---
title: "Mortgage Basics: Understanding the Lingo"
description: Mortgages have their own group of terms that can easily become confusing to someone who is unfamiliar with the home loan process. Learn more about these terms here.
---

[Foreclosure and Loan Modification Blog](https://blog.amerihopealliance.com/blog)

# [Mortgage Basics: Understanding the Lingo](https://blog.amerihopealliance.com/blog/mortgage-basics-understanding-the-lingo)

 Written by [Jake Sterling](https://blog.amerihopealliance.com/blog/author/jake-sterling) | Tuesday, August 20, 2013

*By Barbara Pronin, RISMedia Columnist*

With home prices languishing and mortgage interest rates still at historic lows, this may be the year you will want to buy your first home. But getting a mortgage can be a daunting process, especially if the terms associated with getting a loan are new to your vocabulary.

**From mortgage broker Ken Go, here are some basic terms to know as you move toward becoming a homeowner:**

**Underwriting:** this is the process lenders use to decide if they will give you a loan. Underwriters [evaluate your credit history](https://blog.amerihopealliance.com/blog/bid/306512/Understanding-Improving-Your-Credit-Profile), employment, current debt and available collateral in order to determine how much of a risk you might be to their company.

**Points:** these are fees you will pay for the privilege of getting a mortgage loan. A point is generally 1% of the total loan amount. Discount points, which can reduce your final loan amount, are tax deductible. The points paid to the lender for evaluating and processing your loan are called origination points, and are not tax deductible.

**Fixed rate:** your interest rate (and payment) will remain fixed for the life of your loan.

**Adjustable rate:** your interest rate will be adjusted periodically, and there may be a penalty for paying off the loan early.

**Down payment:** the amount of the total home cost that you will pay upfront. The larger your down payment, the smaller your loan amount and the smaller your monthly payment.

**Good faith estimate:** the lender is required by law to provide a borrower with an estimate of the fees that will be due at closing. The estimate must be provided within three days of accepting your application.

**Escrow:** your funds are held 'in escrow' by a third party until your transaction closes.

**Amortization:** describes the decrease in the principal owed on your home as it decreases over the life of the loan.

 photo credit: [Alan Cleaver](http://www.flickr.com/photos/alancleaver/4121400351/) via [photopin](http://photopin.com) [cc](http://creativecommons.org/licenses/by/2.0/)

[Reprinted](http://newsletter.rismedia.com/news/view/19695/) with permission from [RISMedia](http://rismedia.com). ©2013. All rights reserved.

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