Mortgage basics

The schedule that pays off your loan's principal over time.

Early payments are mostly interest; later payments are mostly principal — even though the payment itself stays the same. It's also why restarting the clock on a refinance can cost more in total interest, even at a lower rate.

See also: Principal, Should I refinance?

Your monthly debt payments divided by your monthly income.

Lenders use it as a guideline for how much you can responsibly borrow, and the acceptable threshold varies by loan program — it's the backbone of the affordability estimate our calculator runs.

See also: Affordability Explorer

An account your lender uses to collect and pay property tax and insurance on your behalf.

It's usually rolled into your monthly payment, which is one reason your payment can be higher than principal and interest alone would suggest.

The rate is what's applied to your principal to calculate interest.

APR folds in certain fees and costs — including points, if you pay any — which is why it's usually a bit higher. It's meant for comparing loans side by side, not for calculating your actual payment.

See also: Points

Your loan amount divided by the home's value.

A lower LTV (more equity or down payment) generally means better terms, and is the threshold that determines whether PMI (on conventional loans) applies.

See also: PMI (Private Mortgage Insurance)

Mortgage insurance required on FHA loans — an upfront premium plus an ongoing annual one.

Unlike PMI on conventional loans, MIP often lasts for the life of an FHA loan, especially with less than 10% down. Getting out of it usually means refinancing into a conventional loan once you have enough equity.

See also: PMI (conventional loans), Loan-to-value ratio (LTV)

Mortgage insurance on conventional loans with less than 20% down.

It protects the lender, not you. Unlike MIP on FHA loans, PMI can usually be removed once your loan-to-value ratio reaches around 80%, whether through payments or appreciation.

See also: MIP (FHA loans), Loan-to-value ratio (LTV)

An upfront fee paid to lower your interest rate.

Whether it's worth it depends on how long you plan to keep the loan — the same break-even logic used to evaluate a refinance.

See also: Refinance costs & break-even

Pre-qualification is a quick, self-reported estimate. Pre-approval means a lender has actually verified your credit, income, and assets.

Pre-qualification takes minutes and doesn't touch your credit report, but it's not a firm number. Pre-approval requires real documentation and a hard credit pull — which is exactly why sellers and agents take it far more seriously on an actual offer.

The amount you borrowed.

Every payment splits between principal (what you owe) and interest (the cost of borrowing it) — how that split shifts over time is what amortization describes.

See also: Amortization

An agreement with your lender that fixes your interest rate for a set window while your loan is processed.

Your rate floats until you lock it. Locking for 30 to 60 days is usually free, but extending past that window — or a slow closing — typically costs a fee. Some lenders offer a float-down option to catch a rate drop after locking, also for a fee.