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.
APPRAISAL
An estimate of the value of a property, made by a State Licensed
professional appraiser
CLOSING
The meeting between the buyer, seller, and lender (or their agents)
where the property and funds legally change hands. Also called
settlement.
CREDIT REPORT
A report that documents a borrower's credit history and current
status. Borrowers can examine their own credit reports, although
most credit reporting companies charge a fee to provide a report.
EQUITY
The value of your home after the outstanding balance of any loans
are subtracted.
ESCROW
A 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.
INTEREST
The sum paid for borrowing money, which pays the lender's costs of
doing business.
LOAN ORIGINATION
FEE
The fee charged by a lender to prepare all the documents
associated with your mortgage.
POINTS (LOAN
DISCOUNT POINTS)
Points are prepaid interest on your mortgage, charged by the
lender at the time of the closing. Each point is one percent of
the loan amount that is, 2 points on a $100,000 mortgage would be
$2,000.
PREPAIDS
The expenses that are put into escrow at closing, usually
including real estate taxes, insurance, and interest.
PRINCIPAL
The amount of debt, not including interest, left on a loan; also
the face amount of the mortgage.
PRIVATE MORTGAGE
INSURANCE (PMI)
An 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.
SURVEY
A measurement of land, prepared by a registered land surveyor,
showing the location of the land with reference to known points,
its dimensions, and the location and dimensions of any buildings.
TITLE INSURANCE
An insurance policy which insures you against errors in the title
search (to determine legal ownership), essentially guaranteeing
your and your lender's financial interest in the property.
UNDERWRITING
The process of deciding whether to make a loan based on credit,
employment, assets, and other factors.
