Mortgage rates glossary
The 10 terms the 5 guides on Mortgage Rates 101 actually use, ordered by how often they come up, starting with Loan Estimate, Index and Margin. Each one notes why it matters for mortgage rates, quoted from the guide where it appears. 1 core terms you will see on any Loan Estimate follow at the end. Terms marked Mortgage rates are specific to mortgage rates.
Terms these guides use
- Loan Estimate
The standardized three-page form a lender must provide within three business days of application.
Why it matters for mortgage rates: “A real quote requires an application so the lender can issue a Loan Estimate.” From Mortgage Rates: A Beginner’s Guide
Appears in 4 guides: Mortgage Rates: A Beginner’s Guide, Fixed or Adjustable? A Starter Comparison, Rate Words That Confuse People and more
- Index Mortgage rates
A published market rate that an adjustable-rate mortgage follows after its fixed period.
Why it matters for mortgage rates: “The rate after the fixed period equals an index plus a margin, subject to caps.” From Fixed vs. Adjustable: A Decision Framework
Appears in 3 guides: Fixed vs. Adjustable: A Decision Framework, Fixed or Adjustable? A Starter Comparison, Rate Words That Confuse People
- Margin Mortgage rates
The fixed amount added to the index to set an ARM’s rate.
Why it matters for mortgage rates: “Ask which index is used and what the margin is.” From Fixed vs. Adjustable: A Decision Framework
Appears in 3 guides: Fixed vs. Adjustable: A Decision Framework, Fixed or Adjustable? A Starter Comparison, Rate Words That Confuse People
- Lender credit
A credit toward closing costs in exchange for a higher interest rate.
Why it matters for mortgage rates: “You can usually pay points for a lower rate or accept a higher rate with lender credits.” From Mortgage Rates: A Beginner’s Guide
Appears in 3 guides: Mortgage Rates: A Beginner’s Guide, Rate Words That Confuse People, Mortgage Rate Shopping for First-Time Buyers: A Starter Checklist
- Discount points
Prepaid interest paid at closing to reduce the interest rate.
Why it matters for mortgage rates: “The rate available with neither discount points nor lender credits.” From Rate Words That Confuse People
Appears in 2 guides: Rate Words That Confuse People, Mortgage Rate Shopping for First-Time Buyers: A Starter Checklist
- Annual percentage rate
The yearly cost of credit including interest and certain finance charges, disclosed under the Truth in Lending Act.
Appears in 1 guide: Rate Words That Confuse People
- Closing Disclosure
The five-page form you receive at least three business days before closing showing final loan terms and costs.
Why it matters for mortgage rates: “Before calling lenders, know a few terms: the interest rate, discount points, lender credits, the Loan Estimate, a rate lock and the Closing Disclosure.” From Mortgage Rate Shopping for First-Time Buyers: A Starter Checklist
Appears in 1 guide: Mortgage Rate Shopping for First-Time Buyers: A Starter Checklist
- Loan-to-value (LTV)
The loan amount divided by the property value.
Why it matters for mortgage rates: “Your loan: credit score, loan-to-value, occupancy, property type, loan amount and lock period.” From Mortgage Rates: A Beginner’s Guide
Appears in 1 guide: Mortgage Rates: A Beginner’s Guide
- Rate lock
A lender’s commitment to hold a rate and price for a set period.
Why it matters for mortgage rates: “Before calling lenders, know a few terms: the interest rate, discount points, lender credits, the Loan Estimate, a rate lock and the Closing Disclosure.” From Mortgage Rate Shopping for First-Time Buyers: A Starter Checklist
Appears in 1 guide: Mortgage Rate Shopping for First-Time Buyers: A Starter Checklist
- Servicer
The company that collects payments and manages the loan after closing.
Why it matters for mortgage rates: “An escrow or impound account is held by your servicer to pay property taxes and insurance.” From Rate Words That Confuse People
Appears in 1 guide: Rate Words That Confuse People
Core terms on every Loan Estimate
- Debt-to-income ratio (DTI)
Monthly debt payments divided by gross monthly income.
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Definitions are general. The quoted notes come from the guides on this site, which cite their official sources.