Glossary

Buying a home, paying off debt, and investing for the future all come with their own jargon. This is a plain-English reference — searchable, organized by topic, and written for people who'd rather not Google every word.

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Mortgage basics

Amortization: The schedule of how each payment is split between paying down the loan balance (principal) and paying interest. Early payments are mostly interest; later ones are mostly principal.
APR (Annual Percentage Rate): The total yearly cost of a loan, including interest plus most lender fees. Useful for comparing offers — two loans with the same rate can have different APRs depending on fees.
ARM (Adjustable-Rate Mortgage): A mortgage with a rate that's fixed for an initial period (typically 5, 7, or 10 years), then adjusts periodically based on a market index.
Discount points: An optional upfront payment to the lender that lowers your rate. One point costs 1% of the loan amount and typically reduces the rate by about 0.25%.
DTI (Debt-to-Income Ratio): The share of your gross monthly income that goes to debt payments. Lenders generally want your total DTI under about 43%.
Fixed-rate mortgage: A mortgage with the same interest rate for the entire term. Predictable payments — the most popular option for buyers planning to stay long-term.
Interest rate: The percentage the lender charges to borrow money, separate from fees. Lower is better; APR captures the full cost.
LTV (Loan-to-Value): Loan amount divided by the home's value, as a percentage. An 80% LTV means you're borrowing 80% and putting 20% down.
PITI: Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment.
Principal: The amount you actually owe the lender, separate from interest. Every payment reduces principal until the loan is paid off.
Rate lock: A lender's guarantee to hold your interest rate for a set period (usually 30–60 days) while your loan is being processed.
Refinance: Replacing your current mortgage with a new one — usually to get a lower rate, change the term, or tap into home equity.

Loan types

Conventional loan: A mortgage not backed by a government agency. Typically requires decent credit and 3–20% down. The most common loan type.
FHA loan: A government-backed loan from the Federal Housing Administration. Allows down payments as low as 3.5% with more lenient credit requirements. Requires mortgage insurance (MIP).
VA loan: A loan backed by the Department of Veterans Affairs, available to qualifying service members, veterans, and certain surviving spouses. Often requires zero down payment.
USDA loan: A government-backed loan for buyers in rural and some suburban areas, with zero down payment for those who qualify.
Conforming loan: A mortgage that meets the size limits and standards set by Fannie Mae and Freddie Mac. Conforming limits are adjusted each year and vary by area.
Jumbo loan: A mortgage larger than the conforming loan limits. Typically requires stronger credit and a larger down payment.

Money you'll pay

Down payment: The portion of the home's price you pay upfront in cash. Common amounts range from 3% to 20% — more down means a smaller loan and lower monthly payments.
Earnest money: A "good faith" deposit (usually 1–3% of price) made when your offer is accepted. Held in escrow and applied toward your down payment at closing.
Closing costs: Fees you pay at the closing table — typically 2–5% of the home price. Includes lender fees, title insurance, escrow charges, and prepaid taxes/insurance.
Escrow: A neutral third-party account that holds funds or documents during a transaction. Also describes the account your lender uses to collect and pay your property taxes and insurance monthly.
Origination fee: The lender's charge for processing your loan, typically 0.5–1% of the loan amount.
PMI (Private Mortgage Insurance): Insurance on conventional loans when your down payment is less than 20%. Protects the lender if you stop paying. Usually drops off automatically once you reach 22% equity.
MIP (Mortgage Insurance Premium): The FHA's version of PMI. Required on most FHA loans for at least 11 years, and for the life of the loan if you put less than 10% down.
Prepaid items: Money collected at closing to fund your escrow account — typically several months of property taxes and a year of homeowners insurance up front.

