Frequently Asked Questions

What in the world is an origination fee?

Some lenders charge an origination fee to process the loan application and other preparatory measures.

How are my rates determined?

The stock market and other economic indicators determine the rates on your mortgage loan. Rates can change multiple times in a day due to this.

Prepaid Interest... what is it?

It is the amount of interest that builds up on your mortgage loan between the day your loan closes and the day of the first monthly payment. Let's say your loan is closed on the first of November and your first monthly payment is due on the January 15th. The prepaid interest is determined by your interest rate and applies to the days between November 1st and January 15th.

What exactly is the difference between "locking in" and "floating" an interest rate?

If you "lock in" an interest rate, it remains the same for a certain amount of time. People do this if they're worried that interest rates will climb while the loan is being processed. If you're "locked in" and the interest rates are lowered, you generally won't get the cheaper rate. If you "float" the interest rate, it is subject to the fluctuations of the market. The plus side is that you could potentially "lock in" to a lower interest rate if it decreases.

Is there a difference between APR and interest rate?

Yes. The annual percentage rate (APR) is the cost of a mortgage loan in the form of a yearly rate. It also includes any fees for acquiring the loan. The interest rate is simply the note rate.

What are these lender fees I'm seeing?

They are the fees charged by the lender to compensate for the cost of producing a mortgage loan. They are also known as processing and underwriting fees.

Do I need an escrow account? What is one exactly?

Escrow accounts are a good idea, but they aren't necessary-it's a matter of preference. They are established by the lender for setting aside a portion of your monthly payments. The money covers annual fees for insurance, mortgage insurance (if you need it), and property taxes. If you have an escrow account, you can be sure that there is money set available for these payments when they arise.