Dayton Home Financing: Key Loan Terms Every Buyer Should Know

Buying a home in Dayton or the Miami Valley? Understanding key mortgage terms can make your financing journey smoother and help you ask the right questions when working with lenders. As a local real estate expert with years of experience helping buyers across Montgomery County, I’ve broken down the most important loan and financing terms you’ll hear during the home buying process.

What Is Pre-Approval vs. Pre-Qualification?

Pre-qualification is an informal estimate based on self-reported financial details, offering a rough idea of what you might be able to borrow.

Pre-approval is a more thorough process where a lender reviews your income, credit, and assets to issue a conditional loan approval.

A pre-approval letter makes your offer stronger by showing sellers you’re financially qualified and ready to buy in today’s competitive Dayton housing market.

What Is a Conditional Loan Commitment?

A conditional loan commitment means the lender agrees to fund your mortgage once certain conditions are met, such as a successful appraisal or updated documentation.

What Does Clear to Close Mean?

When you’re clear to close, your lender has reviewed all paperwork and verified that conditions are satisfied. This is the final approval before you sign and receive the keys, usually within 3 to 5 days.

What Is Underwriting?

Underwriting is the in-depth evaluation of your financial history, credit, income, assets, and the property itself. It determines whether your mortgage will be approved.

What Is a Rate Lock?

A rate lock is a guarantee from your lender that your interest rate won’t change during the loan processing period—typically 30 to 60 days. This protects you from rising rates before closing.

What Are the Types of Loans?

Most Dayton buyers choose from these common loan types:

Conventional Loans – Traditional mortgages with stricter credit and down payment requirements
FHA Loans – Government-backed loans with lower down payments
VA Loans – Exclusive to veterans, with no down payment required

Claire Dunn Real Estate works with trusted local lenders to help you find the right fit for your financial goals.

What Is a Down Payment?

The down payment is the upfront amount you pay toward the home purchase, typically ranging from 3% to 20% of the purchase price. A larger down payment can improve your offer and lower your monthly payment.

What Are Closing Costs?

Closing costs include various fees and services you’ll pay at closing—usually 2% to 5% of the home’s price. These may include:

• Lender fees

• Title insurance

• Attorney fees

• Appraisal and inspection costs

• Recording fees with Montgomery County

What Is Cash to Close?

Cash to Close is the total amount you need to bring on closing day. It includes your down payment, closing costs, and any prepaid items (such as insurance or taxes).

What Are Principal and Interest?

• Principal is the portion of your mortgage payment that reduces your loan balance.

• Interest is the cost of borrowing from the lender.

Together, they form the core of your monthly mortgage payment.

What Is PMI?

Private Mortgage Insurance (PMI) is typically required if your down payment is under 20%. It protects the lender in case you default. PMI is added to your monthly payment and can usually be removed once you reach 20% equity.

What Is an Escrow Account?

An escrow account is set up by your lender to manage and pay your property taxes and homeowners insurance. A portion of each monthly payment goes into this account to ensure bills are paid on time.

Let’s Talk About Your Dayton Home Buying Plan

Understanding mortgage terms helps you approach your Dayton home purchase with confidence. I’m here to guide you through the financing process and connect you with trusted lenders and resources.

Ready to take the next step in Montgomery County or the Miami Valley?
Contact Claire Dunn Real Estate today for expert guidance and a no-pressure consultation.