Essential Mortgage Terms Every Kentucky Homebuyer Should Know
Essential Mortgage Terms Every Kentucky Homebuyer Should Know
Buying a home in Kentucky can feel overwhelming when mortgage jargon starts flying.
This glossary breaks down common mortgage terms in plain English so you can make informed decisions.
Educational only. This information is not a commitment to lend. All loans are subject to credit approval and program guidelines.
Interest Rate
The percentage charged to borrow money for your mortgage loan.
APR (Annual Percentage Rate)
The true yearly cost of the loan, including interest and certain lender fees.
Loan Term
How long you have to repay the mortgage, commonly 15 or 30 years.
Debt-to-Income Ratio (DTI)
Your monthly debt divided by your gross monthly income. Lenders use this to determine affordability.
Down Payment
Money paid upfront toward the purchase of your Kentucky home.
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Kentucky Mortgage Terms to Know (Plain-English Glossary)
If you’re buying a home in Kentucky, mortgage conversations can feel like a different language.
This page breaks down the most common mortgage terms, jargon, and vocabulary you’ll see in
loan paperwork, the Loan Estimate, and the Closing Disclosure.
Tip: When you see a word you don’t understand, copy it and use your browser search on this page: Ctrl + F (Windows) or Cmd + F (Mac).
Educational only. This glossary explains common terms used in mortgage lending. It is not a loan
approval or a commitment to lend. Programs, rates, and guidelines can change.
Mortgage Glossary
Accrued Interest
Interest that has built up on a loan since the last payment date and hasn’t been paid yet.
Amortization
A repayment schedule that pays the loan down over time with monthly payments that include principal and interest.
Annual Percentage Rate (APR)
The annual cost of borrowing expressed as a percentage. APR includes the interest rate plus certain lender fees, points, and mortgage insurance when applicable.
Application Fee
A fee some lenders charge to cover initial processing costs for a mortgage application.
Appraisal
A written opinion of a home’s market value based on the property condition, location, and recent sales of similar homes.
Appraisal Fee
The cost paid for the appraiser to complete the appraisal report.
Borrower
The person(s) taking out the mortgage loan and agreeing to repay it.
Cap (Adjustable-Rate Mortgage)
A limit on how much an ARM interest rate can change during each adjustment period and/or over the life of the loan.
Certificate of Eligibility (COE)
A document confirming a veteran’s eligibility for a VA home loan benefit.
Certificate of Reasonable Value (CRV)
A VA-related appraisal determination used to support the value for a VA loan.
Closing (Settlement)
The day you sign final loan documents and the property ownership transfers to the buyer.
Closing Costs
Fees and prepaid items due at closing, such as lender fees, title fees, appraisal, recording fees, and prepaid taxes/insurance.
Closing Disclosure (CD)
A five-page form showing your final loan terms, monthly payment, and final closing costs. You typically receive it at least three business days before closing.
Commitment Letter
A lender document stating you’re approved subject to conditions (like appraisal, title, and final verification items).
Comparables (Comps)
Recently sold homes similar to the subject property that help determine market value.
Conventional Loan
A mortgage not insured or guaranteed by the government (not FHA, VA, or USDA).
Debt-to-Income Ratio (DTI)
Your total monthly debts divided by your gross monthly income (before taxes). DTI helps determine how much house you can qualify for.
Deed
The legal document that transfers property ownership from seller to buyer.
Department of Veterans Affairs (VA)
The federal agency that backs VA home loans for eligible service members and veterans.
Down Payment
Money paid upfront toward the purchase price. A larger down payment usually reduces the loan amount and can reduce mortgage insurance costs.
Earnest Money
A deposit made with the purchase contract to show the buyer is serious. It’s typically credited toward cash needed at closing.
Equal Credit Opportunity Act (ECOA)
A federal law that prohibits discrimination in lending based on protected characteristics.
Equity
The difference between the home’s current value and what you still owe on the mortgage.
Escrow
An account used to collect money monthly for property taxes and homeowners insurance, so those bills can be paid when due.
Hazard Insurance (Homeowners Insurance)
Insurance that protects your home against certain damages (like fire and storms) in exchange for a premium.
Homeowners Association (HOA)
An organization that manages shared community areas and enforces neighborhood rules. HOA dues may apply.
Interest Rate
The rate charged for borrowing the money. This is not the same as APR.
Loan Estimate (LE)
A three-page form that summarizes estimated loan terms, payments, and closing costs. It is typically provided within three business days after application.
Loan-to-Value (LTV)
The loan amount divided by the appraised value (or purchase price, depending on the loan). Lower LTV generally means lower lender risk.
Rate Lock (Lock-In Rate)
An agreement that holds an interest rate for a set time while the loan is processed (example: 30, 45, or 60 days).
Market Value
The price a home is likely to sell for in the current market based on supply, demand, and comparable sales.
Mortgage Insurance (MI)
Insurance that protects the lender if the borrower defaults. Often required when putting less than 20% down on conventional loans, and also common with FHA loans.
Origination Fee
A lender fee that covers certain administrative costs of underwriting and processing the mortgage.
Prepayment
Paying extra principal ahead of schedule to reduce interest costs and pay the mortgage off sooner.
Prepayment Penalty
A fee some loans charge if you pay off the mortgage early. Many modern mortgages do not have this, but it should always be checked.
Principal
The amount still owed on the loan balance (not including interest).
Realtor
A real estate professional who is a member of the National Association of Realtors.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring certain loan disclosures and protecting consumers from specific abusive settlement practices.
Second Mortgage
An additional loan secured by the home that is behind the first mortgage in lien priority.
Term
The length of the loan (commonly 15 or 30 years).
Title
Legal ownership rights to the property.
Title Insurance
Insurance that protects the lender and/or homeowner against certain losses related to title defects or ownership disputes.
Want help translating your Loan Estimate or Closing Disclosure?
If you’re buying a home in Kentucky and you want a clear explanation of your numbers (rate, APR, cash to close,
escrow, and closing costs), reach out and I’ll walk through it with you in plain English.
Disclaimer: This website is not endorsed by the VA, FHA, USDA, HUD, or any government agency. It is an independent
educational resource created by a Kentucky mortgage professional. Content is for educational purposes only and does
not constitute a loan offer or guarantee of approval.
Glossary of Mortgage Terms to Know For A Kentucky Mortgage Loan.
ACCRUED INTEREST: Accumulated interest since the principal investment that has not yet been paid. AMORTIZATION: Paying off debt, principal and interest, with a fixed repayment schedule in regular installments over a fixed period of time. ANNUAL PERCENTAGE RATE (APR): The annual rate charged for borrowing money expressed as a percentage. APR takes into account interest, discount points, lender fees and mortgage insurance. APPLICATION FEE: A fee charged by a lender to cover the initial costs of processing a loan application. APPRAISAL: A written estimate of a property’s current market value, based on the current condition of the property and recent sales information from similar properties in the same area. APPRAISAL FEE: The cost to have a licensed, certified appraiser estimate the market value of a property as of a specific date. BORROWER: An individual who receives a loan from…
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