Mortgage words, human translations

A neutral holding account baked into your monthly payment. Part of each payment sits there so your property taxes and homeowners insurance get paid on time, automatically. You don't manage it — it just works.

A monthly cost added when you put less than 20% down on a conventional loan. It protects the lender, not you — but it's what makes 3–5% down purchases possible. It typically drops off once you reach about 20% equity.

Prepaid interest. One point = 1% of your loan amount, paid at closing, in exchange for a lower rate. Sometimes worth it, sometimes not — it depends on how long you'll keep the loan. It's a math question, and Ella will do the math with you.

The one-time fees to complete your purchase — appraisal, title, origination, prepaid taxes and insurance. Typically 2–5% of the purchase price. Some can be negotiated for the seller to cover; some can be rolled in, depending on program.

A good-faith deposit (often 1–3% of your offer) showing the seller you're serious. It's not an extra fee — it gets credited toward your down payment or closing costs at closing.

Your interest rate PLUS most loan costs, expressed as a yearly rate. It's why two loans with the same "rate" can cost differently. Comparing APRs is comparing the fuller picture.

Your monthly debt payments divided by your gross monthly income. If you earn $6,000/mo and pay $2,400 toward debts (including the new mortgage), your DTI is 40%. Most programs like to see DTI under roughly 43–50%.

A lender's written statement — after actually verifying your income, assets, and credit — of how much you can borrow. Much stronger than a "pre-qualification," which is often just a guess based on what you typed into a form.

A three-digit summary of your borrowing history. Mortgage lenders usually pull scores from all three bureaus and use the middle one. Higher scores unlock better pricing — but you don't need a perfect score to buy.

Your loan amount divided by the home's value. Borrow $300K on a $375K home and your LTV is 80%. Lower LTV = less lender risk = better pricing and no PMI (at 80% or below on conventional).

Money left over after closing — measured in months of mortgage payments. Some programs want to see a cushion. Retirement accounts often count, which surprises people.

Down payment money given (not lent) by family. Totally allowed on most programs — it just needs a short gift letter and a paper trail. A huge share of first-time buyers use them. No shame, just paperwork.

The verification stage where a professional reviews your entire file — income, assets, credit, appraisal — against program rules. When people say a loan is "in underwriting," it means it's being formally checked and approved.

An independent professional's opinion of the home's value, ordered by the lender. It protects you from dramatically overpaying and the lender from over-lending. If it comes in low, you have options — renegotiate, cover the gap, or walk.

Freezing your interest rate for a set window (often 30–60 days) so market moves can't change your deal while your loan closes. You and Ella pick the moment to lock together.

An "only if" clause in your offer — financing contingency, inspection contingency, appraisal contingency. They're your escape hatches: if the condition isn't met, you can exit with your earnest money.

The underwriter's final green light: every condition satisfied, loan fully approved. The best three words in the process. Closing usually happens within a few days of hearing them.

The final, official statement of your loan terms and costs, delivered at least three business days before closing — by law — so you can review before signing. Ella walks through yours line by line.