Loan Terms

Annual Percentage Rate (APR):
Actual rate you pay during the life of the loan, including interest, points and certain closing costs.

Appraisal:
An official valuation of market value of a house.  Have the house you want to buy appraised so you don’t pay more than it is worth.

Closing:
Transfer of ownership of a house when you sign loan papers and deed is recorded.

Credit Report:
Report on how timely you pay your bills, debt you are carrying, and your current monthly payments.  Credit history is important when a lender considers your loan application.

Fixed Rate Mortgage:
Interest rate is locked in for the life of the loan, so future changes in interest rates won’t affect it.

Insurance:
Hazard insurance and title insurance are required when getting a mortgage.  Mortgage insurance also may be required.

Interest:
Costs you must pay to lending institution for money you borrow.

Lock-in:
To get a set interest rate when applying for a mortgage and not waiting until you close.  Usually available for up to 90 days before closing.

Points:
Part of the closing costs a lender may charge.  One point equals 1% of the amount borrowed.

Prepayment Clause;
Provision permitting you to pay off mortgage early to reduce interest costs.  Some lenders charge a penalty for prepayment.

Principal:
Amount you borrow, excluding interest and points.