Interest Rate Lock
For instance, every loan has an interest rate - that's easy. What you may not know is that most loan programs also allow you to wait before you "lock" your rate. Interest rates fluctuate daily. Let's pretend that you locked your rate today at 7.5%. However, if you wait 'til tomorrow, the rate could drop to 7.0%, or it could go up to 8.0%. The choice of when to lock is up to you. Normally, when you're ready to lock all you have to do is call your lender.

Down Payment
Another item that most loans requires is a down payment. Not all do, but most. Every lender and every product is going to differ on the down payment amount.

Appraisal and Appreciation
Yes, most lenders require an appraisal, and yes, this cost is normally transferred over to the borrower. With an appraisal, the lender simply wants to verify that the home's current market value is great than the loan amount. No use investing $200,000 on a property that's only worth $100,000. This is known as the loan-to-value ration (LTV).

Mortgage Insurance
Mortgage insurance is another item usually required by the lender. Basically, if the borrower doesn't make payment on the loan, the lender needs to be covered. So, mortgage insurance is required. However, normally once 20% of the principle is paid, the mortgage insurance can be dropped, but the borrower has to request it.

Hazard Insurance or Home Owners Insurance
The lender simply wants verification that the property's value is protect in case of fire, severe weather, etc.

Monthly Payment
Yep, ya gotta pay back the loan. Once the loan is approved, your mortgage originator should be able to calculate your monthly payment. Keep in mind that your monthly payment usually includes the principle, interest, taxes, and insurance (PITI).

A few other elements that you may consider evaluating with your lender are:

1. cash reserves
2. discount points
3. buy downs

Sometimes lenders require borrowers to have a specific amount of money in cash reserves before closing. Basically, the lender wants to be certain that the borrower can make his or her first few payments after closing costs have depleted some of their funds.

Discount points are one way in which a lender gets paid on the loan. A point is usually equivalent to 1% of mortgage amount.

Buy downs. They're just that. You actually "purchase" a lower mortgage rate.

You don't need to have a firm grasp on all of the above mentioned components, but a basic knowledge is helpful when choosing one of the..... page 5 of 6