Mortgage Terminology Explained

Understanding mortgage terminology is crucial for navigating the homebuying process with confidence. Familiarity with these terms can empower you to make informed decisions on your path to homeownership.

Adjustable-Rate Mortgage (ARM)

A loan with an interest rate that can change periodically, typically in relation to an index, causing monthly payments to vary over time.

Amortization

The process of gradually paying off a loan through scheduled payments of principal and interest over a set period.

Annual Percentage Rate (APR)

The annual cost of a loan, including interest and fees, expressed as a percentage. It provides insight into the total cost of borrowing.

Appraisal

An evaluation of a property's market value by a licensed appraiser, often required by lenders to ensure the loan amount aligns with the property's worth.

Closing Costs

A Expenses incurred to finalize a real estate transaction, including fees for the loan origination, appraisal, title search, and more.

Conditional Approval

A lender's agreement to approve a loan if specific requirements, like additional documents or a property appraisal, are met.

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Debt-to-Income Ratio (DTI)

A measure comparing your monthly debt payments to your gross monthly income, used by lenders to assess borrowing risk.

Down Payment

The initial upfront portion of the total purchase price paid by the buyer, with the remainder typically financed through a mortgage loan.

Earnest Money Deposit

A deposit made by the buyer to demonstrate their commitment to purchasing a property. It is credited toward the down payment or closing costs at closing.

Escrow

An account held by a third party where funds are deposited to be used for specific purposes, such as property taxes and insurance premiums.

Equity

The portion of a property you own outright, calculated by subtracting the outstanding mortgage balance from the property’s market value.

Fixed-Rate Mortgage

A loan with an interest rate that remains constant throughout the term, resulting in stable monthly payments.

Mortgage Insurance Premiums (MIP)

Fees paid by borrowers on FHA and USDA loans to protect the lender in case of default, typically required both upfront and annually.

Building Trust, One Loan at a Time

5 Stars

Shella was nothing short of amazing! Each and every employee at Texas Lending Solutions went above and beyond for the entire loan process! We looked at the home on March 2nd and we closed on March 28th! We hadn’t even been pre-approved or anything. How’s that for a fast turn around? Any questions we had, their staff didn’t hesitate to respond to, or find someone who could. What an awesome home buying experience!

MEAGHAN B.
Dallas

5 Stars

Paul reached out to me when the rates were really low. We had spoken a few years ago when I bought this home with a 30-year mortgage. He found a way I could get a new 20-year mortgage which effectively eliminated 8 years of payments! Paul is a professional who knows his stuff. His team are thoughtful and amazing. I highly suggest using Texas Lending Solutions for your new home or refinancing needs.

JENNIFER H.
Houston

5 Stars

I am a first-time home buyer and was very unsure of how the process of buying a house would be but Jimmy is very knowledgeable and answered any questions I had. He is very kind and understanding which gave me confidence in buying a house. I am so lucky that I was able to work with Jimmy and I highly recommend him thank you so much, Jimmy for giving me a great experience.

MARISELA H
Austin

Pre-Approval

A formal evaluation by a lender, verifying your financial details and providing a conditional commitment for a specific loan amount.

Pre-Qualification

An initial estimate of how much you can borrow based on self-reported financial information, offering a general idea of your budget.

Private Mortgage Insurance (PMI)

Insurance that protects the lender if the borrower defaults, typically required for loans with less than 20% down payment.

Refinancing

The process of replacing an existing mortgage with a new loan, often to secure better terms or reduce monthly payments.

Title Insurance

A policy that protects homeowners and lenders against financial loss from defects in the property's title.

Underwriting

The process lenders use to evaluate a borrower's financial profile and risk level to determine loan approval.

Still Have Questions?

At Texas Lending Solutions, we're committed to supporting you through each stage of the mortgage journey. From pre-approval to closing, our experts are here to offer guidance and personalized assistance, helping you make your dream home a reality. Don't hesitate to reach out if you have any more questions.