The Annual Percentage Rate (APR) is the effective annual rate of interest for a loan, taking into account fees and other associated costs, disclosed as required by the Truth-in-Lending Act.
A commitment fee is a charge required by a lender to lock in specific terms on a loan at the time of application, ensuring that the terms agreed upon will be honored and the funds will be available when needed.
Discount points are fees paid directly to the lender at the time of the loan origination to reduce the interest rate and lower monthly mortgage payments. Frequently used in conventional, FHA, and VA loans, they offer borrowers flexibility in managing loan costs.
An interest rate is the percentage of a loan amount charged by the lender to the borrower for the use of the borrowed funds. It can also represent the rate of return on an investment. Understanding interest rates is crucial for real estate transactions as they significantly affect mortgage payments and the overall cost of borrowing.
A Loan Discount is a type of fee that some lenders charge at the origination of a loan to lower the interest rate charged during subsequent payments. It’s commonly known as discount points.
Loan points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also referred to as 'buying down the rate.'
A mortgage discount refers to an initial amount deducted by lenders from the principal of a loan, often represented in terms of 'points.'
A nonconforming loan is a loan that does not meet the standards of, or is too large to be purchased by, Fannie Mae (FNMA) or Freddie Mac (FHLMC).
Packed deals are mortgage loans that include excessive fees in the balance owed, which might be potentially illegal due to regulations in certain jurisdictions.
Points are fees paid to lenders to reduce the interest rate or secure a mortgage loan. Each point is 1% of the loan principal, affecting the overall loan cost and effective interest rate.
