Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: General Mortgage Knowledge
OVERVIEW
A strong command of mortgage vocabulary is the foundation of everything else in the NMLS exam. Every concept — from underwriting to closing — is built on these core terms. Know every definition precisely.
- Basic Loan Terms
Principal: The outstanding loan balance on which interest is calculated each payment period. As payments are made, the principal balance decreases through a process called amortisation.
Interest: The cost of borrowing money expressed as an annual percentage of the outstanding principal balance. Interest is the lender's compensation for extending credit.
Amortisation: The gradual repayment of a loan through scheduled principal and interest payments over the full loan term. Early payments are weighted heavily toward interest — later payments apply more to principal.
Amortisation schedule: A complete table showing every payment over the life of the loan, breaking down how much goes to principal and how much goes to interest for each payment.