Mortgage Terms Explained: From APR to Escrow

Posted by : Moneek-2

If you’ve ever felt overwhelmed by mortgage lingo, you’re not alone. The home loan process comes with a language of its own—but understanding a few key terms can make everything feel a lot less intimidating.

📉 APR (Annual Percentage Rate)

APR is the total cost of borrowing, expressed as a yearly rate. It includes the interest rate plus fees like points and lender charges. It gives you a better sense of the loan’s true cost over time.

🔐 PMI (Private Mortgage Insurance)

If your down payment is less than 20%, you may have to pay PMI. This protects the lender in case you default. The good news? It can usually be removed once you reach 20% equity.

🏦 Escrow

Your escrow account holds funds for property taxes and homeowners insurance. You pay into it monthly as part of your mortgage payment, and your lender pays the bills on your behalf.

🧾 Closing Costs

These are the fees and expenses due at the end of the transaction—things like loan origination, title fees, and prepaid taxes. They typically range from 2% to 5% of the home’s purchase price.

💼 Amortization

This is the process of paying off your loan over time through equal monthly payments, which cover both interest and principal. In the early years, a larger portion goes toward interest.

The more you understand these terms, the more confident you’ll feel during the homebuying process—and your lender is here to walk you through every step.

Mortgage Terms Explained: From APR to Escrow