Glossary Of Mortgage Terms: Defined And Explained

Whether you want to take out a mortgage or you already have one, it’s helpful to get familiar with the terms you might encounter. With a clear understanding of common mortgage jargon, you can more confidently navigate the ins and outs of getting a home loan and paying it off. In this glossary, you’ll find a wide range of useful mortgage terms to know as you go through process of financing a home purchase.

Common Mortgage Terminology To Know

Getting comfortable with mortgage terms can help you make informed decisions from application to final payment. We cover some of the most common terms in mortgage lending below.

Adjustable-Rate Mortgage

An adjustable-rate mortgage (ARM) is a type of loan with an interest rate that changes over time. When you sign up for an ARM, you first get a short period of fixed interest, which is usually lower than you’ll find with a fixed-rate loan. This is the introductory period of the loan and can last for up to 10 years.

After the introductory period, your interest rate will follow market rates – you’ll often see this referred to as a variable or floating interest rate. But there is a limit to how much the interest rate attached to your loan can rise or fall due to predetermined caps.

Amortization

Loan amortization describes how the interest and principal components of your loan are spread out over your payments.

When you make a payment on your mortgage, a percentage of it goes toward interest and a percentage goes toward your loan principal. At the beginning of your loan, most of your monthly payment is allocated toward interest due to a high principal balance. But as you chip away at the loan balance, more of your monthly payment will be directed to your principal.

Annual Percentage Rate (APR)

Annual percentage rate (APR) describes the cost of borrowing. It includes the interest rate you’ll pay on your loan annually and any extra lender fees.

APR is usually expressed as a percentage. You may see two interest rates listed when you shop for a loan. The larger number is always your APR because it includes fees.

Appraisal

An appraisal is a written estimate of how much your home is worth. Most mortgage lenders require buyers to get an appraisal before finalizing a home loan.

The appraisal is intended to confirm that the lender isn’t loaning you more money than what your home is worth. Your lender may help you by scheduling an appraisal, done by an independent third party.

Appreciation

Home appreciation indicates that the value of a property increases in value over time. As a property appreciates, the homeowner can watch their home equity grow.

Assessed Value

The assessed value, sometimes called the tax-assessed value, is a metric used when determining property taxes. A higher assessed value leads to higher property taxes. In general, the assessed value of your home is considered a stable indicator of a home’s value.

Assets

Assets encompass anything that you own that has a cash value. Some common assets include your stocks, physical cash, a savings account and bonds.

Balloon Loan

A balloon loan, or balloon mortgage, is a type of nontraditional mortgage. The loan gets its name from the large lump sum payment expected at some point during the loan term. Generally, the lump sum payment is required at the end of your loan term.

During the loan term, a balloon loan might require you to make interest-only payments or both principal and interest payments. Interest-only mortgages only require you to pay the cost of interest throughout your term with the entire balance due at the end.

Bi-Weekly Payment

As a homeowner, you may have the option to make bi-weekly payments. This means you’ll make a half mortgage payment every 2 weeks instead of a single monthly payment. With this repayment schedule, you’ll make an extra month’s worth of payments every year. While the specifics vary, this means you could pay off your mortgage years ahead of schedule.

Break-Even Point

The break-even point is when the cost of your mortgage (typically if you buy mortgage points or refinance your loan) has been recouped. For example, if you choose to purchase mortgage points, you can lower the interest rate on your mortgage. While this can lead to savings over the long term, you’ll pay for the mortgage points upfront. The break-even point indicates when the cost of your mortgage points has been recouped by your interest savings.

It’s a good idea to calculate your break-even point to make sure you plan on living in the home long enough to make purchasing mortgage points worth it.

Bridge Loan

A bridge loan is a short-term financing solution, generally with loan terms of 6 months to 1 year. These loans are often used to finance the purchase of a new house before you sell your current house. This transitional loan is sometimes called a swing loan.

Broker

A real estate broker has the legal qualifications to help you through a real estate transaction. The broker’s job is to confirm that the real estate transaction is in compliance with state regulations, the paperwork is correct and the funds make it to the appropriate parties.

Buydown

A buydown offers a way to lower your mortgage interest rate. You can do this by purchasing discount points or mortgage points, which are one-time fees that you pay at closing to lower your interest rate.

Cash To Close

The term cash to close indicates how much money you’ll need to bring to the closing table. This includes closing costs and your down payment. You should know how much cash to close or funds to close you’ll need before closing day. With that information, you can come prepared with the appropriate amount.

