Mortgage terms, in plain English

The mortgage world loves to make simple things sound complicated. Here's what the words actually mean, no jargon. If something here still isn't clear, that's what I'm for.

Pre-approval

The real thing, not a guess. I verify your income and credit so you know your exact budget and sellers take your offer seriously. Get pre-approved before you start shopping. It costs nothing and it changes how people treat your offer.

Pre-qualification

A quick, ballpark estimate based on what you tell me. Useful for a first gut-check. It is not the same as pre-approval, which is verified and carries real weight with a seller.

Mortgage insurance (PMI / MI)

A small monthly fee you pay when you put less than 20% down. It protects the lender if you stop paying, not you. The good news: it falls off once you have built enough equity, so it is not forever.

Points

Money you pay up front to lower your rate for the whole life of the loan. One point is 1% of the loan amount. Worth it if you are staying put a long time, not if you will move or refinance soon. I will run the math both ways so you can see.

Temporary buydown

A lower rate for the first one to three years that then returns to normal. Usually the seller or builder pays for it. It is a way to ease into your payment. There is a calculator on my site if you want to see it on a real number.

Escrow / impounds

An account that collects a little each month so your property taxes and homeowners insurance get paid for you, instead of hitting you with big bills twice a year. On my quotes I show the loan payment without it, so the number stays clean and comparable.

DTI (debt-to-income)

How much of your monthly income already goes to debts, written as a percentage. Lenders use it to decide how much you can borrow. Lower is better. Paying off a card before you apply can move it in your favor.

LTV (loan-to-value)

The size of your loan compared to the home's value. Put 20% down and your LTV is 80%. It affects your rate and whether you pay mortgage insurance. The more you put down, the lower it goes.

APR

Your interest rate plus most of the upfront loan costs, blended into one yearly number. It exists so you can compare two loans fairly. Your actual note rate is usually a little lower than the APR.

Rate lock

Locking in today's rate so it cannot move on you before you close, usually for 30 to 60 days. Once we lock, you are protected even if the market jumps the next day.

Closing costs

The one-time fees to set up the loan and transfer the home: appraisal, title, lender fees, and a few others. Often 2 to 3% of the price. Sometimes the seller chips in to cover part of them.

Earnest money

A deposit you put down with your offer to show you are serious. It is not an extra cost. It goes toward your down payment or closing costs at the end, and you get it back if a contingency lets you walk.

Contingency

A condition in your offer that lets you back out without losing your deposit, like a home inspection or the appraisal coming in low. Think of it as your safety net.

Conforming vs jumbo

Conforming loans fit under the limit Fannie Mae and Freddie Mac set. Go above that limit and it becomes a jumbo loan, with slightly different rules. Plenty of California buyers land in jumbo territory. I will tell you which one you are in.

Amortization

How your loan gets paid down over time. Early on, most of your payment is interest. Later, more of it goes to the balance. Same payment each month, different mix inside it.

HELOC

A line of credit against the equity in your home. You borrow what you need, when you need it, and you do not have to touch the low rate on your first mortgage to do it.

Bank-statement loan

A loan that qualifies you on your bank deposits instead of your tax returns. Built for self-employed people who write a lot off and look broke on paper but actually run a healthy business.

Gift funds

Money from family to help with your down payment. Allowed on most loans with a short letter saying it is a gift and not a loan you have to repay. I will walk you through the paperwork so it never slows you down.

Seller concessions

When the seller agrees to pay some of your closing costs or fund a buydown. In a slower market it can put more money in your pocket than a simple price cut, and it is often an easier ask than you would think.

Underwriting

The lender's full review of your loan: your income, your credit, and the home itself. It is the step where 'pre-approved' becomes 'cleared to close.' I keep you posted the whole way through so there are no surprises.