An appraisal is an unbiased estimate of the property's fair market value by a licensed professional.

It's something that is typically required by all lenders during the mortgage process to ensure that the loan amount does not exceed the value of the home.

A property's appraisal is based on a number of factors—including location, condition, and sales of similar homes in the area.

Cash to close is the total amount needed to bring on closing day.

It typically includes down payment, fees, pre-paid taxes, homeowner's insurance, and any homeowners association fees that may be applicable.

Cash to close is usually paid in the form of a wire transfer or a certified bank or cashier's check.

A cash-out refinance is when a mortgage is refinanced for more than the outstanding balance—converting home equity into cash.

Cash-out refinancing can be a great way to free up money for outstanding debt or to make an investment in home improvements.

Close of escrow is the point in the homebuying process when everything is finalized.

The funds held in escrow and the loan amount are transferred to the seller, and all outstanding third-party costs, such as taxes and HOA fees, are settled.

Closing is the final step of the homebuying transaction.

All outstanding fees listed in the closing disclosure are paid, the escrow funds are cleared to be delivered to the seller, and the buyer and seller sign documents to transfer ownership of the property.

The buyer signs the mortgage loan, and the title company registers the title deed to the property in the buyer's name.

Closing costs are paid to various third parties to complete the sale of the property.

Depending on the lender, these may include origination fees, credit report fees, and appraisal fees, as well as property taxes and recording fees.

Settlement costs (also known as closing costs) are the fees that the buyer and/or seller have to pay to complete the sale of the property.

A closing disclosure (CD) is a standardized document from the lender that provides final details about the mortgage loan.

It includes the loan terms, projected monthly payments, fees, and other closing costs.

The lender is required to give the CD at least 3 business days before the date of close to compare against the loan estimate (LE).

A comparable sale (also known as a "comp") is a recently sold property in the area with similar features to the home you're looking to buy.

Appraisers use comparable sales to help estimate the fair market value of a home.

A conventional mortgage is a type of home loan that is not insured or guaranteed by the federal government. Instead, it's backed by a private lender.

Conventional loans are the most common type of home loan, making up nearly three quarters of home loans.

If a Buyer applies for a conventional loan with less than a 20% down payment, they will be required to pay for private mortgage insurance (PMI).

A credit check (also known as a credit inquiry or credit pull) is when a lender looks into a Buyer’s financial history with credit reporting agencies to determine creditworthiness.

Mortgage Lenders can use both "soft" and "hard" credit checks to see if the Buyer qualifies for a loan.

For pre-approval, most lenders use a soft credit check that does not impact a credit score.

Once a Buyer applies for a mortgage, the Lender will issue a hard credit check that can negatively impact the score for a short time.

A lender credit is money that the lender provides to lower a Buyer’s closing costs in exchange for a higher interest rate.

Credits are inverse to points.

Debt-to-income ratio (DTI) is a measure of monthly debt compared to monthly income.

This is calculated by monthly debt divided by monthly gross (pre-tax) income.

DTI is one of the factors used to determine how much a Buyer can afford in a monthly mortgage payment.

A down payment is the amount of cash a Buyer pays upfront toward the purchase of a home.

It's often expressed as a percentage of the selling price of a home—typically 5–20% depending on the type of loan.

The difference between the down payment and the price of the home is what is financed with a mortgage.

Generally, if a Buyer puts less than 20% "down" on a home, private mortgage insurance (PMI) is required in addition to the monthly payment.

An escrow is a third-party account where money between two or more parties is managed.

Escrow accounts may be used to hold a buyer's deposits while a real estate transaction is being processed.

Escrow accounts are also commonly used to hold property taxes and insurance premiums (collected as part of the monthly mortgage payment) until the payments are due.

Flood certification is a document issued to certify whether a property is located in a flood zone based on FEMA (Federal Emergency Management Association) flood maps.

A flood certification is required by the lender and determines whether special flood insurance is needed for the home.

Flood insurance is special coverage that covers water damage caused by flooding.

If the home is found to be located within a flood zone, a lender will likely require a buyer to have a flood insurance policy.

Premiums vary depending on how prone the property is to flooding.

