Mortgage, closing cost and auto loan glossary
38 lending terms in plain English, each with an example and a straight answer on whether you can negotiate it. Examples are hypothetical and use simple round numbers; they aren't typical costs.
A to Z:
Mortgage insurance & guarantee fees
Private mortgage insurance (PMI)
Insurance that protects the lender, not you, if you stop paying a conventional loan. Usually required when you put less than 20% down.
- Example
- Hypothetical: on a home bought for $400,000 with 10% down, PMI is typically required until the balance is scheduled to reach 80% of the original value ($320,000).
- Can you negotiate it?
- Partly. You can compare PMI pricing across lenders, choose a larger down payment, or ask about lender-paid PMI (traded for a higher rate). By law you can request cancellation at 80% loan-to-value, and it generally ends automatically at 78%.
- Source
- CFPB: What is private mortgage insurance? · CFPB: When can I remove PMI from my loan?
- Explained in
FHA mortgage insurance premium (MIP)
Mortgage insurance on FHA loans: an upfront premium of 1.75% of the base loan amount plus an annual premium paid monthly. Under HUD Mortgagee Letter 2023-05, most 30-year FHA loans of $726,200 or less with under 5% down pay 0.55% a year.
- Example
- Hypothetical: on a $300,000 FHA base loan, the upfront MIP is 1.75% × $300,000 = $5,250, which is often financed into the loan.
- Can you negotiate it?
- No. HUD sets FHA MIP rates. Lenders can't discount them, but you can compare an FHA loan's total cost with a conventional loan with PMI.
- Source
- HUD Mortgagee Letter 2023-05: FHA annual MIP rates (PDF) · CFPB: FHA loans
- Explained in
VA funding fee
A one-time fee on most VA-backed home loans, set as a percentage of the loan amount. Under VA's chart effective April 7, 2023, a first-time purchase with less than 5% down pays 2.15%; 5% down pays 1.5%; 10% or more pays 1.25%. Veterans receiving VA disability compensation, and some others, are exempt.
- Example
- VA's own example: a first-time buyer purchasing a $200,000 home with $10,000 down (5%) pays 1.5% of the $190,000 loan, or $2,850.
- Can you negotiate it?
- No. VA sets the fee. You can reduce it with a larger down payment, finance it into the loan, or have the seller pay it as part of concessions (VA caps seller concessions at 4% of reasonable value).
- Source
- VA: Funding fee and loan closing costs
- Explained in
USDA guarantee fee
Fees on USDA Single Family Housing Guaranteed Loans: an upfront guarantee fee and an annual fee. For fiscal year 2026 USDA set them at 1% of the loan upfront and 0.35% a year of the average unpaid balance.
- Example
- Hypothetical: a $250,000 USDA loan has an upfront fee of 1% × $250,000 = $2,500 at FY2026 rates.
- Can you negotiate it?
- No. USDA publishes fee rates each fiscal year; check the current notice.
- Source
- Federal Register: USDA OneRD guarantee fee rates for FY2026 · USDA Rural Development: Single Family Housing Guaranteed Loan Program
- Explained in
Closing costs & fees
Origination fee
A charge by the lender (or broker) for making the loan. On a Loan Estimate it's in section A, Origination Charges, sometimes alongside separate application, processing or underwriting fees.
- Example
- Hypothetical: a 1% origination fee on a $300,000 loan is $3,000.
- Can you negotiate it?
- Yes. It's the lender's own charge. Ask for a reduction or waiver, or show a competing Loan Estimate with lower section A charges.
- Source
- CFPB: Loan Estimate explainer · CFPB: Request and review multiple Loan Estimates
- Explained in
Application fee
A lender fee for taking and processing your application. If charged, it appears in section A of the Loan Estimate. Before you receive a Loan Estimate, a lender generally may charge only a reasonable credit report fee.
- Example
- Hypothetical: Lender A charges an application fee and Lender B doesn't; compare section A totals rather than single lines.
- Can you negotiate it?
- Yes. Lender fee; often waived on request or to match a competitor.
- Source
- CFPB: Loan Estimate explainer · CFPB: TILA-RESPA integrated disclosures (Know Before You Owe)
- Explained in
Processing fee
A lender fee for preparing and handling your loan file. It's listed in section A of the Loan Estimate.
- Example
- Hypothetical: two lenders quote the same rate; one lists a processing fee and the other doesn't. The second offer is cheaper by that amount.
- Can you negotiate it?
- Yes. Lender fee; one of the easiest to ask to have waived.
- Source
- CFPB: Loan Estimate explainer
- Explained in
Underwriting fee
A lender fee for evaluating your application and deciding whether to approve the loan. Listed in section A.
- Example
- Hypothetical: a lender lists $0 origination but a separate underwriting fee. Add all section A lines to compare.
