Plain-English answers to mortgage questions.

Your interest rate is what you pay on the loan balance. APR (Annual Percentage Rate) wraps in fees so you can compare loans apples-to-apples. APR is usually slightly higher than the rate.

Your monthly payment usually has four parts. Principal pays down what you borrowed; interest is the cost of borrowing it. Property taxes and homeowners insurance are often collected with the payment and held in an escrow account, then paid on your behalf when they come due. Some loans also carry mortgage insurance, depending on the program and your down payment.

A fixed-rate loan keeps the same interest rate for the life of the loan, so the principal-and-interest portion of your payment never changes. An adjustable-rate mortgage (ARM) starts with a fixed period, then adjusts on a schedule tied to a market index, within limits set in your loan documents. Which is better depends on how long you plan to keep the home and the loan.

Two ratios drive most lending decisions. Loan-to-value (LTV) compares the loan amount to the home's value — the bigger your down payment or equity, the lower the LTV. Debt-to-income (DTI) compares your monthly debt payments, including the new mortgage, to your gross monthly income. Each loan program sets its own limits for both.

Closing costs are the fees to complete the loan and the purchase: lender fees, title and settlement charges, the appraisal, recording fees, and prepaid items like the first months of taxes and insurance. Discount points are an optional fee paid at closing in exchange for a lower interest rate. Whether points make sense depends on how long you'll keep the loan — we'll run both versions for you.

Within three business days of your application you receive a Loan Estimate: a standard form that lays out the loan terms, projected payments and closing costs so you can compare offers. At least three business days before closing you receive the Closing Disclosure, the final version of the same numbers. Read both; we'll go through them with you line by line.

Interest rates move daily. A rate lock is the lender's commitment to a specific rate for a set period — long enough to reach closing. We'll talk about when to lock based on where you are in the process and how the timeline looks.

During a purchase, escrow is the neutral third party — usually a title company — that holds funds and documents until closing. After closing, your escrow account is where your lender collects taxes and insurance with each payment. Same word, two different jobs.