05/12/2022: Mortgage and Lending Terms

If it is time to apply for a home loan or refinance your current loan, it helps if you are familiar with standard mortgage terms. As you schedule appointments with real estate agents and mortgage officers to find the perfect home or mortgage loan, you will feel more confident and prepared if you understand the general process.

Mortgage Glossary

Although this is not an exhaustive list, it contains some of the most commonly occurring mortgage lending terms that you are likely to encounter and is a great place to start as you begin your mortgage search.


Amortization is an accounting technique used to lower the book value of a loan over a set period. Amortization focuses on paying off a loan over time. At first, monthly payments pay off the interest, but those payments soon begin to pay off the remaining principal balance.

Annual Percentage Rate (APR)

The Annual Percentage Rate (APR) is the interest rate you will pay annually on your loan plus other charges or fees, such as mortgage insurance, loan origination fees, closing costs, etc. The Federal Truth in Lending Act requires lenders to disclose the APR in every consumer loan agreement.


An appraisal, performed by an independent third party, estimates the home and property’s value. Mortgage lenders require appraisals for home loans because they ensure that they are not loaning the lender more money than the property is worth.

Closing Costs

Closing costs, or settlement costs, are fees incurred when obtaining a loan. The specific costs will vary but may include attorney fees, appraisal fees, loan origination fees, title searches, etc. You can expect to pay approximately 3% – 6% of the value of your loan in closing costs.

Down Payment

A down payment is the amount of cash paid towards purchasing a home. It is essentially the first payment made on a mortgage loan and makes up the difference between the purchase price of the house and the mortgage loan. The amount of down payment depends on various factors, such as the lender, the loan, and your credit history, and could range from 3% to 20% of the sale price.


Escrow is when your lender deposits money (such as property taxes or homeowners insurance) in a third-party account. This process allows you to split your taxes and insurance over 12 months. Sometimes lenders will add escrow payments to your monthly mortgage and your principal and interest payments.


A preapproval is often the first step in obtaining a mortgage and is a lender’s conditional agreement to lend you a specified amount of money under specific terms. The lender will require information to determine how much you will qualify for a home loan, such as income, assets, credit score, and other financially pertinent information. A preapproval amount can help you estimate how much you can afford and help you stay on budget when comparing properties.

Your Mortgage Needs Covered at State Bank

State Bank has a variety of loan types available to meet your needs. Whether you are a first-time homebuyer, want to buy land to build on later, or are considering renovations, we can help you today. Stop by one of our neighborhood banking centers or contact us to learn more about your mortgage options.

Have a Question?

Contact us! We look forward to assisting you with your banking and financial needs.

Customer Service Hours:
Monday-Friday: 9am -11pm
Saturday-Sunday: 9am – 5pm