It’s back-to-school season, which makes it the perfect time for a quick refresher on mortgage terms that can make or break a deal. Whether you’re a first-time buyer, a seasoned homeowner, or an investor brushing up on the lingo, understanding these basics can help you make confident, informed decisions.

Here are five key terms every buyer should know:

Debt-to-Income Ratio (DTI)

Your DTI measures how much of your income goes toward debt each month. Lenders use this number to see how comfortably you can take on a mortgage. A lower ratio is better—but self-employed borrowers sometimes need extra guidance on documenting income. (Don’t worry, we’ve got you covered!)

Loan-to-Value Ratio (LTV)

LTV compares the loan amount to the home’s value. It’s a significant factor in approval, interest rates, and whether you’ll need private mortgage insurance (PMI). For buyers putting down less than 20%, this number really matters.

Rate Lock

Mortgage rates can shift daily, and timing matters. A rate lock secures your interest rate for a set period to protect you from sudden market changes. It’s a key tool for peace of mind while your loan is in process.

Escrow

Escrow accounts are designed to make homeownership more straightforward. However, they can still cause confusion. Think of escrow as a holding account that covers property taxes and insurance. Understanding how it works can keep surprises off your monthly statement.

Debt Service Coverage Ratio

For investors, this is the golden term. DSCR looks at rental income instead of personal income to qualify for a loan. That means no tax returns are required in many cases—making it easier to expand a real estate portfolio.

At the end of the day, mortgage terms don’t have to be intimidating. With guidance, they become tools you can use to your advantage.

Whether you’re buying your first home, refinancing, or exploring investment opportunities, The Sharpe Mortgage Team is here to help. Contact us anytime at 336-575-9448—we’d love to discuss your options.