Adjustable-Rate Mortgage
A mortgage with an interest rate that changes periodically based on a market index after an initial fixed-rate period.
Amortization Schedule
A table showing the breakdown of each loan payment into principal and interest over the life of the loan.
Amortization
The process of gradually paying off a debt through regular payments, or writing off an intangible asset's cost over time.
APR
The yearly cost of a loan expressed as a percentage, including interest and fees.
APR to APY
Converts a nominal Annual Percentage Rate (APR) to Annual Percentage Yield (APY), accounting for compounding.
APY to APR
Converts an Annual Percentage Yield (APY) back to the equivalent nominal Annual Percentage Rate (APR).
Back-End Ratio
The total debt-to-income ratio comparing all monthly debt obligations to gross monthly income.
Balloon Payment
A large lump-sum payment due at the end of a loan term after a series of smaller regular payments.
Bridge Loan
Short-term financing that covers a funding gap until permanent capital is secured.
20/4/10 Car Rule
The maximum car price you can afford: 20% down, 4-year loan, monthly payment under 10% of gross income.
Closing Costs
Fees and expenses paid at the close of a real estate transaction, beyond the property price and down payment.
Co-Borrower
An additional borrower who shares equal legal responsibility for loan repayment alongside the primary borrower.
Collateral
An asset pledged to a lender to secure a loan, which the lender can seize if the borrower defaults.
Conforming Loan
A mortgage that meets Fannie Mae and Freddie Mac standards, including FHFA loan size limits.
Construction Loan
Short-term financing for building real estate that converts to a permanent mortgage after project completion.
Conventional Loan
A mortgage not insured or guaranteed by a federal government agency such as the FHA or VA.
Cosigner
A person who agrees to repay a loan if the primary borrower defaults, used to help borrowers qualify for credit.
Credit Line
A flexible borrowing arrangement allowing the borrower to draw and repay funds up to a preset limit repeatedly.
Deed of Trust
A legal document used in some states instead of a mortgage, placing property title with a trustee until the loan is repaid.
Loan Delinquency
A borrower's failure to make required loan payments by the scheduled due date.
Down Payment
An upfront cash payment made at the time of purchase, representing the buyer's initial equity in a financed asset.
Draw Period
The phase of a HELOC during which the borrower can withdraw funds up to the approved credit limit.
DTI Ratio
Monthly debt payments as a percentage of gross monthly income, used to qualify for mortgages.
Effective Annual Rate
The actual annual return on a loan or investment after accounting for intra-year compounding.
Escrow
A neutral third-party account that holds funds or documents until specific conditions of a transaction are met.
FHA Loan
A government-backed mortgage insured by the Federal Housing Administration, with low down payment requirements.
Fixed-Rate Mortgage
A mortgage with an interest rate that remains constant for the entire life of the loan.
Forbearance
A temporary agreement to pause or reduce loan payments during financial hardship without triggering default.
Front-End Ratio
The ratio of proposed housing costs to gross monthly income, used by lenders to assess affordability.
Hard Money Loan
A short-term asset-based loan secured by real estate, funded by private investors at higher rates.
HELOC
A revolving line of credit secured by the equity in a homeowner's property.
Home Equity
The portion of a home's value that the owner actually owns outright, equal to market value minus any outstanding mortgage balance.
Interest-Only Loan
A loan where payments cover only interest for an initial period, after which principal repayment begins.
Interest
The cost of borrowing money, expressed as a percentage of the principal over time.
Jumbo Loan
A mortgage that exceeds conforming loan limits set by the FHFA, requiring stricter qualification standards.
Land Loan
A loan that finances the purchase of vacant land rather than an existing structure.
Late Fee
A penalty charged to a borrower who fails to make a required payment by the due date.
Lien
A legal right or claim against a property or asset used as security for a debt.
Loan Modification
A permanent change to the original terms of a loan agreed upon by the lender and borrower to prevent default.
Loan Officer
A financial professional who evaluates, processes, and approves loan applications on behalf of a lending institution.
Origination Fee
An upfront fee charged by a lender for processing a new loan application, typically a percentage of the loan amount.
Loan Processor
A mortgage professional who assembles and verifies the loan application file before it reaches underwriting.
Loan Servicer
A company that manages loan administration after origination, including payment collection and borrower communication.
Loan Term
The agreed length of time the borrower has to repay a loan in full.
Loan-to-Deposit Ratio
A bank's total loans as a percentage of its total deposits, indicating liquidity and lending activity.
LTV Ratio
A ratio comparing the loan amount to the appraised value of the asset being financed, used to assess lending risk.
Mortgage Payment
The monthly payment made to a lender covering principal, interest, taxes, and insurance (PITI) on a home loan.
Mortgage Points
Upfront fees paid to a lender to reduce the mortgage interest rate, where one point equals 1% of the loan.
Mortgage
A loan secured by real estate, used to purchase or refinance property.
Negative Amortization
When minimum loan payments are insufficient to cover accruing interest, causing the balance to increase.
Origination Fee
An upfront fee charged by a lender for processing and underwriting a new loan application.
Payday Loan
A short-term, high-cost loan typically repaid in full on the borrower's next payday.
Piggyback Loan
A second mortgage taken simultaneously with the first mortgage to avoid PMI or cover a down payment gap.
Mortgage Points
Upfront fees paid to a lender at closing to reduce the loan's interest rate.
Prepayment Penalty
A fee charged by some lenders when a borrower pays off a loan early, compensating for lost interest income.
Prime Rate Lending
Lending to highly creditworthy borrowers at or near the prime rate benchmark.
Principal
The original sum of money borrowed in a loan or invested, before interest or returns.
PMI
Insurance that protects the lender when a borrower makes a down payment of less than 20% on a conventional mortgage.
Recourse Loan
A loan where the lender can pursue the borrower's other assets if collateral is insufficient to repay the debt.
Refi Break-Even
The number of months until monthly savings from refinancing recover the closing costs.
Refinancing
Replacing an existing loan with a new loan, typically to obtain a lower interest rate or different loan terms.
Repayment Plan
A structured agreement to repay overdue loan amounts through additional payments over a defined period.
Reverse Mortgage
A loan for homeowners aged 62+ that converts home equity into cash, with repayment deferred until the home is sold or the owner moves out.
Revolving Credit
A borrowing arrangement with a preset credit limit that can be drawn, repaid, and reused repeatedly.
Second Mortgage
A loan secured by a property that already carries a primary mortgage, in a subordinate lien position.
Secured Loan
A loan backed by collateral that the lender can seize if the borrower defaults.
Student Loan Payoff
Monthly payment needed to fully repay a student loan over a given term, plus total interest cost.
Subordinate Lien
A lien that ranks below another lien in repayment priority, paid only after senior liens are satisfied.
Subprime Loan
A loan extended to borrowers with poor credit histories, carrying higher rates to compensate for elevated default risk.
Title Insurance
Insurance that protects homebuyers and lenders against losses from defects or disputes in a property's ownership title.
True Car Cost
The total 5-year cost of vehicle ownership including depreciation, financing, fuel, insurance, and maintenance.
Underwriting Standards
The criteria lenders use to evaluate loan applicants and determine approval, terms, and pricing.
Unsecured Loan
A loan with no collateral, approved based solely on the borrower's creditworthiness and income.
Usury
The practice of charging illegally high or excessive interest rates on a loan.
VA Loan
A government-backed mortgage guaranteed by the Department of Veterans Affairs for eligible veterans and military.
Wraparound Mortgage
A financing arrangement where a new loan wraps around an existing mortgage, with the seller continuing to pay the original lender.