The Mortgage Plug guide
Mortgage glossary
Mortgage words, explained without the jargon.
Reviewed October 29, 2026 · Atiyah Jemison · NMLS #2162831
Principal
The borrowed amount that you repay. Interest is calculated on the unpaid loan balance.
Interest rate
The percentage charged on the loan balance. It is not the same as the APR.
Annual percentage rate (APR)
A broader measure of borrowing cost that includes the interest rate and certain loan charges. Compare APRs on similar loan scenarios.
Discount points
Upfront lender charges that may reduce the interest rate. Consider the upfront cost and your expected time in the loan.
Down payment
Your contribution toward the purchase price rather than the amount financed.
Closing costs
Loan and transaction charges, separate from the down payment.
Prepaids and escrow
Prepaids are amounts paid in advance for items such as interest, insurance, or taxes. An escrow account may hold funds for future property tax and insurance bills.
Cash to close
The final funds needed after deposits, credits, and other adjustments. It can include your down payment, closing costs, and prepaids.
Loan Estimate
A standardized disclosure showing expected loan terms, projected payments, and estimated costs. It is not a loan approval.
Closing Disclosure
The disclosure of final selected-loan terms, payments, and closing costs. Review it against the latest Loan Estimate.
Debt-to-income ratio (DTI)
Monthly debt payments divided by gross monthly income, multiplied by 100. It is one factor in underwriting.
Underwriting
The review of your documented finances, credit, property, and program requirements to determine loan eligibility and terms.
Sources & next steps
Educational guidance only. Eligibility, documentation, loan terms, and property requirements vary by program and underwriting. Use a secure application or approved portal, never email or text, for sensitive financial documents.