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Annual Percentage Rate (A.P.R.)
The actual cost of a mortgage loan expressed as a yearly rate. The APR will be higher than the interest rate stated on the application and note because it includes fees such as: interest, discount points, origination fee, mortgage insurance and other related fees. The truth in lending act requires lenders to disclose an APR to assist the borrower in measuring the actual cost of a loan. |
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Deed of Trust
An instrument used in many states in place of a mortgage. The property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and re-conveyed upon payment in full. |
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Index rate
An index is a widely used published interest rate that lenders use to set the interest rate on loans. 10-year U.S. Treasury securities are often used for 30-year fixed-rate loans. ARM loans are commonly based upon the, one-, three-, and five-year U.S. Treasury security yields; the monthly average interest rate on loans closed by savings and loan institutions; or the monthly average costs-of-funds incurred by savings and loans. Lenders adjust the interest rate up or down on an adjustable rate mortgage by measuring the difference between a current index rate to the ARM interest rate, and adding a margin. |
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Underwriting
Underwriting involves an analysis of the borrower's creditworthiness (debts and assets, employment history, property evaluation, and other factors to determine an appropriate rate, term & loan amount. |
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