A Home Buyer's Dictionary

Buying your home

Types of Mortgages

Being a Smart Borrower

A Home Buyer's Dictionary

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Annual Percentage Rate (APR) - the total cost of credit expressed as a yearly rate. Includes interest, loan discount fee (points) and other credit costs.

Application Fee - includes appraisal and credit report fees and Federal National Mortgage Association underwriting fee, if charged.

Appraisal Fee - inspection of the house and neighborhood review of sale prices of comparable houses to determine value of property; may be included in mortgage insurance or application fees.

Assumable Loan - one transferable from seller to buyer. May require larger down payment, but interest rate could be lower.

Assumption Fee - may be charged for processing buyer's assumption of seller's loan.

Buydown - amount seller pays to lender so buyer gets lower interest rate. Inflated or non-negotiable selling price covers buydown.

Closing/Settlement - all paperwork, financial transactions completed and title passes from seller to buyer.

Credit Report Fee - covers cost of buyer's credit report; may be included in the application fee.

Document Preparation Fee - cost of preparing final legal papers.

Escrow Agent - person or company holding all documents, monies until closing/settlement.

Hazard Insurance - protects lender and buyer against loss by fire, windstorm, other natural hazards.

Home Protection Plan - from builder of new home to protect against faulty materials, workmanship; on used home, first-year protection against unexpected major repair expense, breakdowns.

Lender's Inspection Fee - for inspection of new construction by lender's personnel or outside inspector.

Loan Discount - see Points

Loan Origination Fee - a percentage of the loan; covers administrative processing costs.

Margin - difference between index and actual interest rate of adjustable rate of mortgage.

Notary Fee - cost of a licensed person authenticating execution of documents by both parties.

Points - charged in both fixed- and adjustable-rate mortgages to increase mortgage yield and cover closing costs. A "point" is 1% of the amount of the mortgage.

Reserve Accounts - funds accumulated and held by lender to pay taxes, hazard insurance premiums, and/or assessments imposed by municipalities or subdivisions; also called prepaids, impounds or escrow accounts.

Title Insurance - often required to protect lender against loss due to undiscovered title defects. An owner's policy costs less if bought at the same time. A "Title Insurance Binder," is a "commitment to insure the lender.

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