A homeowners association (HOA) oversees the development and enforcement of rules, regulations, and day-to-day operations for a community.

The HOA is also responsible for maintaining community spaces.

HOA fees may be collected on a monthly or annual basis.

Homeowners insurance is a form of financial protection against loss or damage to a home in the event of burglary, fire, or natural disaster.

Most lenders require proof of a homeowners insurance policy prior to closing. That's because the lender wants to protect their investment as much as a Buyer does—and if something ever happened to the home, they want to know that the buyer has the resources to pay off the loan.

The interest rate is the cost of borrowing money, expressed as a percentage of the loan.

Most consumer mortgages use simple interest which is defined as paying interest only on the principal.

Borrowers are often quoted interest rates in addition to annual percentage rates (APRs), which are interest rates plus lender fees and charges.

A lien is a legal claim to an item of property until an owed debt is paid off.

When a borrower takes out a home loan, the lender has a lien on your home. This gives them the right to seize the home if a borrower fails to repay the loan.

A loan commitment is a letter from a lender indicating a borrower’s eligibility for a loan.

In essence, it is the lender's promise to fund the loan as stated by the terms in the letter.

A borrower typically receives a loan commitment letter once their application has been reviewed and the underwriting process is complete.

A loan estimate (also known as an LE) is a standardized 3-page form that details the interest rate, term, monthly payment, and closing costs associated with a borrower’s loan.

Lenders are required by law to provide the borrower with a loan estimate within three days of the application.

A loan-to-value (LTV) ratio is an equation that lenders use to assess the amount of risk associated with a home loan.

LTV is calculated by dividing the total home loan amount by the appraised market value of the home.

Typically, if the LTV ratio is higher than 0.8, lenders require private mortgage insurance (PMI) to offset the higher risk of default.

A mortgage note (also known as a "note") is a document signed at closing outlining the complete terms of a new home loan.

Think of it like an official "IOU." A mortgage note states how much the Buyer is borrowing from the lender and when you are expected to pay it back.

Origination fees are the one-time costs the borrower pays to a lender for processing the home loan.

These fees may be itemized but it's just as likely that they'll be bundled into one ambiguous line item.

PITI is short for Principal, Interest, Taxes, and Insurance—the four aspects of a monthly home loan payment.

Principal and interest are based on the loan amount and terms of the borrower’s mortgage.

Taxes and insurance are directly related to the value of the property and the levies that the local government applies.

Points (also known as discount points and mortgage points) are a way to lower the interest rate on a home loan by agreeing to pay more at closing.

One mortgage point is equal to 1% of the mortgage amount and can lower the interest rate by up to 0.25%.

The more points a borrower pays, the lower the payment and rate will be.

Points are the inverse of credits.

A pre-approval letter is a document from a lender that states the exact amount a borrower is approved to borrow once their stated information is verified.

Getting a pre-approval letter is an essential time-saving first step in the home shopping process.

When referring to a home loan, the principal is the amount of money borrowed excluding taxes, interest, or homeowners insurance.

A rate lock is a guarantee from a lender that the offered interest rate with the associated points and credits for a mortgage is the rate that the borrower will receive.

Rate locks are good for a pre-set length of time, such as 30, 45, or 60 days.

A survey is a drawing of the property that details the location of the lot, property lines, home, and any other structures within its bounds.

The purpose of a survey is to confirm land boundaries in the event of a legal dispute.

Surveys are typically held by the local county tax collector and are part of the closing costs associated with buying a free-standing home.

Title insurance (also known as owner's title insurance) protects borrowers and lenders against financial loss from past defects or problems with the ownership of a property typically back taxes, liens, and conflicting wills.

Most lenders require title insurance to protect their interest in the property until the home loan is paid off.

Underwriting is the process of evaluating a complete and verified home loan application as well as the appraisal of the property being financed.

Underwriting is the assessment of risk in a home loan and a borrower's ability to repay it.

The process ends with an approval or denial of a home loan.

A wire transfer is an electronic transfer of money between two banks.

Domestic wire transfers are typically processed on the same day they’re initiated.

International wire transfers are usually delivered to the recipient within 2 days.