The friend treatment
Mortgage words, translated to human
Every industry hides behind vocabulary. Here's ours, decoded — the way we'd explain it to a friend over coffee. No email required to read any of it.
Down payment
The cash you bring toward the purchase price. Not 20% — as low as 3% conventional, 3.5% FHA, or $0 on VA/USDA. Minnesota Housing can help cover it.
Closing costs
The fees to complete the transaction — lender, title, appraisal, prepaid taxes and insurance. Typically 2–4% of the price, and sometimes negotiable with the seller.
Escrow
A neutral holding account. Part of each payment sits there so your property taxes and insurance get paid automatically and on time. That’s genuinely the whole concept.
PMI (private mortgage insurance)
A monthly cost when you put less than 20% down on a conventional loan. It protects the lender — and it goes away as you build equity. Not a penalty; a trade for buying sooner.
Points
Optional upfront fee to buy a lower rate. One point = 1% of the loan. Sometimes worth it, sometimes not — the break-even math tells you, and we run it with you.
Earnest money
A good-faith deposit (often 1–2%) sent with your offer to show you’re serious. It isn’t extra cost — it’s credited back to you at closing.
Pre-approval
A lender’s written statement that your credit, income and assets support a loan up to a certain amount. It’s what turns your offer from a wish into a contender.
DTI (debt-to-income ratio)
Your monthly debt payments divided by gross monthly income. It’s the main lever of what you qualify for — most programs like it under roughly 43–50%.
Credit score
A 300–850 number summarizing your borrowing track record. Mortgages price in tiers, so improving from 660 to 700 can genuinely lower your rate.
LTV (loan-to-value)
The loan amount as a percentage of the home’s value. Put 5% down and your LTV is 95%. Lower LTV usually means better pricing and no PMI below 80%.
Reserves
Savings left after closing, measured in months of payments. Not always required — but they strengthen a file and help in competitive offers.
Gift funds
Down payment money given (not lent) by family. Completely allowed on most programs with a simple gift letter — we walk your family through it.
Underwriting
The lender’s formal review of your entire file against program rules. When underwriters ask questions, that’s the process working — not a problem.
Appraisal
An independent professional’s opinion of the home’s value, ordered during processing. It protects you from overpaying and the lender from over-lending.
Conditions
Underwriting’s to-do list before final approval — an updated pay stub, a letter explaining a deposit. Melissa chases these so you mostly just forward emails.
Clear to close
The official green light: every condition satisfied, loan fully approved, closing can be scheduled. The happiest three words in the process.
Closing disclosure (CD)
The final, binding statement of your loan terms and cash to close — legally required at least 3 days before signing, so nothing at the table is a surprise.
Rate lock
Freezing your interest rate for a set window (usually 30–60 days) so market moves can’t change your deal while the loan closes.
Still confused by something?
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