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Have you ever thought your real estate agent and lender were speaking a foreign language? It’s a common feeling among first-time homebuyers, who might not be familiar with the terminology that goes along with the process—from getting a mortgage to closing on your new house.
Before you make an offer, brush up on the lingo with our homebuyer’s glossary.
A chart that lists all the payments you’ll make over the life of your loan, breaking down the portions of your payments that will go toward principal and interest along the way.
A number that represents the total cost of a loan, factoring in the interest you’ll pay as well as all the fees associated with getting the loan.
Tip: APR is different from the interest rate, which doesn’t factor in fees and only calculates what your monthly mortgage payment will be.
The fees, taxes and other charges paid at the closing of a real estate transaction. These costs are separate from the down payment and purchase price, and include things like loan origination fees, credit report fees and attorney fees.
Tip: Closing costs usually add up to between 2% and 5% of the purchase price and are the responsibility of the buyer.
All your monthly debt payments divided by your gross monthly income. Lenders use this percentage to evaluate your ability to repay a loan—this ratio can help determine how much you’re approved to borrow.
Tip: Most lenders want your debt-to-income ratio to be at or below 45%.
Also known as a good faith deposit, this payment is made as a security deposit to show you’re serious about purchasing a home. Unlike a down payment, which is a promise to the lender, an earnest money deposit—typically around 1% to 3% of the sale price—is a promise to the home seller.
Tip: If you’re shopping in a competitive real estate market, an earnest money deposit of 5% may be necessary.
An account set up by the lender for the buyer to deposit money for taxes, insurance and other payments that need to be made over the life of your loan.
Tip: An escrow account ensures that property tax and homeowners insurance payments are paid on time, automatically, and helps homeowners avoid late fees or other penalties.
Fixed rate mortgage (FRM): A home loan with an interest rate that stays the same—keeping your payment similar throughout the life of the loan.
Adjustable rate mortgage (ARM): A home loan with an interest rate that is adjusted periodically—meaning the interest rate, and therefore your payments, could increase or decrease.
Money paid to the lender as compensation for processing a loan application. It covers the preparation of documents, credit checks, inspection and appraisal of the property.
Tip: The amount of the loan origination fee is usually stated as a percentage of the loan—typically 0.5% to 1% of the loan amount.
Also called a discount point, it equals one percent of the dollar amount of the mortgage loan. Paying points directly to the lender at closing—called buying down the rate—is one way to lower the interest rate on the loan.
Tip: One-eighth of a point, or 0.125% of the loan amount, is usually the smallest increment that can be bought.
Principal: The amount of money the lender is loaning you.
Interest: The fee you pay to the lender for borrowing that money.
An insurance policy written by a private company that protects the lender if you stop making payments and go into foreclosure. The cost is usually added to your monthly mortgage payment.
Tip: If your down payment is less than 20% of the purchase price, you’re legally required to have PMI.
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Get help navigating the mortgage options offered by AAA to find the right one for you.
Annual Percentage Rate (APR)
We may change APRs, fees, and other Account terms in the future based on your experience with ACG Card Services and its affiliates as provided under the Cardmember Agreement and applicable law.
1Cash back can be redeemed in the form of a statement credit or ACH deposit ($25 cash back minimum redemption). Cash back is not earned on business related transactions or activities. You may not redeem cash back, and you will immediately lose all of your cash back, if your account is closed to future transactions (including, but not limited to, due to Program misuse, failure to pay, bankruptcy, or death). Cash back will expire at 11:00 p.m. Central Time on the last day of the calendar quarter that is five (5) years from the date on which they are earned. Account must be open and in good standing to earn and redeem rewards and benefits. Upon approval, please refer to your Cardmember Agreement for additional information. Cash back is earned on eligible net purchases. Net purchases are purchases minus credits and returns. Not all transactions are eligible to earn cash back, such as Advances, Balance Transfers, and Convenience Checks and other advance transactions as defined in the Cardmember Agreement, as well as interest charges and fees do not qualify. U.S. Bank cannot control how merchants classify their business or transactions and reserves the right to determine which Purchases will qualify in which category. Earn 2% per dollar for qualifying net purchases made with the card through any participating AAA Club when AAA is the merchant of record, on qualifying net insurance purchases (MCC = 6300) and at eligible retail travel merchants. AAA Clubs located in Northern California, Nevada and Utah are not participating AAA Clubs and purchases made at those clubs will not qualify for 2%. Earn 4% per dollar for qualifying net purchases on AAA purchases, travel and insurance for your first 6 months up to $6,000. After that, earn cash back in the standard 2% category. Foreign Transaction Fee: None.
2 Benefits are subject to terms, conditions, and limitations on the amount of coverage. Travel and Emergency Assistance Services help in coordinating medical, legal and travel services while away from home. Rental Collision Damage Waiver coverage and peace of mind for damage due to collision or theft of most rental cars. Certain terms and conditions apply. Please refer to your Visa Guide to Benefits for details
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*Annual Percentage Yield (APY) is valid as of 11/26/2024. Personal accounts only. Rates are variable and may change without prior notice. $100 minimum balance to open and avoid fees. Fees may reduce earnings. $250,000 maximum opening deposit when account is opened online. After online opening deposit is verified, you may deposit additional funds to your account. $500,000 maximum balance. Auto Club Trust, FSB.
**Annual Percentage Yield (APY) is accurate as of 11/26/2024. Rates are variable and may change without prior notice. Interest rates are fixed until initial maturity after the account is opened. A $1,500 minimum deposit to open the account and obtain the APY is required. A penalty may be imposed for early withdrawal. Fees may reduce earnings. Personal accounts only.
†Annual Percentage Rate (APR). Rates and terms effective as of 10/11/2024. APR is accurate as of 10/11/2024. Advertised rates and terms are subject to change without prior notice. Additional terms and restrictions may apply. Other loan rates available. Subject to borrower qualification. Advertised rate includes a 0.25% discount when you set up automatic payments from any checking or savings account. Rate is variable. Offer valid on personal vehicle loans only. Criteria to receive the stated APR: Loan term 48 months or less new or used, model year 2018 – 2024 with a credit score of 720 or higher based on the Vantage scoring model. Buyer is responsible for all state or local fees. Auto Club Trust, FSB uses a managed credit program and final APR is dependent on your credit score. An auto loan with an APR of 5.49% for a $20,000 loan at a term of 48 months, your estimated monthly payment would be $465. An auto loan with an APR of 5.74% for a $20,000 loan at a term of 48 months, your estimated payment would be $467. Private party sales will not be financed.
††Terms and Conditions apply. Offer valid for loans on vehicles purchased through the AAA Auto Buying Program from a TrueCar, Inc. (TrueCar) Certified Dealer; and approved and funded by Auto Club Trust, FSB. Applicant must submit the Member Price Summary provided by TrueCar during the application process. Must be an active AAA member to receive the additional TrueCar discounted rate. Loans offered by Auto Club Trust, FSB. Equal Opportunity Lender.
Member Savings currently not available in all states. In these states a "Target Price" is presented, which reflects a market-based example of what you can reasonably expect to pay for a vehicle configured with your desired options. Your configured vehicle may not be available or in-stock at the Certified Dealer.
TrueCar operates this information website ("Service") featuring pricing, performance, technical, and safety data available for new and used vehicles. The Service is not available in all locations.
Products are offered by Auto Club Trust, FSB. Equal Credit Opportunity Lender.
Mortgages originated by Auto Club Trust, FSB. Equal Housing Lender. NMLS# 799629
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