Last updated: October 31, 2026
Plain-English definitions of common mortgage terms. Details vary by lender and loan program, so confirm specifics with your lender.
Loan terms
- APR (annual percentage rate): the yearly cost of a loan including interest and certain fees, shown as a percentage.
- Amortization: paying a loan down in scheduled payments, with more interest early and more principal later.
- Break-even point: the month when savings from a lower payment equal what you paid to refinance.
- Closing costs: fees paid to complete a loan or refinance, such as lender, title and appraisal fees.
- Conforming loan: a loan within the size limits and rules that Fannie Mae and Freddie Mac will buy.
- Jumbo loan: a loan above the conforming limit.
- Points: an upfront fee paid to lower the interest rate.
Risk and equity
- Equity: the part of the home’s value you own, meaning value minus what you owe.
- Loan-to-value ratio (LTV): the loan balance divided by the home’s value.
- Debt-to-income ratio (DTI): monthly debt payments divided by gross monthly income.
- PMI (private mortgage insurance): insurance on some conventional loans with a small down payment.
- HELOC: a home equity line of credit, a revolving line secured by your home.
Government programs
- FHA loan: a loan insured by the Federal Housing Administration.
- VA loan: a loan guaranteed by the Department of Veterans Affairs for eligible service members and veterans.
- USDA loan: a loan backed by the US Department of Agriculture for eligible rural areas.
- Loan Estimate: a standard form lenders give you after you apply, to compare offers.
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