Glossary

Mortgage terms, in plain English

Name: The Oliver White Team — Wayzata
Address: 214 Minnetonka Ave South, Wayzata, MN, 55391, US
Telephone: (952) 412-5428

The industry loves jargon. We don't. Every term you'll hear during your loan, translated into normal human language.

A

Adjustable-Rate Mortgage (ARM): A loan whose interest rate is fixed for an initial period, then adjusts periodically based on a market index. Often written like "5/6 ARM": fixed for 5 years, then adjusting every 6 months.
Amortization: The schedule by which your loan is paid off. Early payments are mostly interest; over time, more of each payment goes to principal until the balance hits zero.
Annual Percentage Rate (APR): The yearly cost of your loan including interest plus certain fees, expressed as a rate. APR is designed to make loans easier to compare — it's always at least a little higher than the note rate.
Appraisal: A licensed appraiser's professional opinion of a home's market value, ordered during the loan process to confirm the property supports the loan amount.

Cash-Out Refinance: Replacing your mortgage with a larger one and taking the difference in cash — converting home equity into funds for renovations, debt consolidation, or other goals.
Closing Costs: The fees required to originate the loan and transfer the home — lender fees, title and appraisal charges, government recording fees, and prepaid items like taxes and insurance.
Closing Disclosure (CD): The final, standardized statement of your loan terms and costs, delivered at least three business days before closing so you can review before signing.
Conforming Loan: A conventional loan at or below the loan limits set annually for Fannie Mae and Freddie Mac. Loans above the limit are jumbo loans.
Contingency: A condition written into a purchase agreement that must be satisfied for the sale to proceed — commonly inspection, financing, and appraisal contingencies.
Conventional Loan: A mortgage not insured by a government agency, following Fannie Mae / Freddie Mac guidelines. The most common loan type in the U.S.

Debt-to-Income Ratio (DTI): Your total monthly debt payments (including the new housing payment) divided by gross monthly income. A core qualifying measure on nearly every loan program.
Down Payment: The portion of the purchase price you pay up front. Minimums range from 0% (VA, USDA) to 3–3.5% (conventional, FHA) for qualified buyers — 20% is not a requirement.
Down-Payment Assistance (DPA): Programs — often from state housing agencies like Minnesota Housing — that help eligible buyers cover down payment and closing costs, typically as a deferred, forgivable, or repayable second loan.
DSCR (Debt Service Coverage Ratio): For investment properties: the property's rental income divided by its full housing payment. DSCR loan programs qualify the property's cash flow rather than the borrower's personal income.

Earnest Money: A good-faith deposit made with your offer, held in escrow and credited toward your purchase at closing. Protected by your contract contingencies.
Equity: The portion of the home you truly own: current market value minus what you owe. It grows through payments and appreciation.
Escrow: Two meanings: (1) the neutral account where earnest money and closing funds are held; (2) the account your servicer maintains to pay your property taxes and insurance from your monthly payment.

FHA Loan: A mortgage insured by the Federal Housing Administration — flexible credit guidelines and down payments from 3.5%, in exchange for upfront and monthly mortgage insurance premiums.
Fixed-Rate Mortgage: A loan whose interest rate never changes — the same principal-and-interest payment from first month to last.

Homeowners Association (HOA): The governing body of some neighborhoods, condos, and townhomes, funded by dues that cover shared amenities and maintenance. Dues count in your qualifying payment.
Homestead Classification: A property-tax status for owner-occupied homes that can lower the tax bill — used in Minnesota and other states. New owners typically must file with the county; deadlines apply.

Jumbo Loan: A mortgage larger than the conforming loan limit for its county. Underwriting looks deeper at assets and income; pricing remains competitive for strong borrowers.

Loan Estimate (LE): The standardized three-page form you receive within three business days of applying, showing your rate, payment, and itemized costs — built to be compared side by side with any other lender's LE.
Loan-to-Value Ratio (LTV): The loan amount divided by the home's value. An 80% LTV (20% equity) is the threshold where conventional PMI is no longer required.

Mortgage Insurance (MI / PMI / MIP): Insurance protecting the lender on low-down-payment loans. Conventional PMI can be canceled as equity builds; FHA's MIP usually lasts the life of the loan (refinancing is the common exit).

NMLS: The Nationwide Multistate Licensing System — the national registry of licensed mortgage professionals. Every loan officer's NMLS number is publicly searchable at nmlsconsumeraccess.org.

Origination: The lender's process of creating your loan — application through funding — and the fee category covering that work on your Loan Estimate.

PITI: Principal, Interest, Taxes, and Insurance — the four components of a full monthly housing payment, and the number that actually matters when budgeting (not just principal and interest).
Points (Discount Points): Optional upfront fees paid to lower your interest rate — one point equals 1% of the loan amount. Worth it when you'll keep the loan well past the break-even period.
Pre-Approval: A lender's verified, documented statement of what you can borrow — credit pulled, income and assets reviewed. Far stronger than a pre-qualification, which is only an unverified estimate.
Principal: The amount you borrowed and still owe, not counting interest. Extra payments toward principal shorten your loan and reduce total interest.

Rate Lock: A lender's commitment to hold your quoted interest rate for a set window (commonly 30–60 days) while your loan closes, protecting you from market movement.
Refinance: Replacing your current mortgage with a new one — to lower the rate, change the term, remove mortgage insurance, or take cash out of equity.

Seller Credit (Seller Concession): An amount the seller agrees to contribute toward the buyer's closing costs, negotiated in the purchase agreement. Program limits cap how much is allowed.

Title & Title Insurance: Title is the legal ownership of the property. Title insurance protects against defects in that ownership history — the lender's policy is required; an owner's policy protects your equity.

Underwriting: The lender's formal review of your complete file against program guidelines, ending in an approval (usually with conditions), suspension, or denial. Clearing conditions leads to "clear to close."
USDA Loan: A 0%-down mortgage backed by the U.S. Department of Agriculture for eligible properties in qualifying rural and suburban areas, subject to household income limits.

VA Loan: A mortgage guaranteed by the Department of Veterans Affairs for eligible Veterans, service members, and surviving spouses — 0% down, no monthly mortgage insurance, and a reusable lifetime benefit.

Walkthrough (Final Walkthrough): Your last inspection of the home shortly before closing, confirming agreed repairs are done and the property is in the expected condition.

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