10 Common Mortgage Terms
Get a quick review of common terms and acronyms you’ll come across as you buy your house.
To get you started, here are some of the most common mortgage terms.
Amortization – This is your mortgage’s repayment plan over time. Usually, you’ll receive an amortization schedule, which displays all your future payments and how your loan will be paid down.
Annual Percentage Rate (APR) – This indicates the amount of interest you’ll pay on your loan, which may be a fixed rate or an adjustable rate, depending on the type of mortgage. The higher your rate, the more you’ll pay. Luckily, mortgage rates are still relatively low!
Closing Costs – These are fees you’ll pay to complete the mortgage process. Closing costs may encompass an appraisal, prepaid interest, mortgage origination and underwriting, and more. Many lenders, including UW Credit Union, offer discounts on closing costs.
Debt-to-Income Ratio (DTI) – This is a percentage that represents how much debt you carry versus how much income you make. Lenders use DTI to assess your ability to pay back a mortgage.
Down Payment – This is the amount of money you pay toward the purchase price of your new home. Lenders usually require you to pay a certain percent down payment to qualify for a mortgage.
Escrow – An escrow account holds an amount of your money to pay for things like property taxes and insurance. The lender manages the account and makes payments from it.
Equity – This is the difference between how much your home is worth and how much you owe on your mortgage. For example, if your home is worth $200,000 and your mortgage is $150,000, you have $50,000 in equity.
Loan-to-Value Ratio (LTV) – This is a percentage that represents the amount you owe versus how much your home is worth. If your home is worth $200,000 and your mortgage is $150,000, your LTV is 75%.
Principal – This is the amount of money borrowed for your mortgage. When making mortgage payments, the principal portion goes directly to paying off your loan.
Private Mortgage Insurance (PMI) – If you make a down payment of less than 20 percent, lenders usually will require you to pay PMI, a monthly fee until you’ve paid off 20 percent of your home’s purchase price.
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At UW Credit Union, first-time homebuyers get up to $1,000 off closing costs.* Get started by exploring loan options, then get a customized estimate with our rate quote tool. When you’re ready, start your application to get pre-approved.
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