Appraisal: A professional assessment of a property’s value, required for mortgage approval.
Bb.
Balloon Payment: A large, final payment at the end of a mortgage term that is larger than previous payments.
Bank Statement Loan: A type of Non-QM loan allowing self-employed borrowers to qualify using bank deposits instead of tax returns.
Basis Points (BPS): A unit of measure for interest rates, where 1 basis point = 0.01%.
Broker: A mortgage professional who connects borrowers with lenders to find the best loan options.
Cc.
Closing Costs: Fees paid at the end of the homebuying process, including lender fees, title insurance, and escrow charges.
Collateral: The home or property securing the mortgage loan.
Conventional Loan: A mortgage that is not government-backed (unlike FHA, VA, or USDA loans).
Credit Score: A numerical rating that lenders use to assess a borrower’s ability to repay a loan.
Dd.
Debt-to-Income Ratio (DTI):
The percentage of a borrower’s monthly income used to pay debts, including the mortgage.
Down Payment: The initial cash payment made toward the home purchase, typically ranging from 3-20%.
DSCR (Debt Service Coverage Ratio) Loan: A Non-QM loan for real estate investors, based on rental income instead of personal income.
E-F
Earnest Money: A deposit made by the buyer to show commitment to purchasing a home.
Escrow: An account where a portion of the mortgage payment is held to cover taxes and insurance.
Equity: The difference between a home’s market value and the remaining loan balance.
Fixed-Rate Mortgage: A home loan where the interest rate remains the same for the entire term.
G-H
Gift Funds: Money given to a homebuyer from family or approved sources to help with a down payment.
Gross Income: Total income before taxes, used by lenders to calculate affordability.
Homeowners Insurance:
A policy protecting the home against fire, theft, and other damages.
I-J-K
Interest Rate: The percentage charged by the lender for borrowing money.
Jumbo Loan: A mortgage exceeding conforming loan limits set by Fannie Mae and Freddie Mac.
L-M-N
Lender Credits: Money a lender provides to help cover closing costs in exchange for a higher interest rate.
Loan Estimate: A document detailing estimated mortgage costs, provided by the lender after applying for a loan
Loan-to-Value (LTV) Ratio:
A measure of how much a borrower is financing vs. the home’s value.
Mortgage Insurance (PMI/MIP): Required for FHA and conventional loans with less than 20% down.
O-P-Q
Origination Fee: A lender fee for processing the mortgage application.
Points (Discount Points): Upfront fees paid to lower the interest rate on a mortgage.
Pre-Approval: A lender’s confirmation of how much a buyer can borrow, based on financial review.
Prepayment Penalty: A fee charged for paying off a mortgage early (not common in most loans today).
R-S-T
Refinancing: Replacing an existing mortgage with a new loan, usually to get a better interest rate or terms.
Reserves: Extra savings a borrower must have after closing to cover mortgage payments in case of emergencies.
Title Insurance: A policy protecting against claims on the property’s ownership.
Underwriting: The lender’s process of verifying income, assets, credit, and property details before loan approval.
Understanding Mortgages is Easy with the Right Team.
Whether you’re a first-time buyer, refinancing, or investing in real estate, we’re here to help you understand every step of the mortgage process.
Harmony Home Mortgage provides expert home loan solutions, including FHA, VA, Conventional, USDA, and Non-QM loans. Licensed in FL, GA, NC, SC, and MI, we make homeownership simple and stress-free.
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Harmony Home Mortgage is an independent mortgage broker licensed in Florida, Georgia, North Carolina, South Carolina, and Michigan.
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