Cash-Out Refinance

A cash-out refinance offers a way to tap into your home equity. It works by taking out a bigger mortgage than your existing loan. You’ll use the funds to pay off your current mortgage and pocket the difference in cash. At the end of this transaction, you’ll still have a single mortgage payment to keep up with.

Closing

Closing on a mortgage is the last step in the home buying process. At this point, you’ll sign all of the paperwork and hand over the funds to finalize your home purchase.

Closing Costs

Closing costs are the funds you pay to your lender in exchange for finalizing your loan. Closing costs often amount to 3% – 6% of the total value of your loan.

Common closing costs include appraisal fees, loan origination fees and credit checks. But the exact costs you face will vary based on your unique situation.

Closing Disclosure

A Closing Disclosure is a document that includes all of the final details about your loan. It will include your interest rate, loan principal and the closing costs you must pay.

Your lender is legally required to give you at least 3 days to review your Closing Disclosure before you sign on your loan. If you spot an error or have a question, use this 3-day window to get clarification from your lender.

Co-Borrower

A co-borrower is someone who applies for a loan with you. If approved, both borrowers are legally responsible for repaying the loan. In most cases, co-borrowers share the title to the house.

Collateral

Collateral is an asset used to secure a loan. With home loans, the home acts as collateral for the mortgage. If the borrower doesn’t keep up with the payments, the lender has the right to seize the collateral (house).

Construction Loan

A construction loan is a short-term loan designed to cover the upfront cost of building a new house. After the home is built, the homeowner can apply for a traditional mortgage to pay off the construction loan.

Contingency

A contingency clause in a home purchase offer indicates that a certain condition must be met before the sale is finalized. If the condition isn’t met, the buyer and seller will no longer have an enforceable purchase agreement. One example is the common inspection contingency, which states the buyer has the right to back out of the deal if they don’t like what is found during the inspection.

Conventional Loan

A conventional loan is a type of loan that isn’t backed by a government program. Most conventional loans are also “conforming,” which means they meet the requirements set by Fannie Mae and Freddie Mac. In general, conventional loans have stricter borrower requirements than government-backed loans.

Co-Signer

A co-signer is someone who signs with you for a loan, like a mortgage. As a co-signer, you take on the responsibility for repaying the loan. With that, it’s a significant financial commitment. But co-signers generally don’t get their name on the title of the home.

Credit Report

A credit report is a history of your interactions with credit over the years. For example, it includes information about which loans you have taken out and the payment history for these loans. Lenders can use this information to gauge your creditworthiness.

Credit Score

A credit score is a three-digit number that assesses your creditworthiness based on the information in your credit report. If you have good credit habits, like making on-time payments and not borrowing more than you can afford to pay back, you’ll likely see an excellent credit score.

Lenders look at your credit score when considering your mortgage application. In general, borrowers with excellent credit are more likely to get approved and benefit from lower interest rates.

Curtailment

In the world of mortgages, a curtailment indicates paying off all or part of your mortgage ahead of schedule. A full mortgage curtailment would involve paying off your remaining mortgage balance in one transaction. A partial mortgage curtailment involves making extra payments of any size.

Debt-To-Income Ratio (DTI)

Your debt-to-income (DTI) ratio is a measure of how your monthly debt obligations stack up to your income. You can calculate this number by adding up your minimum monthly payments and dividing that by your total monthly gross income.

Mortgage lenders look at your DTI when they consider you for a loan to make sure that you have enough money coming in to make your payments. You may have trouble finding a loan if your DTI is too high. Most mortgage options require a DTI of 50% or lower (although some loans may allow for a DTI higher than 50%).

Deed

A deed is a physical document that indicates your ownership of the property.

Deed In Lieu Of Foreclosure

If you are behind on your mortgage payments, deed in lieu of foreclosure gives you an opportunity to avoid the foreclosure process. Instead of waiting for the lender to foreclose, this involves voluntarily handing over your deed and giving the property to the lender. Doing a deed in lieu of foreclosure will help lessen damage to your credit score, though according to FICO®, it will drop by 50 – 125 points as a result.

Deed Of Trust

A deed of trust is an agreement between the lender and the homeowner that states the home buyer will repay the mortgage lender. Until the mortgage is paid off, the lender will hold onto the property’s title. This agreement can secure a real estate transaction in some states.

Down Payment

A down payment is the first payment you make on your mortgage loan (due at closing). Generally, down payments are listed as a percentage of your loan value. For example, if you have a 20% down payment on a $100,000 home, you’ll bring $20,000 to closing and mortgage the remaining $80,000.

