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Three young adults discussing a home purchase

Buying a house is a common undertaking for many Americans, but it’s also one of the most complicated — not to mention costly — purchases adults will ever make. It’s important to understand these 10 essential terms so you understand how much house you can afford and make smart decisions when you buy a home.

Mortgage Phrases You Should Know

Adjustable-rate mortgage (ARM)

A mortgage with an interest rate that can change over time. It typically has a low, fixed initial interest rate and then may adjust regularly either up or down depending on market conditions. It can’t exceed a set rate cap.

Closing cost

The settlement costs and fees that the member will pay to the lender in exchange for finalizing the loan. Common closing cost include appraisal fees, commitment fees, inspection fees, etc.

Down payment

The money you will need to purchase a home. Most loan programs require some kind of down payment. A down payment can be as low as 3% of the purchase price of the home or as much as the member is willing and capable of putting down. Some government-backed loans may even allow you to buy a home with no down payment.


A neutral, third-party account that protects the money of both buyers and sellers until real estate transactions are finalized. For example, if you choose to make a deposit with an offer on a home, it would go into an escrow account first rather than directly to the seller. Once you’ve bought a home, escrow accounts are also typically used where the lender will hold money on behalf of the member to pay for property taxes, homeowners insurance and mortgage insurance if applicable on a loan.

FHA loan

A mortgage offered through the Federal Housing Administration (FHA) allows lower credit scores and down payment requirements. An FHA loan requires 3.5% down payment, no cash reserves and is available for primary residence only. You will pay an upfront premium to obtain an FHA loan.

Fixed-rate loan

A mortgage that has the same interest rate for the life of the mortgage loan.

Annual Percentage Rate (APR)

The interest rate that will be paid on the mortgage loan annually plus any additional lender fees. APR is usually expressed as a percentage.


The amount of money you borrow also known as your loan amount. Note that you end up paying more than this amount because of interest.

Private mortgage insurance (PMI)

Insurance that protects the lender in the event the borrower defaults on the loan. Lenders typically require mortgage insurance if less than 20% down payment is made to purchase a home. Mortgage insurance is usually paid monthly and can be placed in the escrow account for the lender to pay on behalf of the borrower.

VA loan

Mortgages for qualified active duty service members, veterans and eligible surving spouses. VA loans typically offer more favorable interest rates and require low to no down payment. They’re offered by financial institutions but backed by the Department of Veterans Affairs.
Home buying can be confusing, but knowing this important lingo will make it easier to navigate the process.

Visit our mortgage page to learn more about the benefits of home buying with Truliant. Truliant is federally insured by NCUA and is an Equal Housing Lender.

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For more information about a mortgage with Truliant, check our mortgage rates, visit our mortgage page or call us at 800.822.0382 to speak with a mortgage specialist.
Provision of the calculator on this page is not an offer of credit. Its use in no way guarantees that credit will be granted. This calculator is solely for informational purposes and provides reasonably accurate estimates; the calculations are not intended to be relied upon as actual loan computations.