Plain-English definitions for the terms you'll encounter on your financial journey.
A provision in a mortgage contract that allows the lender to demand immediate payment of the entire loan balance if certain conditions are met.
A mortgage with an interest rate that can change periodically based on the performance of a specific benchmark.
A home loan with an interest rate that can change periodically based on the performance of a specific benchmark.
Adjustable Rate Mortgage is a home loan where the interest rate can change over time based on the market, meaning your monthly payment might go up or down after an initial fixed period.
A short-term loan that has small monthly payments for a period, followed by a large final payment of the remaining balance.
A refinancing option where a new mortgage is taken out for more than the amount owed, with the difference paid in cash.
A five-page form that provides final details about the mortgage loan, including loan terms and projected monthly payments.
A private sector mortgage that is not insured or guaranteed by the federal government.
The percentage of a borrower's gross monthly income that goes toward paying monthly debt obligations. Mortgage lenders use this figure to evaluate a buyer's ability to manage monthly mortgage payments.
Optional fees paid to a lender at closing in exchange for a lower interest rate on a mortgage.
A government-backed mortgage insured by the FHA that allows borrowers with lower credit scores and smaller down payments to qualify for home financing.
A government-backed mortgage insured by the Federal Housing Administration, designed for low-to-moderate-income borrowers.
A cost that remains the same from month to month, such as a rent or mortgage payment.
A home loan with an interest rate that remains the same for the entire life of the loan.
A form sent to taxpayers by lenders showing the amount of mortgage interest paid during the year for deduction purposes.
The difference between the current market value of your home and the amount you still owe on your mortgage.
Specific expenses such as medical bills or mortgage interest that you list individually to reduce your total taxable income.
A type of mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency.
Financial debts or obligations owed by an individual or business, such as loans and mortgages.
A measure used by lenders to compare the amount of a mortgage to the appraised value of the property.
A calculation that compares the amount of a mortgage to the appraised value of the property.
A loan specifically used to purchase real estate, where the property itself serves as collateral for the debt.
An intermediary who matches borrowers with mortgage lenders to help find the best loan terms and rates.
An insurance fee paid by borrowers, typically on FHA loans, to protect the lender in case of default. It usually consists of both an upfront payment and a monthly fee included in the mortgage payment.
An itemized deduction that allows homeowners to subtract the interest paid on a home loan from their taxable income.
A formal evaluation by a lender that determines the maximum loan amount a borrower qualifies for based on their finances. It gives buyers more credibility when making an offer on a house.
Net Operating Income is the money a rental property earns after paying for regular expenses like taxes and maintenance, but before paying any mortgage or income taxes. Think of it as the profit your building generates from being open for business.
An acronym for Principal, Interest, Taxes, and Insurance, which are the four main components of a monthly mortgage payment. It represents the total periodic cost of owning a home under a mortgage.
Private Mortgage Insurance is a monthly fee added to your mortgage payment if you put down less than 20% on a home. It protects the bank in case you stop paying your loan, and it usually goes away once you have enough equity in the house.
Fees paid directly to a lender at closing in exchange for a lower interest rate on a mortgage.
Insurance that protects the lender if the borrower defaults, usually required if the down payment is less than 20 percent.
An insurance policy required by lenders when a borrower makes a down payment of less than 20 percent of the home's purchase price. It protects the lender in case the borrower defaults on the loan.
A refinancing of an existing mortgage to change the interest rate, the loan term, or both, without taking cash out.
The process of replacing an existing mortgage with a new one, typically to obtain a lower interest rate or different terms. This can help homeowners reduce monthly payments or access home equity.
A loan for homeowners aged 62 or older that allows them to convert part of their home equity into cash.
The sale of a property for less than the amount owed on the mortgage, approved by the lender to avoid foreclosure.
An individual account on a credit report, such as a credit card, mortgage, or auto loan.
A zero-down-payment mortgage for eligible rural and suburban homebuyers, issued through the Department of Agriculture.
A mortgage loan available to veterans, service members, and their spouses, guaranteed by the Department of Veterans Affairs.