This glossary explains common mortgage terms in plain language to help you understand your home financing options. It is provided for general informational purposes only and does not constitute financial or legal advice. If you have questions about your specific situation, please contact us at info@rightmtg.com or (248) 605-2241.
Common Mortgage Terms
Annual Percentage Rate (APR): The yearly cost of a loan expressed as a percentage, including the interest rate plus certain fees. APR helps you compare the true cost of different loan offers.
Amortization: The process of paying off a loan over time through regular payments of principal and interest.
Closing Costs: Fees and expenses, separate from the down payment, that are paid when a real estate transaction is finalized. These may include appraisal, title, and origination fees.
Down Payment: The portion of a home’s purchase price that you pay up front, rather than financing through your loan.
Escrow: An account held by your lender or servicer to pay property taxes and homeowners insurance on your behalf as part of your monthly payment.
Fixed-Rate Mortgage: A loan with an interest rate that stays the same for the entire term of the loan.
Adjustable-Rate Mortgage (ARM): A loan with an interest rate that can change periodically based on a financial index.
Pre-Approval: A lender’s conditional commitment to lend you a specific amount, based on a review of your finances, before you find a home.
Principal: The amount of money you borrow, or the amount still owed on your loan, not including interest.
PITI: The four components of a typical mortgage payment—Principal, Interest, Taxes, and Insurance.
Points: Optional fees paid to the lender at closing, expressed as a percentage of the loan amount, that can lower your interest rate.
Private Mortgage Insurance (PMI): Insurance that may be required when your down payment is less than 20% of the home’s value, protecting the lender if the loan is not repaid.
Refinance: Replacing your current mortgage with a new one, often to obtain a lower rate, change the term, or access equity.
Underwriting: The process a lender uses to evaluate your creditworthiness and the risk of lending to you.
Have a question about a term not listed here? Email us at info@rightmtg.com and we’ll be glad to help.
