Home-buying words, translated.

17 terms

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Appraisal

A professional opinion of a home’s value, usually ordered by the lender. It helps the lender decide whether the home supports the loan amount. It does not replace a home inspection.

APR (annual percentage rate)

A yearly measure of borrowing cost that includes the interest rate and certain loan fees. Compare APRs on similar loans, alongside upfront costs and how long you expect to keep the loan.

Cash to close

The amount you still need to pay at closing after deposits, credits, and payments already made are applied. Your Closing Disclosure shows the final calculation. The calculator’s upfront total is before those adjustments.

Closing costs

Fees and prepaid amounts needed to finish your purchase, separate from your down payment. They may include lender, title, recording, tax, and insurance charges.

Closing Disclosure

The five-page form with your final loan terms and costs. For most mortgages, you must receive it at least three business days before closing. Compare it with your Loan Estimate.

Contingency

A condition in your purchase contract that must be met for the deal to proceed, such as satisfactory financing or an inspection. Deadlines and contract wording determine your rights and whether a deposit can be returned.

Down payment

Your upfront share of the home’s purchase price. The loan covers the rest of the price. It is separate from closing costs.

Earnest money

A deposit you make after agreeing to buy a home to show commitment. It is usually credited toward your purchase at closing. Whether you get it back if the deal falls through depends on your contract.

Escrow

Money held by a third party for a specific purpose. During a purchase, an escrow holder may keep your deposit. After closing, a mortgage escrow account may collect part of your taxes and insurance with each payment and pay those bills when due.

HOA (homeowners association)

An organization that manages a community and enforces its rules. Dues and possible special assessments are costs to consider in addition to your mortgage.

Interest

The charge for borrowing money, expressed as a percentage rate. Your loan payment usually includes both interest and repayment of the amount you borrowed.

Loan Estimate

A standard three-page form showing proposed mortgage terms, estimated payments, fees, and cash to close. Ask at least three lenders for one so you can compare similar offers.

Mortgage insurance / PMI / MIP

Insurance that protects the lender if you stop paying. Conventional loans often require private mortgage insurance (PMI) with less than 20% down. FHA mortgage insurance premiums (MIP) have different upfront and ongoing rules.

Points (discount points)

An optional upfront charge paid to the lender in exchange for a lower interest rate. One point equals 1% of the loan amount. Compare the upfront cost with the monthly savings and how long you plan to keep the loan.

Preapproval

A lender’s conditional indication that it may lend you up to a certain amount after reviewing information such as your income, savings, and credit. Final approval still depends on the property, updated checks, and other conditions.

Principal

The money you borrow, and the remaining loan balance you repay over time. Principal and interest together are only part of the full cost of owning a home.

Rate lock

A lender’s agreement to hold a particular interest rate for a stated period, subject to its terms. Ask when it expires, what can change it, and whether an extension costs extra.