7. Adjustment interval
The period of time between changes in interest rate and payment for an adjustable-rate loan. The most common loans have a 30-year duration, starting with the rate fixed for an initial interval of either three, five, seven or 10 years. "After that first interval," says finance consultant Seth Rabinowitz, "there are adjustments every so often as specified in the loan agreement. Usually the adjustments are done every half year to one year until the 30-year mark is reached in the life of the loan." Rates rise and fall based on prevailing interest conditions in financial markets at the time.
8. Escrow waiver
A loan agreement provision specifying that you will not pay money into an escrow account, which is put aside for future property tax and insurance bills. If you make a down payment of 20 percent or more, you have a better chance of avoiding escrow, says Teresa Dentino, CEO and founder of The Financial 411. But many lenders will charge a fee for waiving it, generally a quarter of a percent of the loan's principal, according to Dentino. Lenders generally like escrow, because it helps ensure that tax and insurance payments on the property remain up to date, and sometimes the lender collects interest that the account generates. So do the math, weigh whether you have the discipline to save on your own for big tax and insurance bills, and decide if no escrow is a smart move for you.
9. Credit report
A report that details your credit history. It includes all credit accounts you ever opened and a history of your payment behavior, a list of the companies that have inquired about your credit recently and public records such as bankruptcies and foreclosures. Anyone lending you money wants to judge your risk factor before granting you the loan, so what's in the report, and how it affects your credit score, is important.
AnnualCreditReport.com (1-877-322-8228 toll-free) is the only place where you can get a credit report for free with no strings attached. (Other sites may slip in monitoring services that will cost you a monthly fee unless you opt out.)
The credit report does not include your credit score, typically a three-digit number between 300 and 800 that predicts your ability to repay your loans. The best-known type of credit score is the FICO score. You can buy scores from credit agencies or get them as part of monthly credit monitoring services — a score may be free if you're organized enough to cancel the monitoring service right away. And federal law now requires that if your score contributes to you getting turned down for such things as a loan or home rental, you have a right to get the score from the party that turned you down.
10. Credit inquiry
When a potential creditor accesses your credit report or your score on file at a credit bureau. There are two types of inquiries — soft and hard. Soft inquiries are generated by lenders for promotional purposes, preapproved mail offers and account reviews. You have no role in initiating them, so they do not affect your credit score. Hard inquiries are ones that creditors make after you apply for credit or accept an offer for it. Because hard inquiries are the first indicators that you are seeking credit, they figure in your credit score — about 10 percent of it, says Paperno. Credit bureaus may interpret many hard inquiries in a short period as a sign that your credit risk is rising, and lower your score.
Janene Mascarella is a New York-based freelance writer.