Mortgage Terms, Explained: No Jargon, Just Answers
Let’s be honest: the mortgage process can feel like learning a whole new language. Between acronyms, industry lingo, and legal-sounding terms, it’s easy to feel overwhelmed. That’s why we’re breaking it all down — no jargon, just clear answers — so you can feel confident every step of the way.
Whether you’re a first-time buyer or need a refresher, here are some common mortgage terms explained in plain language:
Pre-Approval
What it means: A lender reviews your financial information and tells you how much you can borrow.
Why it matters: It shows sellers you’re serious and ready to buy — like a permission slip to shop for a home.
Down Payment
What it means: The amount of money you pay upfront toward your home.
Why it matters: A higher down payment often means lower monthly payments and better loan terms.
Interest Rate
What it means: The cost of borrowing money from your lender, shown as a percentage.
Why it matters: Lower interest rates = less money paid over time. Your rate depends on your credit, loan type, and market conditions.
Rate Lock
What it means: A guarantee that your interest rate won’t change between pre-approval and closing, usually for a set time.
Why it matters: Protects you if rates go up before your loan is finalized.
APR (Annual Percentage Rate)
What it means: Your interest rate plus other loan-related fees, shown as a yearly percentage.
Why it matters: It helps you compare the total cost of different loans — not just the rate.
Loan Estimate
What it means: A document that outlines your loan details, including interest rate, monthly payment, and closing costs.
Why it matters: It helps you understand the full cost of your mortgage and compare offers from different lenders.
Escrow
What it means: An account where part of your monthly payment is set aside to cover property taxes and insurance.
Why it matters: It keeps you from getting hit with big bills all at once.
DTI (Debt-to-Income Ratio)
What it means: A comparison of your monthly debt to your income.
Why it matters: Lenders use it to see if you can afford a mortgage. Lower DTI = better approval odds.
Closing Costs
What it means: Fees paid at the end of the mortgage process (loan origination, title insurance, taxes, etc.).
Why it matters: Usually 2–5% of the home’s price, so it’s important to budget for them.
Underwriting
What it means: The lender’s process of verifying your financial info to approve the loan.
Why it matters: It’s the final review before the loan gets the green light!
Final Thoughts
Understanding mortgage terms shouldn’t feel like decoding a secret message. When you work with a lender who explains things clearly and honestly (like us!), you’ll feel empowered — not overwhelmed.
Still have questions? We’ve got answers.
Reach out anytime — we’re here to make the mortgage process simple, clear, and stress-free from start to finish.