Most loan types require some kind of down payment. Although many people believe that you need a 20% down payment to buy a home, this isn’t true. You can buy a home with as little as 3% down, although you’ll be required to pay private mortgage insurance (PMI) on conventional loans with less than 20% down payment. Some types of government-backed loans may even allow you to buy a home with no down payment (VA loans and USDA loans).

Earnest Money Deposit

An earnest money deposit is a check that you write to a seller when you make an offer on a home. The purpose is to give the seller confidence that the buyer is serious about finalizing the home purchase.

Most earnest money deposits are equal to 1% – 3% of the home’s value. If the seller accepts your offer, your earnest money deposit goes toward your down payment at closing.

Encumbrance

An encumbrance is a type of claim on the property that limits how the owner can use it. Generally, encumbrances are seen as a negative. For example, environmental regulations or zoning laws could create an encumbrance for how a particular property is used.

Equity

Home equity represents the difference between your home’s market value and the amount you still owe on your mortgage. Therefore, you can easily determine your home equity by subtracting your remaining mortgage balance from your home’s market value. When you pay off your entire mortgage, you’ll reach 100% home equity and your lender will remove their lien on your home.

Escrow

An escrow account is where lenders hold money for your property taxes or homeowners insurance. Throughout the year, the lender will set aside a portion of your monthly payment for property taxes and insurance. When these bills are due, the funds will come out of your escrow account.

Fair Market Value

Fair market value (FMV) represents the amount a property will sell for in the open market. If selling your home, the buyer and seller must agree on a purchase price, which can be considered the FMV if selling on the open market.

Fannie Mae

Fannie Mae is a government-sponsored enterprise (GSE). It purchases mortgage loans (that meet its requirements) from lenders and guarantees the loans in the secondary mortgage market. It often repackages and sells these as mortgage-backed securities to investors. The goal of this service is to provide more liquidity in the mortgage market to facilitate more affordable housing opportunities.

Federal Housing Administration (FHA)

The Federal Housing Administration is an agency within the U.S. Department of Housing and Urban Development. The FHA backs FHA loans, which offer less stringent borrower requirements to home buyers. If the buyer defaults, the FHA will cover the losses incurred by the lender, up to the guaranteed amount.

Fixed-Rate Mortgage

A fixed-rate mortgage has the same interest rate throughout the term of the loan. Homeowners who choose a fixed-rate term prefer the stability and predictability this type of loan provides.

Floating Rate

A floating-rate mortgage is a less-common name for an adjustable-rate mortgage.

Forbearance

Mortgage forbearance involves temporarily pausing or lowering your mortgage payments with the permission of your lender. While the payments aren’t waived forever, the period of fewer payments could give you a chance to get back on your feet after a period of bad financial luck. At the end of the forbearance period, you’ll be expected to repay the payments you missed.

Foreclosure

If you fail to make your payments on time, the lender might start the foreclosure process. Essentially, this means the lender will take steps to legally repossess the property.

Freddie Mac

Similarly to Fannie Mae, Freddie Mac is a government-sponsored enterprise that serves to increase the liquidity of the mortgage market. It buys mortgage loans from lenders, primarily smaller banks, lenders and credit unions. It repackages these loans and sells them as mortgage-backed securities to investors in the secondary mortgage market.

Good Faith Estimate

A Good Faith Estimate, or Loan Estimate, is a standardized form that provides key details about the mortgage. The Loan Estimate form replaced the GFE and the initial Truth-in-Lending (TIL) Disclosure in 2015. The document is designed to help the borrower understand what rate, mortgage type, and fees they will pay on the mortgage loan.

Home Equity Line Of Credit (HELOC)

A HELOC offers homeowners a way to tap into their home equity. If approved, you’ll receive a credit limit, which you can borrow from on an as-needed basis during the draw period. During the draw period, you’ll often be expected to make interest payments. After the draw period, you’ll begin the repayment period when you will make payments until the loan is repaid.

This flexible lending solution often comes with a variable interest rate. A HELOC will use your home as collateral, which means you are essentially taking on a second mortgage payment. If you don’t keep up with your HELOC payments, the lender could repossess your property.

Home Equity Loan

A home equity loan is another way to tap into your home equity. In this type of second mortgage, you’ll receive an upfront sum that you will repay in fixed monthly payments.

