Mortgage discount points: One point is 1 percent of your loan amount. Points are prepaid interest on a loan that you pay to the lender when you close on a home. A loan with points has a lower interest rate than one without.
Loan origination fees: Fees the lender charges for taking care of the loan paperwork.
Escrow: An account set up with funds to pay future tax and insurance payments. Lenders often require this and administer the payments.
Equity: the amount of the home's value that you own as separate from what the lender has a legal right to sell or keep should you be unable to pay off your mortgage.
Mortgage insuranceMortgage lenders require you to pay insurance fees to protect themselves in case you don't keep up on your payments and end up losing your home. The only way to get around paying the insurance is to make a down payment of 20 percent or more on a conventional loan. Here are two types of insurance:
Private Mortgage Insurance For those with a conventional loan who pay less than 20 percent on their down payment, you must buy private mortgage insurance. Pay the full amount on the day you close on your home, or monthly as you pay off the loan itself. Homebuyers are released from the insurance costs when they gain 20 percent equity or ownership of their home, or after seven years - whichever comes first.
Mortgage Insurance Premium FHA loans include a fee of 2.25 percent of the total amount for a 30-year loan and 2 percent of a 15-year loan amount. It can be tacked onto your loan amount as part of your monthly payments or paid off when you close on your home. The FHA mortgage insurance also entails an annual fee of 0.5 percent of the current loan amount, charged in monthly installments. The higher your down payment, the less time you will spend paying this fee.