Principal and interest
Principal is the money you borrowed. Interest is what you pay for borrowing it. Early in a loan most of your payment is interest; late in a loan most of it is principal.
Escrow
An account your lender holds to pay your property taxes and home insurance for you. You pay a twelfth of the annual cost each month along with your mortgage, and the lender pays the bills when they fall due. It is why your payment can change even on a fixed-rate loan — the loan did not change, your tax bill did.
APR
The interest rate plus the cost of getting the loan, expressed as a single yearly percentage. It exists so you can compare two offers that have different fees. It is the honest comparison number, which is why it is the one required on advertising.
Mortgage insurance
Insurance that protects the lender, not you, and which you pay for. It is generally required when your cash down is a small share of the price. On conventional loans it comes off once you have built enough equity; on most FHA loans it does not.
Loan-to-value (LTV)
The loan amount divided by the property value. Nearly every guideline in lending is expressed in these terms, so it is worth knowing the phrase.
Debt-to-income (DTI)
Your total monthly debt payments divided by your gross monthly income. This is the number that most often decides how much you can borrow. It counts car loans, student loans, credit card minimums and child support — not utilities, groceries or phone bills.
Underwriting
The formal review of your file against the loan program’s rules. The underwriter is the person who says yes.
Conditions
Items the underwriter needs before final approval — a document, an explanation, a signature. Getting a list of conditions is normal and is not bad news. Clearing them fast is what closes a loan on time.
Loan Estimate
A standardized three-page form every lender must give you after you apply. Because the format is fixed, two Loan Estimates can be compared line by line. Get more than one.
Rate lock
An agreement holding your interest rate for a set number of days while your loan is processed. If your closing moves past the lock expiry, the lock may need extending, which can cost money. It is a good reason to keep the closing date realistic.
Find out what you qualify for.
A licensed loan officer reviews what you send and tells you where you stand, in writing. No cost, and no obligation to go further.