Annual Percentage Rate (APR)a stated interest
rate that reflects all the financing costs of a mortgage. The
APR includes points, origination fees and other finance charges
in addition to the interest on the mortgage, and includes them
all in a yearly interest rate. As a result, the APR is usually
higher than the interest rate alone. It also provides a benchmark
for comparing different types of mortgages based on the annual
cost for each loan.
Appraisalan estimate of the value
of a property, made by a qualified professional called an
Closingthe meeting between the
buyer, seller and lender (or their agents) where the property
and funds legally change hands. Also called settlement.
Closing Coststhe costs and fees
associated with the official change in ownership of the property
and with obtaining your mortgage that are assessed at the
closing or settlement. Closing costs include required certifications,
insurance, taxes and other fees, and typically total between
3 and 6 percent of the mortgage amount.
Credit Reporta report that documents
a borrowers credit history and current status. Borrowers
can examine their own credit reports, although most credit
reporting companies charge a fee to provide a report.
Escrowa special account set up
by the lender in which money is held to pay for taxes and
insurance. "Escrow" can also refer to a third party
who carries out the instructions of both the buyer and seller
to handle the paperwork at the settlement.
Interestthe sum paid for borrowing
money, which pays the lenders costs of doing business.
Loan Origination Feethe fee charged
by a lender to prepare all the documents associated with your
Mortgage Insurancean insurance
policy the borrower buys to protect the lender from non-payment
of the loan. Private mortgage insurance policies are usually
required if you make a down payment that is below 20% of the
appraised value of the home.
Principalthe amount of debt,
not including interest, left on a loan; also the face amount
of the mortgage.
Title Insurancean insurance policy
which insures you against errors in the title search, essentially
guaranteeing your and your lenders financial interest
in the property.
Underwritingthe process of deciding
whether to make a loan based on credit, employment, assets
and other factors.