Mortgage & Real Estate Glossary
Clear, straightforward definitions of common terms you will encounter during the home loan process.
Adjustable-Rate Mortgage (ARM)
A loan where the interest rate adjusts periodically based on a benchmark index.
Amortization
The gradual reduction of loan debt through scheduled monthly payments of principal and interest.
Annual Percentage Rate (APR)
The comprehensive cost of credit expressed as a yearly rate, including interest, points, and lender fees.
Appraisal
A formal professional estimate of the property's fair market value conducted by a licensed appraiser.
Debt-to-Income Ratio (DTI)
The percentage of gross monthly income allocated toward debt obligations and housing costs.
Escrow
A neutral third party that holds funds and documents until contractual real estate closing conditions are satisfied.
Loan-to-Value (LTV)
The ratio of the mortgage amount compared to the appraised value or purchase price of the property.
Points (Discount Points)
Prepaid interest paid at closing to lower the permanent ongoing interest rate on a mortgage.
Principal, Interest, Taxes, and Insurance (PITI)
The complete components of a regular monthly mortgage housing payment.
Private Mortgage Insurance (PMI)
Insurance required on conventional loans with down payments less than 20% to protect the lender.