Use this handy guide to understand common mortgage terms:

Principal: The original amount of money you borrow for your home loan. This is the base amount you'll be paying interest on.

Interest: The cost of borrowing money, expressed as a percentage (interest rate). It's the lender's profit on the loan.

Escrow: An account held by a third party (often the lender) to pay for property taxes and homeowners insurance. You typically pay a portion of these costs with your monthly mortgage payment.

PITI: An acronym representing the four main components of a typical monthly mortgage payment: Principal, Interest, Taxes, and Insurance.

Down Payment: The amount of money you pay upfront towards the purchase of a home, typically a percentage of the total purchase price.

Loan Term: The length of time you have to repay the mortgage loan, commonly expressed in years (e.g., 15-year, 30-year mortgage).

Interest Rate: The percentage charged by the lender on the outstanding loan balance. This can be fixed (stays the same for the life of the loan) or adjustable (can change over time).

APR (Annual Percentage Rate): A broader measure of the cost of borrowing money than the interest rate. It includes the interest rate plus other fees associated with the loan (e.g., origination fees, discount points).

Fixed-Rate Mortgage: A mortgage with an interest rate that remains the same for the entire loan term, providing predictable monthly payments.

Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that is fixed for an initial period and then adjusts periodically based on market conditions.   

 
Amortization: The process of gradually paying off your mortgage loan over time through regular payments. Each payment includes a portion of both principal and interest. In the early years, more of your payment goes towards interest, and later more goes towards principal.

Loan Origination Fee: A fee charged from the lender.