Buying a home in Roseville means navigating a lot of unfamiliar terminology — and it’s hard to make confident decisions when you don’t fully understand the words being used. This glossary breaks down the mortgage terms you’re most likely to encounter, explained in plain English, so you can follow along at every stage of the process.
Bookmark this page as you’ll likely find yourself coming back to it throughout your home buying journey.
Appraisal
An appraisal is a professional assessment of a home’s market value, performed by a licensed appraiser. Lenders require an appraisal to confirm the home is worth at least the purchase price before approving a loan. If the appraisal comes in lower than the agreed price, it can affect your loan amount and may require renegotiation.
APR (Annual Percentage Rate)
Your APR represents the true annual cost of your loan, including both your interest rate and most lender fees. Because it accounts for fees, your APR is usually slightly higher than your interest rate. When comparing loan offers from different lenders, comparing APRs gives you a more accurate picture than comparing interest rates alone.
Appraisal Gap
An appraisal gap occurs when a home’s appraised value comes in lower than the agreed purchase price. In competitive markets like Roseville, some buyers agree in advance to cover a certain amount of this gap out of pocket to keep their offer competitive.
CalHFA (California Housing Finance Agency)
CalHFA is a state agency that offers loan programs and down payment assistance specifically for California homebuyers, particularly first-time buyers. CalHFA doesn’t lend directly to buyers — instead, it works through a network of CalHFA-approved lenders who originate the loans.
CalPLUS
CalPLUS is a CalHFA first mortgage option that pairs with the Zero Interest Program (ZIP) to help cover closing costs. It’s often combined with conventional or FHA financing for buyers who want to minimize upfront cash needed at closing.
Closing Costs
Closing costs are the fees and expenses due at the end of a real estate transaction, separate from your down payment. These typically include lender fees, title insurance, escrow fees, appraisal fees, and prepaid items like homeowners insurance and property taxes. Closing costs in California typically run between 2% and 5% of the purchase price.
Closing Disclosure
A Closing Disclosure is a standardized form your lender provides at least three business days before closing. It outlines your final loan terms, monthly payment, and all closing costs. Reviewing this document carefully — and comparing it to your earlier Loan Estimate — is one of the most important steps before signing your final paperwork.
Conforming Loan Limit
The conforming loan limit is the maximum loan amount that conventional loans backed by Fannie Mae and Freddie Mac can cover. Loans above this limit are considered jumbo loans and typically come with different qualification requirements. Because home prices in Roseville and surrounding areas have risen, more buyers are finding themselves near or above this threshold.
Contingency
A contingency is a condition that must be met for a real estate contract to move forward. Common contingencies include financing (the buyer must secure loan approval), appraisal (the home must appraise at or above the purchase price), and inspection (the buyer can review the home’s condition before committing).
Debt-to-Income Ratio (DTI)
Your DTI compares your total monthly debt payments to your gross monthly income, expressed as a percentage. Lenders use this number to assess how much additional mortgage debt you can reasonably take on. Most conventional loans look for a DTI below 45%, though some programs allow higher ratios with compensating factors.
Down Payment Assistance (DPA)
Down payment assistance refers to programs that help cover some or all of a buyer’s down payment, often through deferred loans or grants. CalHFA’s MyHome Assistance Program is one example available to qualifying Roseville buyers.
Earnest Money
Earnest money is a deposit made by the buyer when an offer is accepted, showing good faith intent to complete the purchase. It’s held in escrow and typically applied toward the buyer’s down payment or closing costs at closing.
Escrow
Escrow is a neutral third party that holds funds and documents during a real estate transaction until all conditions of the sale are met. After closing, “escrow” can also refer to the account your lender uses to collect and pay your property taxes and insurance on your behalf each month.
FHA Loan
An FHA loan is a mortgage backed by the Federal Housing Administration, designed to make homeownership accessible to buyers with lower credit scores or smaller down payments. FHA loans allow down payments as low as 3.5% but require mortgage insurance for the life of the loan in most cases.