The buying process

Pre-qualification: A quick, informal estimate of how much a lender might lend, based on self-reported info. Useful for ballpark planning but not binding.
Pre-approval: A formal review of your finances, resulting in a conditional commitment to lend up to a specific amount. Much stronger than pre-qualification — sellers usually expect it before considering offers.
Offer: The proposed terms (price, contingencies, closing date) you submit to buy a home. Submitted in writing through your agent.
Counteroffer: The seller's revised terms in response to your offer — different price, different conditions, or both.
Contingency: A condition in your offer that must be met for the sale to proceed. Common ones: financing, appraisal, inspection. Lets you back out without losing earnest money.
Under contract: The status of a home after the seller has accepted your offer but before closing. Also called "pending."
Underwriting: The lender's deep review of your finances and the property before final loan approval. Usually takes 1–3 weeks.
Appraisal: A professional valuation of the home, ordered by your lender, to confirm it's worth what you agreed to pay. Affects whether the loan can fund.
Home inspection: A buyer-ordered evaluation of the property's condition — roof, plumbing, electrical, structure, appliances. Done before closing; findings can be used to renegotiate.
Final walk-through: Your last visit to the home, usually 24–48 hours before closing, to confirm it's in the agreed-upon condition.
Closing: The meeting (or e-signing session) where ownership transfers, you sign the loan documents, and funds change hands. Also called settlement.

People & paperwork

Buyer's agent: A licensed real-estate agent representing you, the buyer. How their commission is paid has been evolving since 2024 — confirm with your agent who pays what.
Listing agent: The agent representing the seller and marketing the property.
Realtor®: A real-estate agent who's a member of the National Association of REALTORS®. All Realtors are agents; not all agents are Realtors.
Broker: An agent with additional training and licensing who can run a brokerage and supervise other agents. Many brokers also work directly with clients.
Dual agency: When the same agent (or brokerage) represents both buyer and seller. Legal in most states with disclosure, but creates a conflict of interest.
Loan Estimate (LE): A standardized 3-page document the lender provides within 3 business days of your application. Lists your estimated rate, payment, and closing costs.
Closing Disclosure (CD): A 5-page final summary of your loan terms and closing costs, provided at least 3 business days before closing. Compare it line-by-line to your Loan Estimate.
Deed: The legal document that transfers ownership of the property from seller to buyer.
Title: The legal right of ownership. A clean title means there are no liens or claims against the property.
Title search: A review of public records to verify the seller's right to sell and uncover any liens, easements, or other claims on the property.
MLS (Multiple Listing Service): The shared database of homes for sale that real-estate agents use. Zillow, Redfin, and Realtor.com all pull from MLS data.
Comps: Short for "comparable sales" — recently sold homes similar to the one you're buying or selling, used to estimate fair market value.

Owning the home

Equity: The portion of your home's value you actually own — current market value minus what you still owe on the mortgage.
HOA (Homeowners Association): A neighborhood or condo association that maintains common areas and enforces rules. Members pay monthly or annual dues.
Property tax: An annual tax based on your home's assessed value, paid to your local government. Usually collected monthly through your escrow account.
Homestead exemption: A property-tax break available in many states for owners who live in the home as their primary residence.
Capital gains: Profit from selling your home. Single filers can exclude up to $250,000 of gains from federal tax; married joint filers, up to $500,000 — if you've lived in the home at least 2 of the last 5 years.
Homeowners insurance: Insurance covering damage to your home and liability if someone is injured on the property. Required by lenders; usually paid through escrow.
Title insurance: A one-time policy paid at closing that protects against future ownership disputes — for example, if a hidden heir later surfaces with a claim to the property.
Home warranty: An annual service contract covering breakdowns of major systems and appliances. Optional, often offered by sellers as a sweetener at closing.
Lien: A legal claim against the property used as collateral for a debt. Mortgages create a lien; so do unpaid taxes and contractor disputes.

