Glossary
Plain-language definitions of the terms used across Mortgage Plainly.
- Amortization
- Paying off a loan through regular payments that cover each month's interest and reduce the principal, so the balance reaches zero at the end of the term. Read more
- Annual percentage rate (APR)
- A broader measure of the cost of borrowing than the interest rate, including certain fees such as points. It is usually higher than the rate. Read more
- Closing costs
- Fees and prepaid items due when a mortgage closes, such as appraisal, title, government recording fees, prepaid interest and escrow deposits. Read more
- Closing Disclosure
- The five-page form with a loan's final terms and costs, which the lender must give you at least three business days before closing. Read more
- Conforming loan limit
- The largest loan Fannie Mae and Freddie Mac can buy, set each year by FHFA. For 2026 the baseline for one unit is $832,750. Read more
- Debt-to-income ratio (DTI)
- All monthly debt payments, including the new housing payment, divided by gross monthly income. Read more
- Discount points
- Fees paid at closing to lower the interest rate. One point equals 1% of the loan amount. Read more
- Escrow account
- An account the servicer uses to collect part of each payment and pay property taxes and insurance. Also called an impound account. Read more
- FHA loan
- A mortgage insured by the Federal Housing Administration, part of HUD, with down payments as low as 3.5% and mortgage insurance premiums paid to FHA. Read more
- Funding fee (VA)
- A one-time fee on most VA-backed home loans, a percentage of the loan that depends on loan type, down payment and prior use. Some borrowers are exempt. Read more
- Jumbo loan
- A mortgage larger than the conforming loan limit for its county, which Fannie Mae and Freddie Mac cannot buy. Read more
- Lender credit
- Money from the lender toward closing costs in exchange for a higher interest rate. Read more
- Loan Estimate
- The standard three-page form showing a loan's estimated terms, payments and closing costs, due within three business days of your application. Read more
- Loan-to-value ratio (LTV)
- The loan amount divided by the home's appraised value or price. A higher down payment means a lower LTV. Read more
- PITI
- Principal, interest, taxes and insurance, the four usual parts of a monthly mortgage payment with escrow. Read more
- Prepayment penalty
- A fee some loans charge for paying off all or a large part of the loan early, usually within the first few years. Read more
- Primary Mortgage Market Survey (PMMS)
- Freddie Mac's weekly survey of average 30-year and 15-year fixed mortgage rates, released on Thursdays. Read more
- Private mortgage insurance (PMI)
- Insurance that protects the lender on a conventional loan with less than 20% down. It can be canceled at 80% of original value and ends automatically at 78%. Read more
- Refinance break-even
- The number of months until the monthly savings from a refinance add up to its closing costs. Read more