Mortgage Glossary – Unity Mortgage Group

Chapter 01

Before the loan is selected

Understand the words used to describe your starting point.

Mortgage broker / lender / servicer

A mortgage broker helps arrange financing options. The lender provides the loan and makes the lending decision. The servicer handles payments and account administration; it may be a different company. Ask which organization owns your question.

Prequalification / pre-approval

These labels can describe different levels of review. Ask what was verified and what assumptions remain. Neither label alone is an unconditional promise to lend. ¹

Principal / term / amortization

Principal is the borrowed balance. The term is the scheduled repayment length. Amortization describes how scheduled payments repay principal and interest over time; the split changes as the balance is repaid.

Occupancy / reserves

Occupancy describes how the property will be used, such as a primary home or investment. Reserves are eligible assets remaining after closing under applicable loan rules. Actual living needs can exceed a program minimum.

Chapter 02

When comparing loan costs

Similar-looking numbers can measure different things.

Interest rate / annual percentage rate

The note rate determines interest under the loan terms. APR includes certain additional finance charges in an annualized measure. APR does not include every ownership expense, and adjustable-rate APR is not a maximum-rate prediction. ²

Discount points / lender credits

Points are upfront charges associated with pricing, commonly exchanged for a lower rate. Credits can offset costs and may involve a higher rate. Ask to compare options over the time you expect to keep the loan. ³

Fixed rate / adjustable rate / rate lock

A fixed rate stays fixed under its contract. An adjustable rate can reset under stated rules. A rate lock protects specified pricing for a defined period and conditions; ask what changes or extensions could affect it.

Closing costs / cash to close

Closing costs are transaction and financing charges. Cash to close is the amount due from you after the calculation reflects down payment, costs, credits and amounts already paid. Ask for a reconciliation rather than adding every number yourself.

Chapter 03

Ratios and insurance

These measures describe different risks and responsibilities.

Debt-to-income ratio (DTI)

Qualifying monthly debts divided by qualifying gross monthly income. Example: $2,800 / $8,000 = 35%. The treatment of income and obligations varies by program. A ratio alone is not approval. ⁴

Loan-to-value ratio (LTV)

Loan amount divided by the value used in the lending review. Example: $320,000 / $400,000 = 80%. For purchases, the applicable value may depend on the price and appraisal under the program rules. ⁵

PMI / mortgage insurance premium

Conventional PMI and FHA mortgage insurance differ in premiums and cancellation rules. Mortgage insurance protects the financing provider against specified losses; it does not replace homeowners coverage or protect you from foreclosure. ⁶ ⁷

Escrow account / escrow shortage

An account used for expenses such as property taxes and insurance. Changing bills can change the monthly escrow amount. A shortage means the account does not have the amount required by its analysis. Ask the servicer how it will be addressed. ⁸

Chapter 04

As closing approaches

Know which milestone a word does and does not describe.

Appraisal / inspection

An appraisal or other valuation supports the property-value review. An inspection addresses property condition for the buyer. Ask separately about value, condition and any required repairs.

Title / title insurance

Title concerns legal ownership and associated claims. Title insurance provides coverage subject to the policy. Ask the attorney about lender and owner policies and what exclusions apply.

Underwriting / conditions / clear to close

Underwriting evaluates the application under lending requirements. Conditions are unresolved requirements. Clear to close generally indicates readiness to proceed under the lender process; confirm any remaining checks and funding conditions.

Closing Disclosure / consummation / recording

The Closing Disclosure explains final terms and costs for covered loans. Consummation is the legal commitment to the loan; recording places documents in public records. Signing, funding, recording and possession need not be the same event. Ask the closing attorney about your sequence. ⁹

Put it into practice

Your mortgage question log

Keep this page next to your disclosures. Use it to turn unfamiliar terms into clear next actions.

Find your worksheet on page 6 of the PDF. Print it, or fill in the fields with a compatible PDF reader and save your copy privately.

Download guide & worksheet

Sources & further reading

References reviewed September 7, 2026. Requirements and individual circumstances can change.

For education only; not a commitment to lend or personalized legal, tax, or financial advice. Examples are hypothetical. Confirm decisions and deadlines with the appropriate professionals. Source organizations do not endorse Unity Mortgage Group.

Mortgage terms, translated