If you are a first time home buyer, here are some banking terms you should become familiar with:
- Interest Rate. The interest rate is the amount a lender charges a borrower to obtain a loan. This is usually expressed as a percentage of the total amount loaned. Interest rates are typically quoted on an annual basis, known as annual percentage rate (or “APR”).
- Discount Points. Discount points are used to “buy down” the interest rate, either temporarily or permanently. One discount point carries a cost equal to one percent of your loan size. As a rule of thumb, paying one discount point will lower your mortgage rate by 0.25 percentage points.
- Origination Fees. The origination fee for a mortgage is a fee charged by the lender for processing the loan. Origination fees are paid by the borrower when the loan is funded and are usually based on a flat percentage of the loan amount.
- Loan Term. The loan term is the length of time it will take the borrower to repay loan – like 15 or 30 years – with payments usually being made on a monthly basis.
Should you have any questions, ask your REALTOR® or lender.