As you begin to work with a lender, you'll hear many new terms and will be introduced to new procedures. Some of the major concepts and terms you should know are:

Shopping rates

When shopping interest rates among lenders it isn't always easy to compare. Interest rates are expressed as:

Discount Points

Discount points are equal to a percent of the loan amount. 1.25 points is equal to 1.25% of the loan amount. For example: On a $100,000 loan that equals $1,250. If you pay more points it will lower the interest rate. Paying points can be good if you plan on living in the home for more than three years and the points may be tax deductible.

Loan Origination Fees

Origination fees are often expressed as a percentage. A one percent loan origination fee is equal to 1% of the loan amount. Golden Mortgage does not charge an origination fee on most conventional loans.

Some lenders may only tell you about the discount points and loan origination fees when you ask about closing costs or specifically the discount points associated with the interest rate quote. Don't let them get away with it! Get an itemization of the costs to close the loan and who is the recipient of those fees.

Annual percentage rate (APR)

The APR combines the interest rate, points and related fees to more accurately reflect what you will be paying. Note: Lenders are required by law to divulge the APR.

Rate lock-in

Once you have decided to go with a certain loan program and a certain lender you should ask them to guarantee, or lock-in, the interest rate that you've discussed. Better yet, make sure that they will let you grab a lower rate, if rates should fall during the process. Make sure the lock-in period is long enough to get you to the closing and that the sellers can vacate in 45-60 days.

Prepayment fees