Home Inspection

A home inspection is intended to evaluate a home for specific problems. An inspector will walk around the home to verify square footage and the number of bathrooms and bedrooms, and will test things like the heating and cooling system and appliances. Sometimes a more specialized inspection is required for things like the roof or the foundation. After the inspection, they will then give you a list of everything that needs to be repaired or replaced in the home.

It’s a great idea to get a home inspection whenever you buy a property, to make sure that your home doesn’t have any major issues before you buy it.

Homeowners Association (HOA)

A homeowners association (HOA) is a private organization that manages a particular residential community. Most HOAs have a set of rules for homeowners living within the community. The rules could determine everything from pet regulations to what color paint you can use on the exterior of your home.

In general, HOAs also have a set annual or monthly fee, which could cover things like landscaping or maintaining community property.

Homeowners Insurance

Homeowners insurance offers financial protection by compensating you for damages to your home during a covered incident. Some commonly covered incidents include damage from fires, burglaries, and windstorms. You’ll pay an annual premium to an insurance company in exchange for coverage.

You’re not legally required to get homeowners insurance to own a home. But all mortgage lenders require you to maintain at least a certain level of coverage for the life of your loan.

Interest Rate

The interest rate attached to your mortgage represents the percentage you pay to borrow funds. Interest rates can be fixed or variable. Fixed interest rates remain unchanged for the life of your loan. Variable (or adjustable) interest rates can change over the life of your loan.

Notably, interest rates are different from annual percentage rates (APRs). While interest rates indicate the cost to borrow money each year, APRs include other fees connected to your home loan to represent your borrowing costs more accurately.

Investment Property

An investment property is a piece of real estate purchased with the intention of earning money through rental income or appreciation. Investment opportunities can be found in residential, commercial, and raw land deals.

Jumbo Loan

As the name suggests, a jumbo loan is a large home loan. In general, a jumbo loan exceeds conforming loan limits. These limits can vary based on your location, but in 2024, most conventional loan limits are capped at $766,550.

Lien

A lien is a legal claim against a property. For example, a mortgage is a lien on your home because the lender has a legal claim on the property until you repay the loan. When a lien exists, the lienholder may have the ability to foreclose on your home if you don’t keep up with the payment.

Loan Estimate

A Loan Estimate is a standardized form that breaks down the details of the mortgage you’re applying for. The document will include information like your estimated monthly payment, closing costs, interest rate and more.

When you get a LoanEestimate, you aren’t tied to the lender. But this document provides the information you need to move forward.

Loan Modification

A loan modification is a transaction that makes a change to your original mortgage loan terms. The modification tweaks your mortgage details. But it doesn’t involve replacing your current mortgage with a new one, which is what happens during a refinance.

Loan Origination

A mortgage loan origination is the process of a lender creating your new loan and lending you the money. It involves an administrative process, like processing the application and underwriting the loan. A loan originator is in charge of facilitating this process.

Loan Term

A loan term indicates the total amount of time it will take to repay the loan with regularly scheduled payments. Most mortgages have a loan term of 15 or 30 years.

Loan-To-Value Ratio (LTV)

A loan-to-value ratio (LTV) is a metric that compares the loan amount to the value of the property. You can determine your LTV by dividing your mortgage balance by the appraised value of the property. In general, LTV is expressed as a percentage.

A higher down payment will result in a lower LTV. Lenders use this ratio when determining your approved loan amount and whether you must pay private mortgage insurance (PMI).

Loss Mitigation

Loss mitigation is the process of helping a struggling borrower get back on their feet financially or exit a home loan without the ordeal of foreclosure. If you are struggling to keep up with your mortgage payments, reach out to your lender as soon as possible to discuss possible loss mitigation options.

Manufactured Home

A manufactured home is built in a factory in pieces based on building codes created by the U.S. Department of Housing and Urban Development. The pieces of the house are transported to the home site for installation.

Mortgage

A mortgage is a home loan from a lender. The home buyer uses the mortgage funds to purchase a home, refinance an existing mortgage, or borrow against home equity. After closing, the borrower repays the lender with interest. The house mortgaged is used as collateral to secure the loan.

Mortgage Insurance

Mortgage insurance is a type of policy that protects the lender from loss if the borrower defaults on the loan. Typically, borrowers who make a down payment of less than 20% on conventional loans are required to pay mortgage insurance on their home loan.

Mortgage Lender

A mortgage lender is a financial institution that offers home loans. The right mortgage lender can make for a trusted and smooth home buying process. Take the time to compare loan offerings and interest rates before moving forward with the right mortgage lender.

