November 12, 2019



A Glossary of Mortgage Terms You Need to Know

A Glossary of Mortgage Terms You Need to Know


The homebuying process can be complicated. Luckily, there are experts out there who can help simplify this process. Whether it be a real estate agent, mortgage lender, or simply the internet, there are a ton of educational resources available for first-time homebuyers.

So – in a world of big words and long acronyms, I decided to create A Glossary of Mortgage Terms That First-Time Buyers Need to Know. 

Annual Percentage Rate (APR)

APR is the annual rate that is charged for a loan, representing the actual yearly cost of a loan over the term of a loan. This includes financing charges and any fees or additional costs associated with the loan such as closing costs or points.


An appraisal is a valuation of property, such as real estate, by the estimate of an authorized person.

Assessed Value

This is the current value of the property. The assessment is completed in order to determine property taxes.

Bridge Loan

A bridge loan is a type of mortgage financing between the termination of one loan and the start of another.

Cash to Close

The amount a borrower/buyer needs in cash at the time of closing.

Clear Title

A title that is clear of liens or legal questions as to the ownership of the property. Clear titles are necessary for buyers.


This refers to the meeting at which time all documents for the loan are signed and notarized.

Closing Disclosure

A closing document is presented to the buyer no later than three days before closing and provides the buyer with key information such as interest rate, monthly payments and total costs to close the loan.


Collateral refers to an asset or good, such as a home, used for securing a loan. If a loan is not repaid, the collateral may be taken by the lender.


This refers to the similar properties and homes that are approximately the same size and location as the property in question. Comparables are used by an appraiser to determine the fair market value.

Compound Interest

Interest that is paid on the principal balance as well as accrued and unpaid interest.

Construction Loan

A loan used for the financing of a home construction project. Lender makes payments at each milestone of the building process.


A contingency is a condition or request that must be satisfied/completed before the sale can occur. An example of a contingency would be the passing of an inspection.

Conventional Loan

A conventional loan is a standard loan that is not insured or supported by the federal government.

Credit Report

A statement that has information about your credit activity and current credit situation.

Credit Score

Your credit score is a three-digit number that represents your credit risk, or the likelihood that you will pay your bills on time.

Debt Consolidation

Debt consolidation is often done by paying off multiple loans through one large, longer term loan.

Debt-to-Income Ratio (D-I)

Your D-I Ratio is your total debt payments divided by your gross income before taxes. D-I Ratio is expressed as a percentage.

Down Payment

The amount of cash that you initially pay towards your home. The difference between your purchase price and down payment will be the amount of your mortgage loan. How much should you put down? Check out our mortgage loan calculator. Do you need a down payment? Maybe not. Some first-time homebuyer programs don’t require a down payment.

Earnest Money

Earnest money is a deposit that is tied to a sale offer. This deposit is provided to the buyer as a sign of good faith. It is a great way to show that you have money and “skin in the game”.


The difference between the fair market value of a property and the outstanding balances and other liens on that property.

Fair Market Value

Fair market value is the dollar amount that an appraiser has determined the home is worth.

Fannie Mae

Federal National Mortgage Association.  A government sponsored enterprise that buys and sells mortgages for resale.

Finance Charge

This is the cost of credit. Finance charges include the amount of interest that will be paid during the term of the loan.

Fixed Rate Mortgage

This is a loan with a predetermined fixed interest rate for the entirety of the loan.

Floating Rate

In this case, the rate for a loan is not locked or committed to. The floating rate and discount points are not guaranteed.


Foreclosure is the legal process in which a lender takes control of a property or home after the owner has been unable to make full principal & interest payments on their mortgage.

Funding Date

The funding date is the time in which the proceeds from a loan are available and/or disbursed for the benefit of the borrowers.

Government Loan

Government loans are loans that are insured by the Federal Housing Administration, guaranteed by the Department of Veterans Affairs (VA) or guaranteed by the Rural Housing Service (RHS).

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit that gives you a certain amount of money that you can draw from, pay back, and continue to use over a period of time. HELOC’s are convenient as they allow you to take what you need as you need it.

Homeowners Insurance

Homeowners insurance is a form of property insurance that protects against damages to an individual’s house and assets in the home.

Interest Rate

An interest rate is the percentage of principal charged by the lender for the use of its money (loan).


Liabilities are considered to be the debts or financial obligations that a borrower has.


A claim on your property by the creditor who states that you owe them money on the property.

Lien Holder

An individual or entity that has placed a lien on real property.

Maturity Date

This is the date on which all interest and fees on a loan must be repaid to the lender.


A mortgage is a loan from a bank or a financial institution that helps the borrower purchase a house.

Mortgage Insurance

Mortgage insurance is insurance that protects the lender if you default on your loan. If you put less than 20% down on your purchase, then most lenders will require you to pay mortgage insurance.


How Deerwood Bank will treat you throughout your mortgage process 🙂


A note is a written agreement in which the signer promises to pay a named person/company a specific amount of money at a specified date or on demand.


The date in which loan proceeds are disbursed.


The outstanding balance of a loan has been paid in full.


A preapproval is a lenders conditional agreement to lend a specific amount of money to a homebuyer under a set of determined terms.


There is a difference between preapproval and prequalification – take a look at the main differences.

Principal & Interest

Principal describes the amount of money that is borrowed on the loan. Interest refers to the amount of money that is charged for borrowing the money.

Principal Payment

This is the unpaid portion of the original loan. The principal does not include any interest charges.

Processing Fee

This is a fee charged by the lender to cover the administrative costs of processing the loan.

Promissory Note

A promissory note is a written promise to pay back a specified amount over a predetermined amount of time.

Purchase Agreement

The contract outlining the agreed-upon price and terms for the purchase of a home


Your rate is the amount of interest that you will pay on a loan. This amount is expressed in a percentage.

Recording Fee

A recording fee is charged by a government agency for registering or recording a real estate purchase or sale.

Repayment Period

This is the predetermined amount of time that the borrower must repay their outstanding balance/debt.

Right of First Refusal

This provision gives a potentially interested party the right to buy a property before the seller negotiates any other offers.

Rural Housing Loan (AKA Rural Development Loan)

These are loans that are offered by the Rural Housing Service (RHS). RHS provides financing for qualified property in rural areas.


This is an English word describing Deerwood Bank’s mortgage process 🙂


The number of years that it will take to pay off a loan.


The title is written evidence of property ownership.


The underwriter is the person(s) who reviews, approves, or denies a home loan based on the guidelines of the specific loan program.

Upfront Costs

These are costs that you will pay when applying for a loan. An example of an upfront cost would be an application fee.


A final inspection shortly before settlement to make sure the property is in the same condition that it was at the time the offer contract was written.

Beck Eckleman close up

Becky Eckelman

Office: 218.825.8946
Cell: 218.820.4771
NMLS#: #730105

Becky Eckelman is a Mortgage Lender for Deerwood Bank. Becky is based out of the Baxter office and has been with Deerwood since 2014. She graduated from the University of Minnesota with a B.A. in Sociology, and then went on to obtain her MBA in Business Administration from the College of St Scholastica in 2004. During the warm seasons, you can find Becky in her veggie and flower garden planting, weeding, and pruning. When the cold seasons hit, Becky spends a lot of time out in the woods – hiking, training her dogs, ice skating, and cross country skiing.

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