Mortgage Terms | What is APR?
Learn Mortgage Loan Abbreviations
When you shop for a mortgage you probably are going to hear many unfamiliar mortgage terms. Because of all the options available, obtaining a mortgage loan can be a real adventure. And since so much is at stake, your knowledge of the mortgage terms will help you get the best possible deal.
Adjustable Rate Mortgage: Any type of mortgage that includes an adjustment in the interest rate during the term of the mortgage. Such interest rate adjustments may be made monthly, semi-annually, at three years or even at five years.
Annual Percentage Rate: Commonly called APR, this interest rate reflects the total amount of all finance charges including interest, points, origination fees and mortgage insurance. This APR allows consumers to compare mortgage costs among several mortgage lenders. Mortgage lenders must provide this information to all loan applicants. The higher the APR, the higher the cost of the mortgage to you.
Application Fee: Many mortgage lenders charge an upfront fee to cover their cost for the credit report and appraisal. This fee is usually not refundable, but will be credited at closing.
Appraisal: An evaluation of the market and reproduction value of a house by a qualified appraiser. Mortgage lenders require appraisals in most cases, but exceptions may be made with a refinance mortgage loan.
Bridge Loan: A form of second mortgage that is collateralized by the borrowers present home (which is usually for sale) that allows the proceeds to be used for closing on a new house before the present home is sold.
Building Codes: Regulate the design, construction, and materials used to meet standardized guidelines for building integrity.
Building Permits: Legal permission from the local government agency authorizing construction. Permits are applied for by the builder or owner and fees are paid for the permitting process.
Buy Down: This refers to the practice of paying larger loan fees up front to provide a lower interest rate during the term of a loan. Buy downs only make sense when the borrower is going to have the loan for a long time and can recoup the cost of the buy down. Even then if rates drop and the borrower refinances, the buy down fee is lost.
Closing: The consummation of the sale of real property. The mortgage closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds by the mortgage lender necessary to complete the sale and mortgage loan transaction.
Closing Costs: All of the costs paid at the mortgage loan closing. Typically mortgage closing costs include loan fees, appraisal fees, credit report fees, title insurance, survey, documentary stamps, recording fees and other mortgage lender costs assessed at closing. Prepaid tax and insurance escrows and prepaid interest are also included.
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