Mortgage Glossary

A simple guide to common mortgage and real estate terms

A – C

Abstract of Title

A written summary of the ownership history of a property.

Acceleration Clause

A loan provision allowing the lender to require full repayment if the borrower defaults.

Amortization

The process of repaying a loan over time through scheduled payments.

Application Fee

An upfront fee paid to the lender to cover initial loan processing costs.

Appraisal

A professional estimate of a property’s market value.

APR (Annual Percentage Rate)

The total cost of a loan expressed as a yearly percentage, including fees and interest.

ARM (Adjustable-Rate Mortgage)

A loan with an interest rate that can change periodically based on market conditions.

Assessed Value

The value assigned to a property by a tax authority for taxation purposes.

Assumption of Mortgage

When a buyer takes over the seller’s existing mortgage and payments.

Balloon Mortgage

A loan with smaller payments that ends with a large lump-sum payment.

Bridge Loan

A short-term loan used to cover costs while transitioning between homes.

Broker

A professional who connects buyers and lenders for a fee.

Buydown

An arrangement where upfront funds reduce the borrower’s interest rate temporarily or permanently.

Cap (Interest Rate / Payment)

Limits on how much an adjustable-rate mortgage can increase.

Certificate of Title

A document confirming legal ownership of a property.

Closing

The final step where ownership transfers and loan documents are signed.

Closing Costs

Fees associated with completing a real estate transaction.

Closing Disclosure

A final document outlining loan terms, payments, and closing costs.

Commission

A fee paid to agents or brokers for facilitating a transaction.

Commitment

A lender’s promise to provide a loan under specific conditions.

Comparables (Comps)

Similar properties used to determine a home’s value.

Condominium

Ownership of a unit within a shared building or complex.

Contingency

A condition that must be met for a contract to remain valid.

Conventional Mortgage

A loan not backed by a government agency.

Convey

To transfer ownership of property.

Credit Report

A record of a borrower’s credit history.

D – H

Deed

A legal document transferring ownership of property.

Default

Failure to meet loan obligations.

Down Payment

The portion of a home’s price paid upfront.

Due-on-Sale Clause

Requires full loan repayment if the property is sold.

Earnest Money

A deposit showing a buyer’s serious intent to purchase.

Easement

The right to use another person’s land for a specific purpose.

Encumbrance

A claim or liability on a property (e.g., liens or taxes).

Equity

The portion of the property owned outright.

Escrow

Funds held by a third party for taxes, insurance, or closing.

First Mortgage

The primary loan secured by a property.

Fixed-Rate Mortgage

A loan with a consistent interest rate and payment.

Fixture

An item permanently attached to property.

Flood Certification

A report determining if a property is in a flood zone.

Foreclosure

The legal process of reclaiming a property after loan default.

Gross Income

Total income before taxes and deductions.

Hazard Insurance

Insurance covering damage from fire, storms, and other risks.

Homeowner’s Insurance

Coverage protecting a home and its contents.

I – P

Income Property

Real estate owned to generate income.

Interest

The cost of borrowing money.

Interim Financing (Bridge Loan)

Short-term financing during a transition period.

Land Contract

A financing arrangement where the seller acts as the lender.

Lien

A legal claim against a property for a debt.

Loan Estimate

A document outlining estimated loan costs and terms.

Loan-to-Value Ratio (LTV)

The ratio of loan amount to property value.

Market Value

The price a property would sell for under normal conditions.

Mortgage

A loan secured by real estate.

Mortgage Note

A legal promise to repay a loan.

Mortgagee

The lender.

Mortgagor

The borrower.

Negative Amortization

When loan balance increases due to insufficient payments.

Offer to Purchase

A formal proposal to buy property.

Origination Fee

A fee for processing a loan.

Owner Financing

When the seller provides financing to the buyer.

PITI

Principal, Interest, Taxes, and Insurance combined in a monthly payment.

PMI (Private Mortgage Insurance)

Insurance required when down payment is less than 20%.

Point (Discount Point)

A fee equal to 1% of the loan amount to reduce interest rate.

Pre-Approval

A lender’s conditional commitment to provide a loan.

Pre-Qualification

An estimate of borrowing ability (not a guarantee).

Prepayment Penalty

A fee for paying off a loan early.

Prime Rate

A benchmark interest rate used by banks.

Principal

The original loan amount.

Q – Z

Qualifying Ratios (DTI)

Measures used to determine loan affordability.

Realtor®

A licensed real estate professional affiliated with the National Association of Realtors.

Recording Fee

A fee to officially record property documents.

Refinancing

Replacing an existing loan with a new one.

Second Mortgage

An additional loan secured by a property.

Secondary Mortgage Market

Where lenders sell loans to investors.

Survey

A map outlining property boundaries.

Title

Legal ownership of property.

Title Insurance

Protection against ownership disputes or defects.

Title Search

Review of public records to confirm ownership.

Transfer Tax

Tax applied when property changes ownership.

Truth-in-Lending (TILA)

Federal law requiring loan cost disclosures.

Underwriting

The process of evaluating loan risk and approval.