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Mortgage Basics

Although each individual home financing package has its own variety of features, the concept of a mortgage is really quite simple: a mortgage is a loan made to help you finance a home. Your lender advances you a certain amount of money, which you repay over a specified period.


Rates, Points & Loan Fees

The total cost of your mortgage is determined by a number of different factors, most notably the interest rate, discount points, and loan fees. The expenses that contribute to the cost of your loan can be expressed as the annual percentage rate (APR).

When considering loan pricing, keep in mind that rates, points and fees should be considered together. The interest rate alone only tells part of the story

Your Monthly Mortgage Payment

Mortgage payments can generally be divided into four parts: principal, interest, taxes, and insurance. These are often referred to with the acronym PITI.

Note that the loan's APR doesn't figure into the calculation of the monthly payment. The APR reflects all the costs of your mortgage, including not only the quoted interest rate (used to calculate the principal and interest) but also required loan fees such as loan points, fees and mortgage insurance.