Glossary
Every term and acronym used in the calculator, in plain language. Jump to a section, or read straight through.
Mortgage & Loan Terms
7 terms
Principal
The original amount borrowed from the lender, not including interest. Your monthly payment gradually reduces the principal over the life of the loan.
Interest
The cost charged by the lender for borrowing money, expressed as an annual interest rate. In early years most of your payment is interest; this shifts toward principal over time.
PITI
Principal, Interest, Taxes, and Insurance — your total monthly housing payment including the escrow portion for property taxes and homeowners insurance. This is the number lenders use to qualify you.
PMI (Private Mortgage Insurance)
Insurance required by lenders when your down payment is less than 20% of the purchase price (LTV > 80%). Protects the lender, not you. Typically 0.5%–1% of the loan amount annually. This calculator zeroes out PMI once your loan-to-value ratio reaches 80%, matching the auto-calculation on the Mortgage tab. Note: federal law (the Homeowners Protection Act) requires lenders to automatically cancel PMI at 78% LTV based on your original amortization schedule — this tool's 80% threshold is a simplified estimate for planning purposes, not a substitute for your actual lender's PMI cancellation terms.
LTV (Loan-to-Value Ratio)
Your loan amount divided by the property value or purchase price, expressed as a percentage. Example: $667,250 loan ÷ $785,000 price = 85% LTV. Lower LTV = better rate and no PMI at 80% or below.
Down Payment
The portion of the purchase price you pay upfront in cash. The loan covers the remainder. Down payment = purchase price − loan amount.
Amortization
The schedule of monthly payments that fully pay off your loan by the end of the term. Early payments are mostly interest; later payments are mostly principal.
Escrow & Prepaids
5 terms
Escrow Account
A separate account your lender manages to collect and pay your property taxes and homeowners insurance. A portion of your monthly PITI goes into escrow so the lender can make these payments on your behalf when they come due.
Initial Escrow Deposit
Funds collected at closing to seed your escrow account. Typically 2–3 months of property tax and insurance reserves.
Prepaid Interest
Interest that accrues from your closing date to the end of the month. The closer to month-end you close, the less this is.
Prepaid Insurance
One full year of homeowners insurance premium paid upfront at closing. Required by lenders before they will fund your loan.
Prorated Property Taxes
At closing, taxes are split between buyer and seller based on who owns the property each day of the tax year. In Tennessee, property taxes are paid in arrears, so buyers typically receive a credit at closing representing the seller's share of taxes accrued before closing.
Closing Costs
7 terms
Cash to Close
The total amount of money you need to bring to the closing table. Calculated as: (Purchase Price + All Closing Costs) − (Loan Amount + Earnest Money + Seller Credits + Prorated Property Tax Credit).
Earnest Money Deposit (EMD)
A good-faith deposit paid when you go under contract, typically 1%–2% of the purchase price. Applied toward your cash to close at the end.
Lender Fees
Charges from your mortgage lender to originate and process your loan. Includes origination fee, underwriting fee, processing fee, appraisal fee, and credit report fee.
TN Mortgage Indebtedness Tax
A Tennessee state tax on the mortgage instrument. Rate: $0.115 per $100 of loan amount. The first $2,000 of debt is exempt. Paid by the buyer.
TN Realty Transfer Tax
A Tennessee state tax on the transfer of real property. Rate: $0.37 per $100 of the purchase price. The standard Tennessee REALTORS® purchase agreement (RF401) assigns it to the buyer, though the contract can shift it to the seller.
Recording Fees
Fees paid to the county Register of Deeds. Calculated in Tennessee at $5 per page + a $2 computer fund fee, plus a $1 probate fee on a deed or deed of trust (not on a lien release). Note: fees vary by county — confirm current rates with your title company.
Owner's Title Insurance
Protects YOU against pre-existing title defects. In Middle Tennessee, customarily paid by the seller. Calculated at approximately 0.6% of the purchase price in this model.
Seller Net Sheet
4 terms
Net Proceeds
The amount the seller receives after all costs are deducted from the sale price. Net Proceeds = Sale Price − (Mortgage Payoffs + Commissions + Title/Settlement Fees + Concessions + Prorated Taxes), plus transfer tax if the contract assigns it to the seller.
Mortgage Payoff
The exact amount needed to fully satisfy your existing mortgage(s) at closing. Includes the outstanding principal balance + interest accrued through the funding date.
Listing Commission
The fee paid to the seller's real estate agent/broker. Since the 2024 NAR settlement, all commissions are fully negotiable and must be agreed in writing.
Deed Preparation Fee
The title company's charge to draft the new deed transferring ownership from seller to buyer. Typically $200–$350.
Budget & DTI
4 terms
DTI (Debt-to-Income Ratio)
Total monthly debt obligations divided by gross monthly income, expressed as a percentage. The most important ratio lenders use to evaluate loan qualification.
Front-End DTI (Housing Ratio)
Your PITI divided by gross monthly income. Lenders prefer this to be 28% or below. The 28% threshold applies to conventional loans; FHA guidelines use 31%.
Back-End DTI (Total Debt Ratio)
All monthly debt payments (PITI + car loans + student loans + credit card minimums) divided by gross monthly income. Conventional loans typically require 43% or below. Note: 43% is a guideline — automated underwriting systems may approve higher ratios, so do not assume you are disqualified if your DTI exceeds 43%.
Fixed Monthly Debts
Recurring minimum debt obligations that appear on your credit report. Includes car payments, student loan minimums, credit card minimums. Does NOT include utilities, groceries, or current rent.
Acronyms Quick Reference
10 terms
DTI
Debt-to-Income Ratio
EMD
Earnest Money Deposit
LTV
Loan-to-Value Ratio
P&I
Principal & Interest
PITI
Principal, Interest, Taxes, Insurance
PMI
Private Mortgage Insurance
THDA
Tennessee Housing Development Agency — administers state homebuyer assistance programs including Great Choice Home Loans and down payment assistance.
FHA
Federal Housing Administration — government-backed loan program allowing lower down payments (3.5%) and more flexible credit requirements.
VA
Department of Veterans Affairs — government-backed loan program for eligible veterans with no down payment requirement and no PMI.
NAR
National Association of Realtors — its 2024 settlement changed how buyer's agent commissions are negotiated and disclosed.
Every figure these terms describe is calculated — and editable — in the calculator. Run your numbers →