Plain-English definitions
Mortgage glossary
Every mortgage term you're likely to hear while buying a home in Texas, explained in a sentence or two. If a word on a form or in an email stops you, look it up here, or just text me.
A
- Amortization
- How your loan is paid down over time. Early payments are mostly interest; later payments are mostly principal.
- Appraisal
- A licensed appraiser's estimate of the home's value. Lenders lend based on the lower of the appraised value or the price.
- APR (annual percentage rate)
- The yearly cost of the loan including the interest rate plus certain fees, so you can compare offers on equal terms. It's usually a little higher than the interest rate.
B
- Bank statement loan
- A loan for self-employed buyers that qualifies you on the deposits in your bank statements instead of the income on your tax returns. Read a client story →
C
- Cash to close
- The total you bring to closing: your down payment plus closing costs, minus any credits and your earnest money.
- Certificate of Eligibility (COE)
- The VA document that proves you can use a VA loan and shows how much entitlement you have. VA guide →
- Closing costs
- Fees and prepaid items paid at closing, such as lender fees, title insurance, the appraisal, and prepaid property taxes and homeowners insurance.
- Closing Disclosure
- The final form listing your loan terms and every cost. You get it at least 3 business days before closing so you can compare it with your Loan Estimate.
- Conforming loan limit
- The largest loan Fannie Mae and Freddie Mac will buy. In 2026 it's $832,750 for a single-family home in most of the country, including San Antonio. Bigger loans are called jumbo loans.
- Conventional loan
- A mortgage not backed by a government agency. Some allow as little as 3% down, and mortgage insurance can be removed once you reach 20% equity.
- Credit score
- A number, usually from 300 to 850, that sums up your credit history. A higher score usually means more loan options and a better rate.
D
- Debt-to-income ratio (DTI)
- The share of your gross monthly income that goes to debt payments, including the new mortgage. Lenders use it to judge whether the payment fits.
- Down payment assistance (DPA)
- Grants or forgivable loans that help with your down payment and closing costs, usually with income limits. First-time buyer guide →
- DSCR loan
- An investment property loan that qualifies you mostly on the rent the property can bring in compared with its payment, rather than on your personal income.
E
- Earnest money
- A deposit you make after your offer is accepted to show you're serious. It's held by the title company and counts toward your purchase at closing.
- Equity
- The part of the home you own outright: its value minus what you still owe.
- Escrow account
- An account your lender uses to collect part of your property taxes and homeowners insurance with each payment, then pay those bills for you.
F
- FHA loan
- A government-insured loan with 3.5% down at a 580 credit score, popular with first-time buyers and buyers rebuilding credit. FHA guide →
H
- Homestead exemption
- A reduction in your home's taxable value because it's your primary residence. In Texas it takes $140,000 off for school taxes, plus local exemptions. Bexar County guide →
L
- Loan Estimate
- A standard 3-page form every lender must give you within 3 business days of applying. It shows your rate, payment and costs, so you can compare lenders line by line.
- Loan-to-value (LTV)
- Your loan amount as a percentage of the home's value. 3.5% down means a 96.5% LTV.
M
- Manual underwrite
- When a human underwriter reviews your whole file by hand instead of relying on an automated system's approval. FHA and VA allow it, but not every lender will do one. Read a client story →
- MIP (FHA mortgage insurance)
- Mortgage insurance on FHA loans: an upfront premium, usually added to the loan, plus an annual premium built into your monthly payment. FHA guide →
- Mortgage credit certificate (MCC)
- A certificate for first-time buyers that turns part of the mortgage interest you pay into a federal tax credit each year.
O
- Option fee and option period
- In Texas, a small fee you pay the seller for the right to back out for any reason during the option period, usually a week or so, when you get your inspection done.
P
- PITI
- Principal, interest, taxes and insurance: the four parts of a typical monthly mortgage payment.
- PMI (private mortgage insurance)
- Mortgage insurance on conventional loans with less than 20% down. It can be removed once you reach 20% equity.
- Points (discount points)
- Optional fees paid at closing to lower your interest rate. One point costs 1% of the loan amount.
- Pre-approval
- A lender's written estimate of how much you can borrow, based on a review of your credit, income and assets. Sellers expect one with your offer.
- Pre-qualification
- A quicker, rougher estimate based on what you tell the lender, usually without verifying documents. Less weight with sellers than a pre-approval.
- Principal
- The amount you borrowed, not counting interest.
R
- Rate lock
- A lender's promise to hold your interest rate for a set time, such as 30 or 45 days, while your loan closes.
- Residual income
- On VA loans, the money left each month after your mortgage, debts and estimated living costs. VA uses it to make sure the payment fits real life. VA guide →
S
- Survey and T-47
- A survey maps the property lines and improvements. In Texas, if the seller has a recent survey, they may sign a T-47 affidavit saying nothing has changed, which can save you the cost of a new one.
T
- Title insurance
- Insurance that protects you and your lender if someone later claims a right to the property. In Texas, premiums are set by the state.
U
- Underwriting
- The lender's review of your file to confirm your income, assets, credit and the property meet the loan's rules before final approval.
- USDA loan
- A government loan with no down payment for eligible buyers in eligible areas outside city cores, with household income limits.
V
- VA funding fee
- A one-time fee on most VA loans, a percentage of the loan amount, that replaces monthly mortgage insurance. Many disabled veterans don't pay it. VA guide →
- VA loan
- A loan for veterans, service members and some surviving spouses, with no down payment for eligible buyers and no monthly mortgage insurance. VA guide →
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This guide is general education, not a loan offer or legal or tax advice. Program rules, fees and limits change; I check them against the sources above when this page is reviewed. Eligibility depends on your situation, and not all applicants will qualify.