Mortgage Jargon Explained: 15 Terms You Need to Know

If you’ve ever felt overwhelmed by the lingo thrown around during the mortgage process, you’re not alone. Mortgages come with their own dictionary—and understanding the terminology can make a huge difference when it comes to making informed decisions.

At Rapid Home Loan, we believe in transparency, education, and empowering our clients with knowledge. That’s why we’ve broken down 15 key mortgage terms you’re likely to encounter during your home loan journey.

📘 1. Pre-Approval

A lender’s conditional commitment to lend you a specific amount based on your income, credit, and assets. It shows sellers you’re a serious buyer.

📄 2. Loan Estimate (LE)

A standardized form you’ll receive after applying for a mortgage that outlines the loan terms, interest rate, monthly payments, and closing costs.

💵 3. Down Payment

The amount of money you pay upfront when buying a home—usually between 3% to 20% of the purchase price, depending on the loan type.

📈 4. Interest Rate

The percentage you’re charged for borrowing money. A lower rate means a lower monthly payment and less paid over the life of the loan.

🔒 5. Rate Lock

An agreement to lock in a specific interest rate for a set period—usually 30 to 60 days—while your loan is being processed.

📊 6. Annual Percentage Rate (APR)

Your true yearly cost of borrowing, including the interest rate and other fees. APR helps you compare loan offers apples-to-apples.

💳 7. Credit Score

A number (typically between 300–850) that represents your creditworthiness. Higher scores get better rates and more loan options.

📉 8. Loan-to-Value Ratio (LTV)

The ratio of your loan amount to your home’s value. A lower LTV usually means better terms and less risk for the lender.

📆 9. Amortization

A schedule that shows how each mortgage payment is split between principal and interest over the life of the loan.

🛡️ 10. Private Mortgage Insurance (PMI)

Insurance required on conventional loans if your down payment is less than 20%. It protects the lender—not you—in case of default.

🧾 11. Escrow Account

A savings account managed by your lender to hold funds for property taxes and homeowners insurance, paid monthly along with your mortgage.

🏡 12. Appraisal

An unbiased estimate of your home’s value. Lenders use this to ensure the loan amount is appropriate for the property.

🧮 13. Debt-to-Income Ratio (DTI)

The percentage of your monthly income that goes toward debt. A lower DTI makes it easier to qualify for a mortgage.

🔁 14. Refinance

Replacing your current mortgage with a new one—usually to lower your interest rate, change loan terms, or access home equity.

📝 15. Closing Costs

The fees you pay at the end of the mortgage process—typically 2–5% of the home’s purchase price. These cover things like title, appraisal, lender fees, and taxes.

🧠 Why This Matters

Understanding mortgage terms can help you:

Ask smarter questions
Avoid unnecessary fees
Make confident financial decisions
Speed up the approval process

At Rapid Home Loan, we take the time to explain everything—no pressure, no jargon. Just clear answers and expert guidance every step of the way.

🏡 Ready to Apply With Confidence?

Whether you’re buying your first home, refinancing, or investing in property, Rapid Home Loan is here to help you understand your options and secure the loan that fits your life.