Financing terms
- Pre-qualification: An early estimate based on information supplied by a borrower; the depth of review varies by lender.
- Pre-approval: A lender's preliminary review of a borrower's finances. It is not a final commitment to lend.
- Principal: The amount borrowed or the unpaid balance of a loan.
- Interest rate: The cost of borrowing expressed as a percentage; the rate may be fixed or adjustable.
- APR: Annual percentage rate, a broader measure of credit cost that can include certain fees.
- Discount points: Upfront charges paid to a lender in exchange for a lower interest rate, depending on the loan terms.
- Rate lock: An agreement that holds a specified interest rate for a defined period, subject to the lender's conditions.
- Loan Estimate: A lender-provided form showing key loan terms and estimated costs.
- Closing Disclosure: A form showing final loan terms and closing costs for most covered mortgage loans.
- Debt-to-income ratio (DTI): A comparison of monthly debt obligations with gross monthly income, calculated according to lender guidelines.
- Loan-to-value ratio (LTV): The loan amount compared with the property's value used for lending purposes.
- Mortgage insurance: Coverage that may be required under certain loan programs or down-payment structures; it generally protects the lender, not the homeowner.
Purchase and escrow terms
- Earnest money deposit: Funds delivered under the purchase agreement and handled according to its instructions. The agreement controls how the deposit is treated if a dispute or cancellation occurs.
- Contingency: A contractual condition that may provide a right to investigate, negotiate, or cancel if requirements are not met. The exact wording and deadlines matter.
- Appraisal: An appraiser's opinion of value for a defined purpose. A lender appraisal is not a home inspection.
- Inspection: An evaluation of observable condition within the inspector's scope. Additional specialists may be appropriate.
- Escrow: A neutral coordination process for funds and documents under written instructions.
- Preliminary title report: A report of recorded matters affecting title that may become exceptions to a title policy.
- Proration: An allocation of certain expenses, such as property taxes or HOA charges, between buyer and seller based on the closing date and contract.
- Cash to close: The funds a buyer must bring or send to complete the purchase, after accounting for deposits, credits, and charges.
- Recording: The county recorder's entry of the deed or other instrument into public records.
Property and ownership terms
- HOA: Homeowners association that may collect dues and administer community rules and common areas.
- Special assessment: A charge imposed for a particular purpose by an association or public entity, depending on the property and governing documents.
- Mello-Roos: A common name for a special tax levied by certain community facilities districts. Confirm the parcel's actual tax bill and duration rather than assuming a neighborhood-wide amount.
- Equity: Estimated property value minus debts secured by the property; selling costs may affect actual proceeds.
- Easement: A legal right for another party to use a defined portion of property for a stated purpose.
- Deed of trust: A security instrument commonly used in California to secure repayment of a real estate loan.
Documents worth comparing
Compare your Loan Estimate with the Closing Disclosure and ask your lender to explain changes in the loan amount, interest rate, monthly payment, cash to close, and fees. The Consumer Financial Protection Bureau offers a Loan Estimate overview and a Closing Disclosure explainer.
Definitions are simplified for education. The meaning and legal effect of a term depend on the actual document and transaction.