appraisalA written opinion of a home's market value. It may compare the home with other properties in the neighborhood.
closingThe last step of a sale, when the home changes hands. It is also called settlement. The buyer signs the loan papers at the closing table.
closing costsFees paid to finish the purchase, beyond the price. Among them are fees for the appraisal, the credit report and title insurance.
down paymentThe buyer's own money put toward the price of the home. A buyer who puts $20,000 down on a $200,000 home borrows the other $180,000.
escrowAn arrangement where an outsider holds funds for a sale. Its root is escroe, Old French for a scrap of paper or a parchment scroll.
home inspectionA check of a house's condition by a trained examiner. The inspector hands the client a written report of what was found.
homeowners insuranceA policy that pays for losses from a fire or a burglary. Lenders generally ask a borrower for proof of it.
interestThe ongoing cost of borrowing, on top of the sum repaid. At 5 percent a year, $200,000 owed for a full year costs $10,000 in interest.
mortgageA long loan secured by the house it pays for. If the borrower stops paying, the lender has the right to take the property.
offerA bid to buy a home, made to the seller. A deposit of earnest money customarily goes with it.
real estate agentA licensed person who represents a buyer or a seller. Most agents work under a broker, who also holds a license.
titleThe legal right to own a piece of property. A document called a deed shows that the seller has passed the title to the buyer.
Show all 36 terms (24 more)
The mortgage 12
adjustable-rate mortgageA home loan whose percentage charge can go up or down. It is written ARM. The rate usually follows an index, a benchmark that moves with the market.
amortizationPaying off a loan little by little on a set schedule. Each payment has a part for interest and a part for principal.
credit scoreA rating lenders check before deciding whether to lend. Lenders also use it to decide what interest rate to offer.
debt-to-income ratioWhat a person owes each month set against what they earn. Monthly payments of $1,500 on gross monthly income of $5,000 give a ratio of 30 percent.
fixed-rate mortgageA home loan whose percentage charge never changes. The rate is set when the loan is taken out and holds for the whole term.
home equityWhat a house would sell for, less the loans against it. A home worth $250,000 with $150,000 still owed has $100,000 of equity.
interest rateThe price of a loan per year, given as a percentage. It leaves out fees. The annual percentage rate, or APR, counts them in, so it is usually the higher figure.
loan termThe length of time a borrower has to repay. For most kinds of home it is 15, 20 or 30 years.
preapproval letterA lender's note saying it would likely lend up to a sum. It shows a seller that the buyer is likely to get financing.
principalThe amount borrowed that still has to be repaid. Each payment toward principal lowers what is owed, so less interest is charged afterward.
private mortgage insuranceA policy that protects the lender if payments stop. It is written PMI. A lender may require it on a conventional loan when the down payment is under 20 percent.
property taxMoney a county or city collects on a home's value. It is often collected with the monthly mortgage payment and passed on by the lender.
From offer to closing 12
Closing DisclosureA five-page form with the final terms and costs. The lender must hand it over at least three business days before the closing.
contingencyA contract clause that makes the sale depend on an event. A mortgage contingency makes the purchase depend on the buyer getting a loan.
counterofferA reply that changes the terms instead of accepting them. It ends the first offer and puts a new one in its place.
deedThe legal paper that passes a home to its new owner. State and local government offices charge a fee to record a deed.
earnest moneyA good-faith deposit made once a contract is signed. If the sale closes, it may go toward the down payment or the closing costs.
Loan EstimateA three-page form of expected costs, sent after applying. A lender must send it within three business days of receiving an application.
origination feeThe lender's charge for setting up the loan. It may cover processing the application and underwriting.
purchase contractThe signed paper that binds both sides to the sale. By law a sale of land needs a written contract before a court will enforce it.
purchase priceThe sum that buyer and seller agree the home will cost. The buyer pays part of it as a down payment and usually borrows the rest.
title insuranceCoverage in case someone has an older claim to the home. A lender's policy protects only the lender. An owner's policy protects the buyer.
title searchA study of public records to confirm who owns a property. It also looks for claims or liens against the property.
underwritingThe lender's review of a borrower before final approval. Underwriters look at three things: credit, capacity and collateral.
How this list was compiled: Term list chosen for this site on 2026-10-12. Each meaning is written in our own words and was checked that day against pages of the Consumer Financial Protection Bureau, a U.S. government agency: its mortgage key terms (https://www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/), its answers What is a Loan Estimate?, What is a Closing Disclosure? and What's the difference between a prequalification letter and a preapproval letter? (https://www.consumerfinance.gov/ask-cfpb/) and the four steps of its guide to buying a house (https://www.consumerfinance.gov/owning-a-home/). Most terms were checked a second time against the English Wikipedia (https://en.wikipedia.org/), whose text is under the Creative Commons Attribution-ShareAlike license, in the articles Mortgage, Down payment, Interest, Escrow, Real estate appraisal, Closing (real estate), Offer and acceptance, Home inspection, Real estate agent, Closing costs, Home insurance, Title (property), Interest rate, Fixed-rate mortgage, Adjustable-rate mortgage, Pre-approval, Credit score, Debt-to-income ratio, Lenders mortgage insurance, Property tax, Home equity, Amortizing loan, Earnest payment, Real estate contract, Title search, Title insurance, Deed and Mortgage underwriting in the United States. Loan term, purchase price, origination fee, Loan Estimate and Closing Disclosure rest on the Bureau's pages alone; offer, counteroffer, contingency, purchase contract, title search, real estate agent and the three things underwriters look at rest on Wikipedia alone. The sums in the examples were worked out and checked a second time. The sentence after each meaning is from the same sources. Licence: own work
How it works
A buying a house vocabulary worksheet for a life skills or personal finance class: mortgage, down payment, interest, escrow, appraisal, closing and six more terms on the left, their meanings mixed up on the right, with the answer key as the last page.
Read the full guide
The words of a mortgage
In Set, The mortgage has principal, interest rate, fixed-rate mortgage, adjustable-rate mortgage, loan term, preapproval letter, credit score, debt-to-income ratio, private mortgage insurance, property tax, home equity and amortization.
From offer to closing
The third set follows a sale: purchase price, earnest money, contingency, counteroffer, purchase contract, title search, title insurance, Loan Estimate, Closing Disclosure, origination fee, deed and underwriting. Under the tool each term has a fact or a worked sum. The meanings were checked against the mortgage key terms of the Consumer Financial Protection Bureau and against Wikipedia.
The sheets teach vocabulary, not home buying: they give no advice about a house or a loan, and the example prices are made up.
Questions and answers
What are the steps of buying a house?
The Consumer Financial Protection Bureau sets out four: prepare by checking credit and setting a budget; explore loan choices and make an offer; compare Loan Estimates and pick a loan; then close, with an inspection, insurance and the final papers.
What is the difference between an appraisal and a home inspection?
An appraisal is a written opinion of what the property is worth, and the lender usually chooses the appraiser. A home inspection examines the condition of the house, such as its structure, heating and wiring. The buyer typically has the right to hire the inspector.
What is escrow when buying a house?
Escrow has two uses. During a sale a third party holds money, such as the earnest money deposit, until the sale closes. Afterward an escrow account is one the lender keeps to pay property taxes and homeowners insurance out of the monthly payment.
What is the difference between prequalification and preapproval?
Both are letters in which a lender says it is generally willing to lend up to a certain amount. Lenders use the two words differently, and some verify the buyer's information only for a preapproval. Neither letter is a guaranteed loan.