Mortgage terms, decoded.

What share of your monthly income goes to debt payments. If you make $5,000/month and you have $1,500 toward debts, your DTI is 30%. Most lenders like to see this under 43%.

How much of the home's price you're borrowing. Buy a $300K house with $30K down, and you're borrowing $270K — that's a 90% LTV. The lower this number, the better terms you'll usually get.

Insurance you pay when you put down less than 20%. It protects the lender (not you) and usually costs 0.3% to 1.5% of the loan annually. Goes away once you've paid down to 78% LTV.

The true cost of borrowing — interest plus most lender fees, blended into a single percentage. APR is almost always higher than the headline interest rate. Compare APR to APR when shopping lenders.

Two meanings: (1) a neutral account that holds your earnest money during a sale, (2) the account your lender uses to pay your property taxes and homeowners insurance from your monthly payment. Same word, different jobs.

Government or non-profit program that helps cover your down payment (and sometimes closing costs). Can be a grant, a forgivable loan, or a second mortgage. Thousands exist; that is why we exist.

A government-insured loan that lets you buy with as little as 3.5% down and lower credit-score requirements. Comes with mortgage insurance for the life of the loan unless you refinance.

A zero-down loan backed by the U.S. Department of Veterans Affairs. For active-duty service members, veterans, and some surviving spouses. Often the best deal in mortgages if you qualify.

A zero-down loan from the U.S. Department of Agriculture for buying in eligible rural and suburban areas. Income limits apply.

All the fees due at the end of a mortgage transaction — lender fees, title insurance, recording fees, prepaid taxes and insurance. Typically 2–5% of the purchase price.

A lender's informal estimate of what you might be able to borrow, based on what you tell them. Free, quick, no credit pull.

A lender verifies your income, assets, and credit and gives you a conditional commitment to lend up to a specific amount. Requires a credit pull and document review. Sellers take this more seriously than a pre-qual.

A loan not backed by a government program. Usually requires higher credit scores than FHA, but no upfront mortgage insurance and PMI drops off at 78% LTV.

A conventional loan that fits Fannie Mae / Freddie Mac size limits ($766,550 in most counties for 2024). Above that is a jumbo.

Cash you put down with an offer to show you're serious. Usually 1–3% of the purchase price. Applied to your down payment at closing — or forfeited if you back out for reasons not in the contract.