Mortgage Points

Mortgage points, also called discount points, are a form of prepaid interest. As a home buyer, you may have the option of purchasing mortgage points to lower the interest rate on your loan. A single mortgage point costs 1% of your loan amount.

Non-Owner-Occupied

A non-owner-occupied unit means that the owner of the property doesn’t live in the property. In general, this means the owner intends to use the property as an investment. Most non-owner-occupied home loans involve slightly higher interest rates than owner-occupied mortgages.

Owner Financing

Owner financing, sometimes called seller financing, involves the owner of the property providing the financing to a buyer. This is a contrast to the typical financing arrangement in which a buyer obtains financing through a lender.

Owner-Occupied

An owner-occupied property means that the owner of the property uses it as their primary residence. In the world of real estate investing, this usually means that the property owner lives on-site but rents out some of their space to tenants.

Payoff Amount

A payoff amount indicates the total amount of money required to fully pay off a mortgage. It includes your outstanding balance, interest charges, and any potential fees.

Preapproval

A preapproval is a document that indicates how much a lender may be willing to lend you.

Many lenders consider the preapproval to be the first step in getting a mortgage. When you apply for a preapproval, your lender will ask you about your credit score, income, assets and other financial information. Your lender will then use these details to tell you how much money you qualify for. While preapproval isn’t a guarantee that you’ll get approved, it does give you a good idea of how much you can borrow during your home shopping.

Prepayment Penalty

A prepayment penalty is a fee some lenders charge when you pay off your home loan early. Not all mortgages come with a prepayment penalty attached. But you will find out if yours does when in the process of applying for and closing on a home loan. Rocket Mortgage does not charge prepayment penalties.

Prequalification

A prequalification is a document that provides a rough estimate of how much a lender may be willing to lend you. A preapproval isn’t the same as prequalification. Prequalifications usually don’t involve asset and income verification, which means that they aren’t as reliable as preapprovals. Make sure you get a preapproval before you begin shopping for homes.

Prime Rate

The prime rate is an underlying index that serves as a financial benchmark for lending institutions. When applying for a loan, the current prime rate will impact the interest rate you receive. As a starting point, it’s essentially the most favorable interest rate that a financial institution can charge its customers. But in general, the prime rate is reserved for borrowers with a stellar financial situation and a rock-solid credit score.

Principal

Your principal balance is the amount that you take out in a loan. As you make loan payments, your principal shrinks over time. In addition to the principal, your monthly payments will include interest charges.

Principal, Interest, Taxes and Insurance (PITI)

PITI stands for principal, interest, taxes and insurance. The combination of these costs represents the monthly cost of owning a home, which lenders use when determining if you qualify for a loan. By looking at all of these costs, the lender avoids extending a loan that you might have trouble paying each month.

Private Mortgage Insurance (PMI)

Private mortgage insurance (PMI) protects the owners of your mortgage if you default on your loan. In general, you’re required to pay PMI if you put down less than 20% on conventional loans. The good news is that you can remove PMI from your loan when you reach 20% equity in your property.

Property Taxes

Property taxes are levied by your local government. The amount you pay in property taxes depends on your home’s value and where you live. Property taxes fund local public services such as police departments, roads, libraries and community development projects.

Purchase Agreement

A purchase agreement is a contract that includes the terms a buyer and seller agree to move forward with a home purchase. This legally binding document includes critical details of the transaction. Buyers and sellers negotiate the terms of this agreement.

Rate Lock

A rate lock protects borrowers from rising interest rates during the closing process. Essentially, this freezes your interest rate from the time you apply for a mortgage to closing on your home loan. If interest rates rise during this period, you’ll be able to keep the lower interest rate.

Real Estate Agent

A real estate agent is a local property professional who is licensed to help you navigate the home buying process. Real estate agents can show you homes in your price range, draw up offer letters and work with sellers to get you a great deal on a home.

There are two main types of real estate agents: listing agents and buyer's agents. Listing agents help individuals sell their properties, while buyer's agents work with those shopping for a home. In exchange for working with you and the seller, real estate agents receive a commission from your home sale or purchase.

Real Estate Settlement Procedure Act (RESPA)

RESPA is designed to help borrowers navigate the mortgage loan process with all of the costs and fees easily accessible. It requires lenders to provide necessary financial information to buyers throughout the home loan process.

Refinance

If you refinance your existing mortgage, you’ll trade the original debt obligation in for a new one. Borrowers might choose to refinance for a more convenient payment schedule, a lower interest rate or a different term. Before refinancing your mortgage, consider the closing costs associated with getting a new loan.

