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Mortgage jargon, translated.
Twenty-two terms you'll hear during your loan — defined the way Debbie would explain them across the kitchen table.
APR
Annual Percentage Rate — your interest rate plus certain loan costs, expressed as a yearly rate. Better for comparing offers than the rate alone.
Amortization
The schedule that splits each payment between interest and principal. Early payments are mostly interest; later payments are mostly principal.
Appraisal
A licensed appraiser's professional opinion of the home's market value. Lenders require it to make sure the home is worth the loan.
Closing costs
The fees to complete your loan — appraisal, title work, recording, and prepaid taxes and insurance. Typically 2–4% of the loan amount.
Closing Disclosure (CD)
The final, official statement of your loan terms and costs. You get it at least three business days before closing — by law.
DTI (Debt-to-Income)
Your monthly debt payments divided by your gross monthly income. One of the main numbers underwriters use to size your loan.
Down payment assistance (DPA)
Programs — like Minnesota Housing — that help eligible buyers cover down payment and closing costs, layered on a standard first mortgage.
Earnest money
A good-faith deposit you make with your offer. It's held in escrow and applied to your down payment or closing costs at the finish line.
Escrow
An account your servicer manages to pay your property taxes and homeowners insurance — collected as part of your monthly payment.
FHA loan
A government-insured loan with 3.5% minimum down and flexible credit guidelines. A workhorse for first-time buyers.
HECM
Home Equity Conversion Mortgage — the FHA-insured reverse mortgage. Lets homeowners 62+ access equity with no required monthly mortgage payment while keeping title.
HECM for Purchase
Using a reverse mortgage to buy a new primary residence — right-sizing without taking on a monthly mortgage payment.
HUD counseling
The independent, HUD-approved counseling session every reverse mortgage borrower must complete before applying. A built-in consumer protection.
Non-recourse
A HECM feature: neither you nor your heirs can owe more than the home is worth when it is sold to repay the loan.
PITI
Principal, Interest, Taxes, Insurance — the four parts of a typical monthly mortgage payment.
PMI
Private Mortgage Insurance — required on most conventional loans with less than 20% down. It drops off once you reach enough equity.
Pre-approval
A lender-verified statement of what you can borrow, based on your actual documents. Much stronger than a pre-qualification.
Principal
The amount you actually borrowed. Every dollar of principal you pay builds your equity.
Rate lock
Freezing your interest rate for a set window (often 30–60 days) so market moves can’t change your deal while your loan closes.
Refinance
Replacing your current mortgage with a new one — to lower the rate or payment, shorten the term, or take cash out of your equity.
Title insurance
Protects you and the lender against ownership disputes or liens that surface after closing. A one-time cost at closing.
Underwriting
The verification stage where the lender confirms your income, assets, credit, and the property itself before final approval.
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Still have a 'wait, what does that mean?'
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