- Can you negotiate it?
- Yes. Lender fee; negotiate it along with other section A charges.
- Source
- CFPB: Loan Estimate explainer
- Explained in
Discount points
An upfront fee paid to the lender to lower your interest rate. One point equals 1% of the loan amount.
- Example
- Hypothetical: 1 point on a $300,000 loan costs $3,000. If it lowers the payment by $50 a month, break-even is 60 months.
- Can you negotiate it?
- Your choice. Ask for quotes with zero points and with points, and compare break-even.
- Source
- CFPB: What are discount points and lender credits?
- Explained in
Lender credits
Money the lender puts toward your closing costs in exchange for a higher interest rate. Shown as a negative number in section J of the Loan Estimate.
- Example
- Hypothetical: accepting a rate 0.25 points higher in exchange for a $3,000 credit lowers cash to close by $3,000 but raises every monthly payment.
- Can you negotiate it?
- Yes. Ask each lender what credit it offers at each rate.
- Source
- CFPB: What are discount points and lender credits?
- Explained in
Appraisal fee
Payment for an independent appraiser's estimate of the home's value, which the lender uses to set loan-to-value. Usually listed in section B, services you can't shop for.
- Example
- If a home appraises below the contract price, the loan-to-value ratio rises, which can change the down payment you need.
- Can you negotiate it?
- Limited. The lender chooses the appraiser, but appraisal fees differ across lenders, and some lenders offer credits.
- Source
- CFPB: Loan Estimate explainer · VA: Funding fee and loan closing costs
- Explained in
Title insurance (lender's vs owner's)
Insurance against problems with the property's legal title. Lender's title insurance is usually required and protects only the lender. Owner's title insurance is generally optional and protects your ownership interest.
- Example
- If a previously unknown lien or ownership claim surfaces after you buy, an owner's policy can cover covered losses; a lender's policy only protects the lender's loan.
- Can you negotiate it?
- Yes, by shopping. Title services usually appear in section C (services you can shop for), and the CFPB recommends comparing providers. In some states rates are regulated.
- Source
- CFPB: What is lender's title insurance? · CFPB: What is owner's title insurance? · CFPB: Shop for title insurance and other closing services
- Explained in
Title search
A review of public records to confirm the seller owns the property and to find liens or other claims. Usually performed by the title company.
- Example
- A title search might find an unpaid contractor's lien that must be cleared before closing.
- Can you negotiate it?
- Yes, by shopping title and settlement providers (section C).
- Source
- CFPB: Shop for title insurance and other closing services · CFPB: Loan Estimate explainer
Survey fee
Charge for a surveyor to confirm property boundaries and improvements. Some lenders or title companies require one.
- Example
- A survey could reveal that a neighbor's fence sits on your lot line.
- Can you negotiate it?
- Yes, by shopping when it's listed in section C; ask whether an existing survey can be reused.
- Source
- CFPB: Shop for title insurance and other closing services · CFPB: Loan Estimate explainer
Pest inspection
An inspection for wood-destroying insects or other pests, required by some lenders, loan programs or purchase contracts.
- Example
- A lender may require proof that termite damage was repaired before closing.
- Can you negotiate it?
- Yes. Shop providers, and who pays can be negotiated with the seller.
- Source
- CFPB: Shop for title insurance and other closing services · CFPB: Loan Estimate explainer
Credit report fee
The cost of pulling your credit reports. It's the one fee a mortgage lender may generally charge before giving you a Loan Estimate.
- Example
- Each lender you apply with may charge its own credit report fee; check section B.
- Can you negotiate it?
- Limited. It's small and set by the lender's vendor, but some lenders waive it.
- Source
- CFPB: Loan Estimate explainer · CFPB: TILA-RESPA integrated disclosures (Know Before You Owe) · CFPB: What happens when a mortgage lender checks my credit?
- Explained in
Flood certification (flood determination)
A check of FEMA flood maps to see whether the property is in a special flood hazard area, which affects whether flood insurance is required.
- Example
- If the certification shows a high-risk flood zone, a federally backed lender will require flood insurance.
- Can you negotiate it?
- No. Set by the lender's vendor (section B); compare across lenders.
- Source
- CFPB: Loan Estimate explainer
Recording fees
Fees charged by a local government to record the deed and mortgage in public records. Listed in section E, Taxes and Other Government Fees.
- Example
- Recording makes your ownership and the lender's lien a matter of public record.
- Can you negotiate it?
- No. Set by government.
- Source
- CFPB: Loan Estimate explainer
- Explained in
Transfer taxes
Taxes some state and local governments charge when property changes hands. Listed in section E.
- Example
- In some places custom or the contract decides whether the buyer or seller pays.
- Can you negotiate it?
