We know mortgage speak can get thick. Here’s a quick guide to cutting through the confusion.


Interest Rate

When you get a mortgage, you’re borrowing money to pay for property. Borrowing this money isn’t free—your lender will charge a percentage of the sale price as interest. This percentage is your interest rate. Mortgage interest rates vary slightly from lender to lender, but in general, they’re controlled by national economic conditions relating to interest rates set by the Federal Reserve, among other indices. In other words, the interest rate you’re charged for your mortgage isn’t arbitrary. Interest rates also change over time, which is one reason why homeowners end up refinancing their mortgage. If interest rates go down over time after they buy their house, homeowners can refinance to save money in the long run.


Legal Description

When you purchase a home with land of any sort, the legal description of that property defines where your property lines are. This description can help you understand where your rights as a property owner begin and end. The legal description may also define whether the property has any easements (another party’s right to use specific parts of the property—easements are typically held by governments or corporate entities). As official, legally binding documents, your property’s legal description needs to be registered with your local assessor’s office.

Lender Credits

If you don’t have adequate cash to close and other liquid assets to cover your up-front costs at closing, you may be able to have some of those fees folded into your mortgage loan in exchange for raising your interest rate. These are referred to as lender credits, and they’re expressed as 1% of the loan amount (also known as negative points). This is essentially the inverse of discount points .


A legal right granted by an owner of property, by a law or otherwise acquired by a creditor. A lien serves to guarantee an underlying obligation, such as the repayment of a loan. If the underlying obligation is not satisfied, the creditor may be able to seize the asset that is the subject of the lien.

Liquid Assets

Though some mortgage programs don’t require a down paymen t and have minimal fees, most people can’t finance their home purchase 100% through a loan. This means you’ll need to have access to funds that you can use as needed. These available funds are known as liquid assets. Anything you have that can quickly be converted to cash without losing value is a liquid asset. So, the money you have in checking and savings is a liquid asset. The money you have tied up in a retirement account with an early withdrawal penalty is not liquid (illiquid). No matter how theoretically valuable they may be, items like cars, collectibles, jewelry and art aren’t considered liquid because they may take time to sell (convert to cash) and could lose value in the transaction. Liquid assets are an important consideration for things like down payments, cash to close and appraisal gaps . You’ll need to show that you can cover these costs yourself—that the assets are available to you immediately if you need them.

Loan-To-Value Ratio (LTV)

The loan-to-value ratio is a simple mortgage calculation that divides the amount of money you borrow by the value of the property you want to buy. This ratio tells the lender how risky a mortgage might be. Houses that sell for more than they’re worth have a high LTV, and lenders may compensate for that by charging a higher interest rate.

Lock or Lock-In Period

A set period of time that a lender will guarantee a specific interest rate. Lock-ins protect you against rate increases during that period of time. A lock period typically lasts 15 to 60 days. To keep the mortgage rate you’ve locked, you must close your loan during that time.