Repayment Period

The repayment period attached to your mortgage indicates the amount of time you have to repay the loan. For example, a 30-year mortgage has a repayment period of 30 years.

In the context of HELOCs, the repayment period indicates when you will be expected to repay the amount you borrowed. Generally, you cannot borrow anymore funds from the line of credit during the repayment period.

Reverse Mortgage

A reverse mortgage is a loan product for homeowners who are at least 62 years old. It allows you to borrow against some of your home equity. Instead of making payments to your lender, the lender will make regular payments to you.

While this option can give you an additional income stream during retirement, it decreases your home equity and you could outlive the loan benefits.

Right Of First Refusal (ROFR)

The right of first refusal is a legal clause. If it’s in a lease or real estate contract, it gives interested buyers the contractual right to be the first party to place an offer on a property when the owner chooses to list it for sale. The clause is commonly found in lease agreements in which the buyer expresses interest in purchasing the home one day.

Right Of Rescission

The right of rescission gives a buyer the opportunity to cancel a refinance loan within 3 business days of finalizing the transaction. Essentially, this presents a chance to change your mind on a major loan such as a cash-out refinance or a home equity loan if you discover a problem after closing.

Secured Overnight Financing Rate (SOFR)

The Secured Overnight Financing Rate (SOFR) is the interest rate set by the U.S. Treasury to determine overnight borrowing for banks. Notably, this replaced the London Interbank Offered Rate (LIBOR).

Seller Concessions

Seller concessions are closing costs that the seller pays instead of the buyer.

Buyers and sellers can negotiate seller concessions. For example, you might ask the seller to cover elements like appraisal fees or your title search and insurance. The seller can reject your concessions or send you a counteroffer with concessions removed.

Seller Financing

Seller financing is a type of real estate transaction in which the seller accepts installment payments directly from the buyer. This is in contrast to the traditional sale transaction in which a buyer obtains financing from a lender and the seller is paid in full at closing.

Short Sale

A short sale involves a homeowner selling a property for less than the remaining mortgage amount. After the sale, the mortgage lender gets all of the proceeds. From there, the lender might forgive the remaining balance or consider it as taxable income for the borrower. Typically, this only happens when the homeowner is facing significant financial distress.

Title

A title is legal proof that you own a home. A title includes a physical description of the property, the names of anyone who owns the property, and a list of any liens on the home.

Title Insurance

Title insurance protects home buyers against outside claims to the property. Unlike other types of insurance, you don’t need to pay for title insurance every month. Instead, you make a single payment at closing that protects you for as long as you own the home. It’s a typical closing cost for homeowners.

Truth In Lending Act (TILA)

The Truth in Lending Act was passed in 1968. It is designed to require lenders to disclose all necessary information during the lending process. The goal is to eliminate predatory lending practices such as unfair loan terms, high fees, hidden fees, high interest rates and more.

Underwriting

Underwriting involves the lender verifying all of the details of your financial situation necessary to approve your home loan. For example, the lender will verify your assets, income, debt, property details and more.

Unsecured Loan

An unsecured loan doesn’t require any collateral. In contrast, secured loans are backed by an asset. For example, mortgages are secured loans backed by the home. But student loans are unsecured.

Upfront Costs

The upfront costs of buying a house can add up quickly. It’s important to be clear on the costs of buying a home to help you avoid any uncomfortable surprises.

U.S. Department of Agriculture (USDA) Loan

A USDA loan is backed by the U.S. Department of Agriculture. These loans are designed to create affordable homeownership opportunities to borrowers in rural areas. Depending on your situation, you can qualify for a loan with no down payment and competitive interest rates.

U.S. Department of Veterans Affairs (VA) Loan

A VA loan is backed by the U.S. Department of Veterans Affairs. These loans are designed to create affordable homeownership opportunities to buyers with sufficient military experience. You’ll need to have a qualifying connection to the military. But if you qualify, you can buy a home with no down payment.

Variable Rate

A variable rate changes throughout the life of your loan. If you get a mortgage with a variable rate, the interest rate will change based on market conditions at predetermined intervals.

Walk-Through

A final walk-through gives you one last opportunity to inspect a property before the closing is complete. You can use this time to confirm the property is in the condition you expect and verify the seller has completed everything that was agreed-to.

The Bottom Line: Learning Mortgage Terms Is Important

When getting a mortgage, you might have a string of new words thrown your way. It’s helpful to get a handle on this vocabulary to help you navigate the home buying process.

If you are ready to purchase a home, start the mortgage process today.