The homebuying glossary
Every term your buyers ask about, in plain English. Share it to turn confusion into confidence.
Pre-qualification
A quick estimate of what you might borrow, based on info you share but not yet verified.
Pre-approval
A lender's written commitment based on verified income, assets, and credit — much stronger than a pre-qual when you make an offer.
Debt-to-income (DTI)
Your monthly debt payments divided by your gross monthly income. Lenders use it to size your loan.
Underwriting
The lender's final review that verifies everything and approves the loan.
Rate lock
Locking today's interest rate for a set period so it won't change before you close.
Interest rate
The cost of borrowing, shown as a yearly percentage of the loan balance.
APR
The annual percentage rate — your interest rate plus certain fees, so it's slightly higher and helps compare loans.
Points (discount points)
Optional upfront fees you pay to lower your interest rate. One point = 1% of the loan.
Rate buydown
Paying to reduce your rate — temporarily (e.g. 2-1 buydown) or permanently.
Loan-to-value (LTV)
The loan amount divided by the home's value. Lower LTV (more down) usually means better terms.
Amortization
How your loan is paid down over time — early payments are mostly interest, later ones mostly principal.
Conforming vs. jumbo
Conforming loans fall under the annual limit; jumbo loans exceed it and have stricter requirements.
Principal & interest (P&I)
The core of your monthly payment — paying down the loan plus the interest.
PITI
Principal, Interest, Taxes, and Insurance — the full monthly housing payment.
PMI / MIP
Mortgage insurance, usually required with less than 20% down (PMI on conventional, MIP on FHA).
Escrow / impound account
An account your lender uses to collect and pay your property taxes and insurance.
Earnest money
A good-faith deposit with your offer that's credited toward your costs at closing.
Closing costs
Lender, title, and escrow fees to finalize the loan — typically 2–5% of the price.
Cash to close
The total you need at closing: down payment + closing costs − credits and deposits.
Loan Estimate (LE)
A standardized 3-page form showing your estimated rate, payment, and costs after you apply.
Closing Disclosure (CD)
The final version of your loan terms and costs — you get it at least 3 days before closing.
Appraisal
An independent estimate of the home's value that the lender requires.
Contingency
A condition in your offer (inspection, appraisal, financing) that lets you back out if it isn't met.
Title insurance
Protects you and the lender against claims or defects in the home's ownership history.
HOA
A homeowners association that maintains shared areas and charges dues — factor it into your budget.
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