- The tax itself isn't negotiable, but who pays it can be negotiated in the purchase contract where local law allows.
- Source
- CFPB: Loan Estimate explainer
- Explained in
Prepaid items (prepaids)
Costs you pay at closing in advance, such as the first year of homeowners insurance, interest from closing to the end of the month, and sometimes property taxes. Section F.
- Example
- Hypothetical: closing near the end of a month means fewer days of prepaid interest at closing (but the same total interest over the loan).
- Can you negotiate it?
- Partly. Shop homeowners insurance; the closing date changes prepaid interest.
- Source
- CFPB: Loan Estimate explainer · CFPB: Closing Disclosure explainer
- Explained in
Escrow (impound) account
An account your servicer uses to collect part of each monthly payment and pay property taxes and insurance for you. Your initial deposit is section G of the Loan Estimate.
- Example
- Hypothetical: annual taxes of $4,800 add $400 a month to your payment through escrow.
- Can you negotiate it?
- Mostly no. Many lenders require escrow; some allow waiving it in exchange for a fee or with a large down payment.
- Source
- CFPB: What is an escrow or impound account?
- Explained in
Loan Estimate
A standard 3-page form lenders must give you within 3 business days of receiving your mortgage application, showing the rate, payment and estimated closing costs.
- Example
- Request Loan Estimates from three lenders on the same day and compare page 2 section A and page 3 side by side.
- Can you negotiate it?
- It's a disclosure, not a contract; use competing estimates to negotiate.
- Source
- CFPB: Loan Estimate explainer · CFPB: Request and review multiple Loan Estimates
- Explained in
Closing Disclosure
A 5-page form with your final loan terms and closing costs, which you must receive at least 3 business days before closing.
- Example
- Compare it with your Loan Estimate line by line and ask about any increase.
- Can you negotiate it?
- Question any unexpected changes; some charges can't increase from the Loan Estimate.
- Source
- CFPB: Closing Disclosure explainer · CFPB: TILA-RESPA integrated disclosures (Know Before You Owe)
- Explained in
Cash to close
The total amount you must bring to closing: down payment plus closing costs, minus deposits, credits and seller concessions.
- Example
- Hypothetical: $40,000 down + $9,000 closing costs − $5,000 earnest money − $2,000 lender credit = $42,000 cash to close.
- Can you negotiate it?
- Indirectly. Lower it with lender credits, seller concessions or fee waivers.
- Source
- CFPB: Loan Estimate explainer · CFPB: Closing Disclosure explainer
- Explained in
Earnest money
A good-faith deposit you make when your offer on a home is accepted. It's usually held in escrow and credited toward your down payment or closing costs.
- Example
- Hypothetical: a $5,000 earnest money deposit is subtracted from your cash to close.
- Can you negotiate it?
- Yes, with the seller: the amount and the contract conditions under which you'd get it back are part of the purchase negotiation.
- Source
- CFPB: Closing Disclosure explainer · CFPB: Buying a House
- Explained in
Rates, ratios & loan terms
APR vs interest rate
The interest rate is the cost of borrowing the principal. The APR (annual percentage rate) is a broader yearly cost that also includes certain fees, such as points and origination charges.
- Example
- Hypothetical: two 7.00% loans; the one with $6,000 more in upfront fees has a higher APR.
- Can you negotiate it?
- Use APR to compare offers; negotiate the rate and the fees.
- Source
- CFPB: Mortgage interest rate vs APR · CFPB: A loan's interest rate vs its APR
- Explained in
Rate lock and float-down
A rate lock is a lender's commitment to hold an interest rate and points for a set period while your loan is processed. A float-down option lets you take a lower rate if market rates drop during the lock, usually for a fee or under conditions.
- Example
- Hypothetical: a 45-day lock that expires before closing may need a paid extension.
- Can you negotiate it?
- Yes. Lock length, extension fees and float-down terms vary by lender; ask and get them in writing.
- Source
- CFPB: What's a rate lock? · CFPB: Loan Estimate explainer
- Explained in
Debt-to-income ratio (DTI)
Your total monthly debt payments divided by your gross monthly income. Lenders use it to judge whether you can afford a new payment.
- Example
- Hypothetical: $2,400 in monthly debts (including the new mortgage) ÷ $6,000 gross income = 40% DTI.
- Can you negotiate it?
- Not negotiable, but you can lower it by paying down debts or increasing income before applying.
- Source
- CFPB: What is a debt-to-income ratio?
- Explained in
Loan-to-value ratio (LTV)
The loan amount divided by the home's appraised value or purchase price (usually the lower). LTV affects your rate, whether you need mortgage insurance and PMI cancellation.
- Example
- Hypothetical: a $360,000 loan on a $400,000 home = 90% LTV.
