A mortgage with an interest rate that changes periodically based on market conditions. Common types include 5/1, 7/1, and 10/1 ARMs. The first number is how many years the rate stays fixed; the second is how often it adjusts after that.
Learn moreThe process of paying off a loan through regular payments over time. Early payments go mostly toward interest; later payments go more toward principal. A 30-year fixed mortgage is fully amortized over 360 months.
View amortization calculatorThe total yearly cost of a mortgage including the interest rate plus certain fees and charges. APR gives a more complete picture of loan cost than the interest rate alone. Always compare APRs, not just rates, when shopping for loans.
APR vs Interest Rate explainedA professional assessment of a property's market value conducted by a licensed appraiser. Required by lenders to ensure the home is worth at least the loan amount. FHA and VA appraisals include additional property condition requirements.
Fees and expenses paid when finalizing a mortgage, typically 2-5% of the loan amount. Includes lender fees, title insurance, appraisal, taxes, and recording fees. Can sometimes be negotiated or rolled into the loan.
Full closing costs guideA mortgage not insured or guaranteed by the government (unlike FHA or VA loans). Typically requires higher credit scores but may have lower mortgage insurance costs. Can be conforming (within loan limits) or non-conforming (jumbo).
Learn about conventional loansA refinance where you borrow more than your current loan balance and receive the difference in cash. Common uses: home improvements, debt consolidation, or major expenses. Typically requires significant equity in the home.
Learn about cash-out refinanceA number (300-850) representing creditworthiness. Higher scores unlock better mortgage rates and terms. FHA minimum: 580 for 3.5% down. Conventional: typically 620+. VA: no official minimum, but most lenders want 580-620.
Credit requirements by loan typeThe percentage of your gross monthly income that goes toward debt payments. Front-end DTI covers housing costs; back-end DTI includes all debts. Most loans require back-end DTI under 43-50%. Lower is always better.
Calculate your DTIThe upfront cash you pay toward the home purchase, expressed as a percentage of the price. FHA: 3.5% minimum. Conventional: 3-20%. VA: 0% down. Larger down payments reduce your loan amount and may eliminate mortgage insurance.
Complete down payment guideA third-party account where your lender holds funds for property taxes and homeowners insurance. Part of your monthly payment goes into escrow, and the lender pays these bills on your behalf. Most loans require escrow for at least the first year.
A government-insured mortgage backed by the Federal Housing Administration. Popular with first-time buyers due to low credit requirements (580+), low down payments (3.5%), and flexible qualification. Requires mortgage insurance (MIP) for the life of most loans.
Learn about FHA loansA mortgage where the interest rate stays the same for the entire loan term. The most common type. Available in 15, 20, and 30-year terms. Monthly principal and interest payments never change, making budgeting predictable.
Money given to a homebuyer by family members or approved organizations to help with a down payment or closing costs. Most loan programs allow gift funds with proper documentation (gift letter + proof of transfer).
The portion of your home's value that you actually own — your home's market value minus your remaining mortgage balance. Equity builds through paying down your loan and home value appreciation. Can be accessed through cash-out refinance or home equity loans.
The cost of borrowing money, expressed as a percentage of the loan amount. Does not include fees or other charges (see APR). Rates are influenced by the Federal Reserve, inflation, bond markets, and your personal credit profile.
How interest rates workA mortgage that exceeds the conforming loan limits set by the FHFA (Federal Housing Finance Agency). For 2025, the conforming limit is $766,550 in most areas; anything above is a jumbo loan, typically requiring stronger credit and larger down payments.
Learn about jumbo loansA standardized 3-page form that lenders must provide within 3 days of receiving your mortgage application. Details the loan terms, projected payments, closing costs, and other key information in a consistent format designed for easy comparison.
How to read your loan estimateThe ratio of your loan amount to the property's appraised value. If you buy a $400,000 home with $40,000 down, your loan is $360,000 and LTV is 90%. Lower LTV generally means better rates and terms.
Insurance that protects the lender if you default. PMI is for conventional loans with less than 20% down. MIP is for FHA loans. Costs vary by loan type and down payment. PMI can be canceled; FHA MIP is typically permanent unless you refinance.
PMI vs MIP explainedOptional upfront fees paid at closing to lower your interest rate. One point equals 1% of the loan amount and typically reduces the rate by about 0.25%. Worth it if you plan to keep the loan long enough to recoup the cost through interest savings.
When to buy mortgage pointsAcronym for Principal, Interest, Taxes, and Insurance — the four components of most monthly mortgage payments. Lenders use PITI to calculate your housing expense ratio and determine how much you can afford.
A lender's written conditional commitment to lend you a specific amount, based on verified income, assets, and credit. Stronger than pre-qualification. Sellers prefer buyers with pre-approval letters because it shows you're a serious, qualified buyer.
Pre-approval vs pre-qualificationReplacing your existing mortgage with a new one, typically to get a lower rate, change the loan term, switch loan types, or access equity. Common types: rate-and-term refinance, cash-out refinance, and streamline refinance (FHA/VA).
Explore refinance optionsA simplified refinance for FHA or VA loans with reduced documentation. No appraisal typically required. Designed to lower your rate or payment quickly. FHA Streamline requires a net tangible benefit; VA IRRRL is the VA version.
FHA & VA streamline refinanceInsurance that protects the lender (and optionally the buyer) against claims or defects in the property's title — like undisclosed liens, ownership disputes, or recording errors. A one-time cost paid at closing, required by virtually all lenders.
The process where a lender evaluates your financial profile — income, assets, credit, debts, and the property itself — to decide whether to approve your loan. Takes 5-15 business days. Automated underwriting systems can speed up initial decisions.
A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and surviving spouses. Key benefits: $0 down payment, no mortgage insurance, competitive rates, and flexible credit requirements.
Learn about VA loansAn official document from the VA that proves to lenders you meet the service requirements for a VA loan. Can be obtained online through the VA eBenefits portal, through a VA-approved lender, or by mail. Required to start the VA loan process.
How to get your COEA one-time fee paid on VA loans to help sustain the program. Typically 1.25-3.3% of the loan amount depending on down payment and whether it's your first VA loan. Can be financed into the loan. Exempt for veterans with service-connected disabilities.
VA funding fee explainedExplore our Mortgage Basics hub or compare loan programs side by side.
Ready to apply? Get pre-approved