Debt payoff

Debt snowball: A payoff strategy where you attack your smallest balance first, regardless of interest rate, then roll its minimum into the next smallest. Research (Gal & McShane, 2012) found this strategy produces higher success rates because the early wins build momentum.
Debt avalanche: A payoff strategy where you attack your highest-interest debt first, regardless of balance, then move to the next highest. Mathematically optimal — minimizes total interest and usually finishes faster than the snowball if you stick with it.
Minimum payment: The smallest monthly amount a lender will accept without marking your account delinquent. Paying only the minimum keeps you in debt for years and costs the most in interest.
Credit utilization: The percentage of your available credit you're using. Carrying balances above 30% of your limit hurts your score; paying balances down boosts it. Major factor in your credit rating.
Snowflake (payment): Any extra small amount thrown at your focus debt outside your normal payment — money saved skipping a coffee, a $20 side-gig payment, leftover budget at month's end. Stacks up faster than people expect.
Balance transfer: Moving a credit-card balance to a new card offering 0% interest for a promotional period (often 15–21 months). Watch for the transfer fee (typically 3–5%) and the post-promo rate, which can be higher than your original card.
Debt consolidation: Combining multiple debts into one — usually a fixed-rate personal loan. Useful for replacing high-rate credit-card debt with a lower fixed rate, but only works if you don't run the cards back up afterward.
HELOC (Home Equity Line of Credit): A revolving credit line secured by your home's equity. Lower interest than credit cards, but using one to consolidate unsecured debt is risky — if you can't pay, you can lose the house.
Lump sum payment: A one-time large payment toward debt — typically from a tax refund, work bonus, or other windfall. Applied to your focus debt, it shifts your payoff date forward by months.

Investing & retirement

401(k): Employer-sponsored retirement account. Contributions reduce your taxable income today (Traditional) or are after-tax now and tax-free in retirement (Roth). 2024 employee contribution limit: $23,000.
Employer match: Your employer contributes alongside your 401(k) contributions, up to a limit. Effectively free money — if your employer matches 100% of the first 3% of salary, contribute at least 3% to capture the full match.
IRA (Individual Retirement Account): A retirement account you open yourself, separate from your employer. Two main types: Traditional (tax break now) and Roth (tax-free in retirement). 2024 contribution limit: $7,000 ($8,000 if you're 50+).
Roth IRA: Contributions are made with after-tax dollars; growth and qualified withdrawals in retirement are tax-free. Best when you expect to be in a higher tax bracket later — usually the right call for younger earners.
Traditional IRA: Contributions reduce your taxable income today; you pay ordinary income tax on withdrawals in retirement. Best when you expect to be in a lower tax bracket later — often the right call for high earners in their peak years.
HSA (Health Savings Account): A triple-tax-advantaged account available with high-deductible health plans. Contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. After 65, withdrawals for any purpose (just like a 401(k)).
HYSA (High-Yield Savings Account): A savings account, usually at an online bank, paying significantly higher interest than a traditional checking or savings account. The right place to park your emergency fund and down-payment savings.
Index fund: A mutual fund that holds every stock (or bond) in a market index — like the S&P 500 or total US stock market. Low fees, broad diversification. Beats most actively managed funds over long periods.
ETF (Exchange-Traded Fund): Like an index fund but trades like a stock during market hours. Typically has the lowest expense ratios; slightly more flexible than mutual funds. VTI, VXUS, and BND are common examples.
Target-date fund: A single fund that automatically adjusts its mix of stocks and bonds based on a target retirement year. The "set it and forget it" option — picks the allocation for you and shifts toward bonds as you age.
Compound interest: Interest earned on your principal plus previously earned interest. The reason consistent investing for decades produces wildly more than you contributed — your gains start earning their own gains, then those gains earn gains.
Brokerage account: A regular taxable investment account — no retirement tax benefits, but no contribution limits either. Use it after maxing out tax-advantaged accounts (401(k), IRA, HSA).
Dollar-cost averaging: Investing a fixed amount on a regular schedule (e.g., $500 every month), regardless of price. Smooths out market timing — you buy more shares when prices are low, fewer when high. The default strategy for most retirement contributions.

One more thing: Definitions here are simplified for everyday use. Specific lenders, states, and contracts may use these terms a little differently — always confirm meanings in your own paperwork.