- Can you negotiate it?
- Lower it with a larger down payment.
- Source
- CFPB: What is a loan-to-value ratio?
- Explained in
Amortization
Paying off a loan through regular payments that cover interest first and then principal. Early payments are mostly interest; later payments are mostly principal.
- Example
- Hypothetical: on a $300,000 30-year loan at 7%, the first payment of $1,995.91 includes $1,750 of interest and about $246 of principal.
- Can you negotiate it?
- Not negotiable, but extra principal payments shorten the schedule if there's no prepayment penalty.
- Source
- CFPB: What is amortization?
- Explained in
Adjustable-rate mortgage (ARM)
A mortgage with a fixed rate for an initial period, after which the rate changes periodically based on an index plus a margin, within caps.
- Example
- A 5/6 ARM is fixed for 5 years and then adjusts every 6 months.
- Can you negotiate it?
- The margin and caps vary by lender; compare them.
- Source
- CFPB: Consumer Handbook on Adjustable-Rate Mortgages (PDF)
- Explained in
Prepayment penalty
A fee some loans charge if you pay off all or part of the loan early, such as by refinancing or selling. Page 1 of the Loan Estimate shows whether a mortgage has one.
- Example
- If a loan has a prepayment penalty, refinancing in the first few years could cost extra.
- Can you negotiate it?
- Yes. Ask for a loan without one; many loans don't have them.
- Source
- CFPB: What is a prepayment penalty?
- Explained in
Balloon payment
A large lump-sum payment due at the end of a loan, after smaller regular payments. Page 1 of the Loan Estimate shows whether a mortgage has one.
- Example
- Hypothetical: a loan with low payments for 7 years and the remaining balance due in year 7.
- Can you negotiate it?
- Yes. Ask for a fully amortizing loan instead.
- Source
- CFPB: What is a balloon payment?
- Explained in
Auto loans
Dealer reserve (dealer markup) and buy rate
The buy rate is the rate a lender approves you for on a dealer-arranged loan. The dealer may set a higher contract rate; the difference, often called dealer reserve or markup, is compensation to the dealer.
- Example
- Hypothetical: a lender approves 6% (buy rate) and the contract says 7%; the extra point is markup.
- Can you negotiate it?
- Yes. Ask for the buy rate, or show a direct pre-approval and ask the dealer to match it.
- Source
- CFPB: What is a buy rate for an auto loan? · CFPB: Am I required to get my auto loan through a dealership?
- Explained in
GAP insurance (guaranteed asset protection)
Optional coverage that pays some or all of the difference between what you owe on a car loan and what your auto insurer pays if the car is totaled or stolen.
- Example
- Hypothetical: you owe $25,000 and insurance pays $20,000; GAP may cover the $5,000 gap, minus exclusions.
- Can you negotiate it?
- Yes. It's optional; compare the price from the dealer, your lender and your auto insurer. If it's financed, you pay interest on it too.
- Source
- CFPB: What is GAP insurance? · FTC: Did you ask for all those add-ons?
- Explained in
Documentation (doc) fee
A fee dealers charge for preparing sales and title paperwork.
- Example
- Ask for an itemized out-the-door price so the doc fee is visible before you agree.
- Can you negotiate it?
- Sometimes. Some states cap doc fees and some dealers won't reduce them, but you can negotiate the vehicle price to offset it.
- Source
- FTC: Car dealer ads and promotions · FTC: Financing or leasing a car
- Explained in
Negative equity
Owing more on a car loan than the car is worth. Rolling it into a new loan increases the new loan's amount and cost.
- Example
- Hypothetical: you owe $18,000 on a car worth $15,000; $3,000 of negative equity added to a new loan raises its balance by $3,000.
- Can you negotiate it?
- Not negotiable, but you can pay it down, wait to trade in, or ask the dealer to show it clearly in the contract.
- Source
- CFPB: Should I trade in my car if it's not paid off? · CFPB: Auto loan key terms
- Explained in
Money factor (leases)
The finance charge on a car lease, written as a small decimal instead of an APR. A common rule of thumb converts it to an approximate interest rate by multiplying by 2,400.
- Example
- Hypothetical: a money factor of 0.0025 × 2,400 ≈ 6% approximate rate.
- Can you negotiate it?
- Yes. Ask for the money factor in writing and compare it with quotes from other dealers or lease lenders.
- Source
- CFPB: Leasing versus buying a car · FTC: Financing or leasing a car
Put the terms to work
Equal Housing Opportunity. We support the Fair Housing Act and the Equal Credit Opportunity Act: it is illegal to discriminate in housing or lending on the basis of race, color, religion, national origin, sex (including sexual orientation and gender identity), familial status, disability or, for credit, age, marital status or receipt of public assistance. Learn more.