Home Buying Terms: Lingo You Should Know

Cardinal Financial January 13, 2020 | 4 min read
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Do home buying terms make your head hurt? Here we’ll break down the lingo you should know in ways you can understand.

interest rate

Probably the most basic home buying term on this list, interest rates are fundamental to all forms of lending. In the simplest terms possible, interest is what you pay a lender to borrow money. Whether you’re looking to lend money to buy a home, a car, or pay for school, you want your interest rate to be as low as possible so you end up paying less over time.

closing costs

Getting a loan can take a while, and throughout the process, you’ll have to deal with closing costs. Closing costs usually come from third parties and can include things like home appraisal and title fees. You have to pay for these as they come up, but your lender can help you plan for them and put money aside ahead of time.


Equity is the overall value of your home once you subtract what you owe in loans. For example, you may have a home that is worth $400,000. If your current balance is $300,000, you have $100,000 in equity. So how do you build equity? Pay off your mortgage or increase the value of your home.

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seller’s/buyer’s market

When you’re looking to buy a house, your real estate agent may tell you it’s either a seller’s market or a buyer’s market. A seller’s market implies that there are more buyers than available homes in a given area. Seller’s markets are super competitive, so be ready for bidding wars and potentially missing out on your first choice. Buyer’s markets are the opposite, and obviously what you want as a prospective buyer. When there are more homes than potential buyers, there’s less competition and prices tend to drop.

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LTV, or loan-to-value, is a ratio used to describe the overall size of your loan versus the value of the home you’re buying. It will always be expressed as a percentage and comes from dividing the loan size by the home’s value. LTV is critical in understanding how much you’ll be able to borrow.

funding fee

Funding fees are government fees buyers pay that protect the lender from loss and fund the loan program itself. Government loans, such as VA and FHA loans, have funding fees, but in some cases waivers are available. Ask your loan originator if you’re eligible for a funding fee waiver! Speaking of loan originators. . . .

loan originator

Not to be confused with a mortgage broker, a loan originator is a representative of a financial institution that assists buyers in their mortgage application process. A mortgage broker is a licensed professional who works on a buyer’s behalf to secure financing through a bank or another lender. In short, a loan originator works for a lender, while brokers are independent.


Underwriting is the process lenders follow to assess an applicant’s income, assets, and credit, as well as the risk involved with offering the applicant a loan. Underwriting typically happens after a mortgage application has been submitted. Your lender will comb through your personal information and financial records to determine whether you qualify for a loan. Thinking about applying for a mortgage? It’s a good idea to get your affairs in order ahead of time!

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What are some home buying terms you have trouble understanding? Tell us on social media and we’ll help you out!

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