Common vocab to simplify homebuying

Don’t let confusing financial phrases and concepts slow down your journey to homeownership. Understanding these terms can set you up for mortgage negotiation success.

Term	Definition
Amortization schedule	A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made.
Closing costs	Fees and expenses related to the sale of real estate, which are paid at the closing, on the last day, of a real estate transaction before the title is transferred to the purchaser. The costs can include as loan fees, title fees, appraisal fees, inspection fees, attorney’s fees, mortgage insurance, etc.
Points	Fees paid to the lender in exchange for a lower interest rate.
Debt-to-income ratio	A calculation that determines the mortgage payment you may be able to afford. Calculate by dividing your monthly debt load by your gross monthly income. Your debt number should be 40% or less of your gross income.
Disposable income	The amount of money you have left after monthly expenses are subtracted. Calculate by subtracting your monthly expenses (e.g., minimum credit card payments, vehicle loan payments) from your net income.
Down payment	Usually a lump-sum cash payment made at the time of purchase of an expensive item such as a home.
Escrow payment	A portion of your monthly mortgage payment held by the lender to pay for expenses such as taxes, hazard insurance, and other bills related to homebuying.
Homeowners Association dues (HOA)	Amount of money that must be paid monthly by homeowners to an organization that assists with maintaining and improving their home and other properties in the same group.
Homeowners insurance policy	A policy that covers the dwelling and its contents in the case of fire or wind damage, theft, liability for property damage and personal liability.
Loan estimate	Form that includes important details about the loan you have applied for, such as estimated interest rate, monthly payment, and total closing costs for the loan, among other details.
Private mortgage insurance (PMI)	A form of insurance paid to the lender to offset losses in case of default. This is usually charged if the down payment is less than 20%.
Realtor	A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors. Not all real estate agents hold this title.

Buying a home is a big decision with far-reaching financial implications. We want to set you up for success, so keep this cheat sheet close!

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Mortgages 101: Common vocab to simplify homebuying

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