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10 Words or Less—Key Homebuyer Terms You Need to Know

January 10, 2024


Min Read
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Real quick.

If you’re buying a home, there are going to be terms you’ve never needed to know before. So we did the hard work—every term, described in 10 words or less. Review this list now, and bookmark it for later reference.




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Adjustable-Rate Mortgage (ARM): Loan with lower starting rate that adjusts with the market.

Amortization: 30,000-foot view of your mortgage payment over years.

Amortization Schedule: Breakdown of your principal and interest payments over time.

Annual Percentage Rate (APR): Most realistic interest rate that includes fees and charges.

Appraisal: Property inspection by certified appraiser to determine property value

Assessed Value: Specific property value used for tax purposes, not mortgage.

Assets: Owned items with monetary value including cash and accounts, too.

Assumption: When a buyer takes on a seller's existing mortgage.


Back-End DTI: All monthly debts over monthly income

Balloon Mortgage: Low upfront payments, lump-sum balance due later.

Bankruptcy: Legal inability to repay debts, affecting loan eligibility.

Buyer’s Agent: Represents home buyer in a real estate transaction.


Closing Day: Date for signing final mortgage documents and paying closing costs.

Closing Agent: Coordinates closing documents and funds distribution.

Closing Costs: Additional expenses beyond the home purchase price due at closing.

Closing Disclosure: Final loan details provided by lender three days before closing.

Commitment Letter: Lender's loan terms confirmation.

Concession: Offers or discounts during negotiations, like seller-paid repairs.

Condominium: Owned unit in a multi-unit building or property.

Contingency: Contract exit option if conditions aren't met.

Counter-Offer: Revised offer in ongoing negotiation.

Credit Bureau: Collects credit data, generates credit reports and scores.

Credit History: Record of debt management and payment consistency.

Credit Report: Overview of credit use and history.

Credit Score: Numeric measure of creditworthiness based on history of credit use.


Debt: Owed money or financial obligation.

Debt-to-Income Ratio (DTI): Income ratio covering monthly debts.

Deed: Legal document transferring property ownership.

Down Payment: Initial money due when buying a house, not borrowed.


Earnest Money Deposit: Money set aside when offer is made, often non-refundable.

Escrow: Account that holds funds for later distribution. (Insurance, taxes, etc.)


Front End DTI/Housing Ratio: Primary Housing Expense over monthly income

FHA Loan: Mortgage backed by Federal Housing Administration. Great for first timers.

Fixed Income: Salary or non-fluctuating income. Easier to qualify with.

Fixed-Rate Mortgage: Very common loan with interest rate that doesn’t change over time.


Gift Letter: Official document showing money gifted to you for down payment.

Gross Monthly Income: Total monthly pay before deductions or taxes including bonuses, commissions.


Home Inspection: Property condition check by professional inspector. Highly recommended, not required.

Homeowner's Insurance: Monetary protection for home damages, liability, personal property.


Inquiry: Credit application submission that will show on a credit report.

Interest: Money paid for borrowing money, usually expressed as a percentage.


Liabilities: Financial obligations or debts. Car loans, credit cards, alimony, etc.

Listing: Description published to sell a property.

Loan Estimate: Lender-provided mortgage cost overview. Multiple given through mortgage process.

Loan Origination Fees: Lender charges for processing mortgage application.

Lock-In Rate: Guaranteed interest rate for a specific period of time.

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Market Value: Expected current home value.

Mortgage: Loan using home as collateral.

Mortgage Broker: Connects a borrower and lender for a mortgage.

Mortgage Lender: Provides funds for a mortgage.

Mortgage Rate: Homebuyer's interest rate.


Offer: Formal purchase proposal submitted by a buyer to a seller.

Open House: Property tour without needing to schedule with an agent.


Points: Costs associated with a specific mortgage rate, often collected at loan closing.

Pre-Approval Letter: Lender-confirmed borrowing qualification.

Pre-Qualification Letter: Informal loan thumbs up based on applicant’s un-confirmed information.

Principal: Total loan amount owed, decreasing over time.

Private Mortgage Insurance (PMI): Extra monthly payment made in exchange for lower down payment.


Rate Cap: Rate change limit on an adjustable-rate mortgage.


Sales Contract: Agreement outlining property purchase details.


Title: Proof of property ownership.

Title Insurance: Protection for a homeowner if title issues or liens are found.

Truth-In-Lending Act (TILA): Federal law protecting you against inaccurate, unfair lending practices.


Underwriting: Step of loan process when lender evaluates property, repayment ability.

Uniform Residential Loan Application: Mortgage application form standardized by the government. Also called 1003.


Variable Income: Income from self-employment, commission, overtime, etc. Often averaged over two years.

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