First Mortgage
A first mortgage is the primary loan used to purchase a home and holds the senior position against the property. When buyers use down payment assistance programs, those funds typically come in the form of a second (or “junior”) loan that sits behind the first mortgage.
HFA Preferred
HFA Preferred is a type of conventional loan offered through state housing finance agencies like CalHFA. It allows for lower down payments than standard conventional loans and can be paired with CalHFA down payment assistance programs.
Homebuyer Education Course
A homebuyer education course is a required component of CalHFA and many other first-time buyer programs. These courses, often completed online in about eight hours, cover the basics of budgeting, the home buying process, and homeownership responsibilities. Completion results in a certificate your lender includes in your loan file.
Interest Rate
Your interest rate is the percentage charged by your lender for borrowing the loan principal, expressed as an annual rate. It directly determines your monthly principal and interest payment, but doesn’t include other costs like fees — which is why comparing APRs gives a fuller picture.
Loan Estimate
A Loan Estimate is a standardized document lenders provide within three days of receiving your application. It outlines your estimated interest rate, monthly payment, and closing costs, allowing you to compare offers from different lenders on equal terms.
MyHome Assistance Program
MyHome is a CalHFA down payment assistance program that provides a deferred-payment second loan, typically covering 3% to 3.5% of the purchase price. No monthly payments are required — the loan is repaid when you sell, refinance, or pay off your first mortgage.
Origination Fee
An origination fee is a charge from your lender for processing your loan application, typically expressed as a percentage of the loan amount. This fee is included in your closing costs and factored into your APR.
Points (Mortgage Points)
Points, also called discount points, are upfront fees paid to reduce your interest rate. One point typically costs 1% of your loan amount and lowers your rate by a small fixed amount. Whether buying points makes sense depends on how long you plan to keep the loan — the longer you stay, the more likely the upfront cost pays off over time.
Pre-Approval
A pre-approval is a lender’s conditional commitment to lend you a specific amount, based on a verified review of your income, assets, and credit. Unlike pre-qualification, pre-approval involves actual documentation review, which is why sellers and listing agents in competitive markets like Roseville expect to see one before considering an offer.
Pre-Qualification
Pre-qualification is an informal estimate of what you might be able to borrow, based on self-reported financial information without verification. It’s a useful starting point but carries far less weight than a pre-approval when making an offer.
Private Mortgage Insurance (PMI)
PMI is insurance required on conventional loans when the down payment is less than 20%. It protects the lender — not the buyer — in case of default. PMI can typically be removed once you’ve built up enough equity in the home, usually around 20%.
Reserves
Reserves refer to the funds you have left over after covering your down payment and closing costs. Lenders often want to see two to three months of mortgage payments in reserve, as this demonstrates you can handle the loan even if your financial situation temporarily changes.
Underwriting
Underwriting is the process by which a lender reviews your full loan file — income, assets, credit, and the property itself — to make a final lending decision. An underwriter may approve your loan outright, approve it with conditions that need to be satisfied, or in some cases deny it. Most underwriting decisions take a few days to a couple of weeks, depending on how quickly any additional documentation is provided.
VA Loan
A VA loan is a mortgage backed by the Department of Veterans Affairs, available to eligible veterans, active-duty service members, and certain surviving spouses. VA loans typically require no down payment and no private mortgage insurance, making them one of the most favorable loan options for those who qualify.
Zero Interest Program (ZIP)
ZIP is a CalHFA program that provides a 0% interest deferred second loan to help cover closing costs, typically paired with a CalPLUS first mortgage. Like other CalHFA assistance programs, no monthly payment is required — the loan is repaid when the home is sold or refinanced.
Have a Term You Don’t See Here?
Mortgage terminology can feel overwhelming, especially when you’re navigating it for the first time. If there’s a term you’ve come across that isn’t covered here — or if you’d just like someone to walk through your specific situation in plain English — contct the JJ Mack Team, a local Roseville mortgage lenders, for help.
We work with buyers throughout Roseville and Placer County every day, and we’re always happy to answer questions with no obligation. Reach out for a free consultation, and let’s make sure you understand every part of your home financing.
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