Understanding mortgage terms is crucial when navigating the home buying process. Here are some of the top mortgage-related terms you should be familiar with:

1. **Mortgage:** A legal agreement that allows a lender to take possession of a property if the borrower fails to repay the loan as agreed.

2. **Interest Rate:** The percentage of the loan amount that a lender charges as interest over the life of the loan.

3. **Principal:** The original amount borrowed, excluding interest and other fees.

4. **Amortization:** The process of gradually paying off the loan through regular payments, which includes both principal and interest.

5. **Down Payment:** The initial payment made by the homebuyer toward the purchase price, typically a percentage of the home’s total cost.

6. **Loan Term:** The length of time over which the mortgage is repaid, often 15, 20, or 30 years.

7. **Fixed-Rate Mortgage:** A mortgage with an interest rate that remains constant throughout the entire loan term.

8. **Adjustable-Rate Mortgage (ARM):** A mortgage with an interest rate that can change periodically, usually after an initial fixed-rate period.

9. **Credit Score:** A numerical representation of a borrower’s creditworthiness, which lenders use to assess the risk of lending.

10. **Pre-Approval:** A lender’s written commitment to provide a borrower with a specific loan amount, subject to certain conditions.

11. **Closing Costs:** The fees and expenses associated with finalizing the mortgage and transferring ownership of the property.

12. **Escrow Account:** An account where a portion of each mortgage payment is held to cover property taxes and insurance payments.

13. **Private Mortgage Insurance (PMI):** Insurance that protects the lender if the borrower defaults on the loan and has a down payment of less than 20%.

14. **Appraisal:** An assessment of the property’s value by a qualified appraiser to determine its market worth.

15. **Title Insurance:** Insurance that protects the buyer and lender from any defects or issues with the property’s title.

16. **Deed:** A legal document that transfers ownership of the property from the seller to the buyer.

17. **Closing Disclosure:** A document provided to the borrower before closing, detailing all the final costs and terms of the mortgage.

18. **Homeowners Association (HOA):** An organization that manages common areas and enforces rules and regulations in a planned community or condominium complex.

19. **Origination Fee:** A fee charged by the lender to cover the cost of processing a mortgage application.

20. **Interest-Only Mortgage:** A type of mortgage where the borrower pays only the interest for a specific period, typically followed by higher payments to cover both principal and interest.

21. **Loan-to-Value Ratio (LTV):** The ratio of the loan amount to the appraised value of the property, used to determine risk and loan eligibility.

22. **Debt-to-Income Ratio (DTI):** A borrower’s total monthly debt payments as a percentage of their gross monthly income, used to assess affordability.

23. **Closing Date:** The date on which the sale of the property is finalized, and ownership is transferred from the seller to the buyer.

24. **Points:** Fees paid to the lender to lower the interest rate on the mortgage, often referred to as discount points or origination points.

25. **Underwriting:** The process of evaluating a borrower’s creditworthiness and determining whether to approve or deny a mortgage application.

These mortgage terms provide a foundation for understanding the mortgage process, but there are many more specific terms and concepts to explore when securing a home loan. It’s advisable to work closely with a mortgage lender or advisor who can provide guidance and explanations throughout the process.