Buying or building your first home means hearing a lot of new words. Here’s every one explained in plain English — no decoder ring required.
Principal · Interest · Taxes · Insurance
The four parts that usually make up your monthly house payment: the loan amount (principal), the cost to borrow it (interest), property taxes, and home insurance. People say “PITI” to mean your full monthly payment, not just the loan.
Annual Percentage Rate
The yearly cost of your loan shown as one percent. It adds most loan fees to the interest rate, so it shows the true price of borrowing better than the rate alone.
A safe holding account run by a neutral company. Money sits there — like your deposit, or cash set aside for taxes and insurance — until it’s the right time to pay it out.
Private Mortgage Insurance
An extra monthly fee you may pay if your down payment is under 20%. It protects the lender, not you, and usually drops off once you owe less than 80% of the home’s value.
A deposit you put down to show the seller you’re serious about buying. It’s held safely and later counts toward your costs at closing.
The one-time fees you pay to finish buying the home, like loan and paperwork fees. They usually add up to about 2–5% of the price.
Principal · Interest · Taxes · Insurance
The four parts that usually make up your monthly house payment: the loan amount (principal), the cost to borrow it (interest), property taxes, and home insurance. People say “PITI” to mean your full monthly payment, not just the loan.
An expert’s estimate of what the home is worth. Lenders require it so they don’t lend more than the home is actually worth.
The part of the home you truly own. It’s the home’s value minus what you still owe. It grows as you pay down your loan or the home gains value.
A common type of credit score
A number (about 300–850) that shows how well you handle borrowed money. A higher number can earn you a lower interest rate.
The plan that pays off your loan in equal monthly payments over time. At first more of each payment goes to interest; later, more goes to the loan itself.
A neutral company that checks who legally owns the home, makes sure there are no hidden claims on it, and handles the money and papers at closing.
A loan you use to buy a home. You pay it back in monthly payments, usually over 15 to 30 years.
The money you pay up front from your own pocket. Your loan covers the rest of the price.
The amount of money you actually borrowed, not counting interest. Paying it down builds your equity.
The percent a lender charges you to borrow money. A lower rate means a smaller monthly payment.
A loan whose interest rate never changes. Your payment stays the same for the whole loan.
A loan whose interest rate can change over time, so your payment can go up or down.
A common home loan that the government does not back. It often needs a higher credit score and bigger down payment.
A government-backed loan that’s popular with first-time buyers because it allows a smaller down payment and lower credit score.
A government-backed loan for veterans and service members. It often needs no down payment.
A government-backed loan for homes in certain rural and small-town areas, often with no down payment.
How much of your monthly income goes to paying debts. Lenders use it to see how much you can safely borrow.
A record of how you’ve borrowed and paid back money. Lenders read it to decide whether to lend to you.
A standard form from a lender listing your loan’s rate, monthly payment, and costs, so you can compare lenders side by side.
A fee the lender charges for setting up your loan.
An optional fee you can pay up front to lower your interest rate. One point usually costs 1% of the loan.
A lender’s promise to hold your interest rate for a set number of days while your loan is being finished.
The price and terms you tell the seller you’ll pay when you want to buy their home.
A “must happen first” rule in your offer, like passing inspection. If it doesn’t happen, you can usually back out without losing your deposit.
A close check of the home’s condition by a trained inspector, so you learn about problems before you buy.
The lender’s careful review of your money, credit, and the home before they say yes to your loan.
The final meeting where you sign the papers, pay your costs, and get the keys.
A form you get a few days before closing that shows your final loan terms and exact costs. Compare it to your Loan Estimate.
The legal paper that proves you own the home.
Your legal right to own and use the home.
A one-time policy that protects you and your lender if someone later claims they own part of your home.
Your last look at the home right before closing to make sure it’s in the shape you agreed on.
A licensed pro who helps you find a home and guides you through the deal.
A home that is newly built. Sometimes you can pick finishes before it’s done.
A finished sample home you can tour to see how a floor plan looks and feels.
A new home the builder finishes first and sells as-is, instead of building to your custom picks.
The items already included in the price of the home, at no extra cost.
An item you choose to add or improve for an extra cost, beyond the standard features.
A set dollar amount the builder includes for things like flooring or lighting. You choose within that budget.
An extra charge for a better lot, like a corner or a larger space.
The builder’s promise to fix certain problems in your new home for a set time after you move in.
A list of small fixes the builder agrees to finish before or just after you close.
An official OK from the city saying the home is safe and ready to live in.
Taxes you pay your local government based on your home’s value. They’re often collected as part of your monthly payment.
A policy that helps pay to repair or replace your home and the things inside if something like a fire happens.
A part of your monthly payment your lender sets aside to pay your property taxes and insurance when they come due.
A group that manages a neighborhood’s shared rules and spaces. It usually charges a regular fee.
Replacing your current loan with a new one, often to get a lower rate or change your monthly payment.
