Adjustable Rate Mortgage

Rate is fixed for the first 5, 7 or 10 years (depending on your term) and may adjust every 12 months based on current market rates after that. You'll likely have a lower interest rate and APR for the initial period of an adjustable rate loan than you would with a fixed rate loan.

Annual Percentage Rate (APR)

A measure of the cost to you for borrowing money, the APR includes your interest rate, points, fees and other charges associated with your loan – that's why it's usually higher than your interest rate.

Break-even Point

When you recover the upfront costs of refinancing from the savings associated with a lower monthly payment or shorter loan term.

Closing Costs

The amount you pay the day you close on a home. Closing costs will vary, but this is typically 1% to 2% of the purchase price.

Credit Score

Your credit score is determined by things like payment history and how long you've had credit. Lenders use this number to figure out how likely you are to pay back your loan and what interest rate you'll get.

Debt-to-Income Ratio

This percentage is your total monthly expenses divided by your gross monthly income.

Down Payment

Amount paid up front when you purchase a home and isn't part of the loan. Having a down payment will decrease your home loan amount and may qualify you for a better interest rate. You may also need to cover closing costs in addition to a down payment, which adds to the total amount you pay up front.

Estimated Property Taxes

Annual property taxes are usually determined by your local government and often based on a percentage of the home's assessed value.

Fixed-rate mortgage

Your rate won’t change, and your monthly principal and interest payments will stay the same over the life of your loan.

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Homeowners Association Dues

An amount homeowners are required to pay for common services or amenities within their community. This can include trash pickup, landscaping, pool maintenance and snow removal.


Loan-to-value (LTV) is a ratio lenders use to assess risk before approving a mortgage. The ratio is calculated by dividing the desired loan amount by the appraised home value. Typically, the loan is considered higher risk if the ratio is high.

Loan Estimate

This document provides all the information about a lender's offer when you apply for a home loan, including your loan amount, interest rate, monthly payment, closing costs and other details. Lenders are required to provide you with a Loan Estimate within 3 business days of receiving your application.

Monthly Expenses

The total amount you're required to pay each month toward credit card debt, car loans, student loans, child support, alimony or other financial obligations.

Non-conforming loans

Non-conforming loans are ones that are too large to meet financing limits set by the Federal Housing Finance Agency (FHFA). This means they can’t be purchased by Fannie Mae and Freddie Mac like standard loans, and they have different underwriting guidelines.


Also known as "discount points", this is an upfront fee, calculated as a percentage of your total loan amount, and is paid directly to the lender at closing in exchange for a reduced interest rate. You have the option to choose the number of points and how many you buy when discussing rate options with your loan expert.

Private Mortgage Insurance (PMI)

This protects the lender when a borrower defaults on a home loan.

Property Taxes

Annual property taxes are usually determined by your local government and often based on a percentage of the home's assessed value.