In observance of June's American Housing Month, Four Corners Community Bank offers the following terms to help those new (or seasoned!) navigate the language of the housing market:
Annual percentage rate (APR):
This is
how
much your loan will cost over the course of a year. This figure is almost always higher than the interest rate, because it takes into account the interest charged, as well as fees or additional costs associated with the loan. Since all lenders use the same formula, it can be a more effective way of comparing mortgages rather than interest rate alone.
Loan estimate: An accurate estimate of fees associated with a loan provided to the customer by a mortgage lender or broker. A loan estimate is required by law under the Real Estate Settlement Procedures Act (RESPA). The estimate must be provided within three business days of applying for a loan and includes the estimated interest rate, monthly payment, and total closing costs for the loan.
Closing costs/settlement fees:
The costs, in addition to the price of the property, that buyers and sellers are charged to complete a real estate transaction. Costs include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees, and credit report charges.
Closing disclosure: This
five-page form provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).
Points:
Borrowers can pay a lender points to reduce the interest rate on the loan, resulting in a lower monthly payment. The cost of one point is equal to one percent of the loan amount. Depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of a percent.
Escrow: An account held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. Escrow accounts are usually required by lenders to cover property taxes and mortgage insurance. After an initial deposit, borrowers pay into the escrow monthly, usually as part of the mortgage payment.
Have questions? Looking for a mortgage lender? We can help guide you.
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