Understanding key mortgage terms is crucial when navigating the homebuying process. Here are some essential terms to know:


The original loan amount borrowed, excluding interest.

Interest Rate:

The percentage charged by the lender for borrowing the principal amount.


The process of repaying the loan through scheduled, equal payments over time, which includes both principal and interest.

Down Payment:

The initial payment made by the buyer towards the home purchase, expressed as a percentage of the property's total value.

Loan-to-Value (LTV) Ratio:

The ratio of the loan amount to the property's appraised value, expressed as a percentage.

Closing Costs:

The fees and expenses associated with finalizing a real estate transaction, including appraisal fees, title insurance, and legal fees.

Loan Term:

The length of time over which the loan is repaid (e.g., 30 years).

Fixed-Rate Mortgage:

A mortgage with a constant interest rate throughout the entire loan term.

Adjustable-Rate Mortgage (ARM):

A mortgage with an interest rate that may change periodically based on market conditions.


An account held by the lender to cover property taxes and insurance on behalf of the borrower.

Private Mortgage Insurance (PMI):

Insurance required for conventional loans when the down payment is less than 20% of the home's value.

Homeowners Insurance:

Insurance that protects the homeowner against property damage and liability.


An assessment of the property's value conducted by a professional appraiser.

Title Insurance:

Insurance that protects the buyer and lender against any defects in the property's title.


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