For most people, buying their first home is perhaps one of the most monumental decisions they’ve ever made in their adult life. It’s obviously quite a big commitment and not an easy transaction to go through, but anyone who goes through the process of home buying is bound to pick up a few terms. To help you make sense of some of those terms, we’ve compiled a short list of mortgage terms and principles that you may encounter along the way.


Once you’ve taken out a loan and started paying for it for quite some time, the gradual reduction in the principal amount is what’s called an amortization. Depending on the lender, most of the money you pay during the loan’s early years is applied toward the interest owed. It’s only during the final years of the loan that payment amounts are finally applied to the principal, which jumpstarts the amortization.

Annual Percentage Rate (APR)

The annual percentage rate (APR) is the interest rate you’ll need to pay on your loan each year plus any additional lender fees. When you’re still in the process of shopping for a loan, you’ll notice two interest rates listed under a particular loan package, one of which is the APR. They’re usually the higher number since it includes other fees.

Appraisal Fee

An appraisal fee is essentially the cost of a home appraisal for a particular property you’re buying or selling. Home appraisals are an essential part of real estate transactions since they provide an independent estimate of the property’s value. Mortgage lenders require appraisals so they can have an idea of how much money you’ll be borrowing for that particular property.

Balloon Loan

A particular type of loan called a balloon loan offers lower monthly payments for a set period of time. This is then followed by a payment that’s larger-than-usual at the end of the loan repayment period. However, it’s important to remember that paying lower monthly payments also means you make higher interest payments over the life of the loan.

Closing Costs

Real estate transactions take time to complete and have an entire process built into them. At the end of these transactions is what’s called the closing. This is the time and place at which all documents for your loan are signed, dated, and notarized. As such, closing costs consist of the settlement costs and fees you pay to a lender in exchange for finalizing your loan. They are typically about 3% of the loan amount and are often paid at closing or just before your loan closes.

Debt-to-Income Ratio

A debt-to-income (DTI) ratio is one of the metrics most lenders look at when processing your application. Your DTI is basically equal to all of your monthly debt payments divided by your gross monthly income. Lenders use this metric to see if you have the ability to manage your monthly payments to repay the amount you request to borrow.


That’s just the tip of the iceberg when it comes to all the mortgage terms and jargons you’ll probably encounter on your journey to finding your dream home. Obviously, there are many other terms you should know that might be of great help to you as you begin the process of buying a house.

Finding your dream home just became a lot easier now with the help of Total Lending Concepts. We offer home loans to fit every situation and help you buy a house that’s suitable for your needs. If you’re looking for a reputable mortgage lender in Colorado Springs, Total Lending Concepts is here to help. Contact us today to apply for a loan!